The case of Lock and others v British Gas Trading Ltd has returned to an Employment Tribunal, which has ruled it necessary to add words to the Working Time Regulations 1998 (WTR) to make it compliant with the EU Working Time Directive. You may recall that the European Court of Justice (ECJ) had previously given a preliminary ruling on Lock that commission payments should be taken into account when calculating holiday pay under the Directive.
The Tribunal’s Decision in Lock comes on the back of the decision in Bear Scotland Ltd v Fulton handed down by the EAT in the Autumn, which found that non-guaranteed overtime should be included in the calculation of holiday pay. In that case the EAT also decided to add words to the WTR so that it conforms with EU law.
Mr Lock worked as an energy trader at British Gas and his pay packet usually consisted of basic pay plus any commission on the sales he achieved. His commission usually made up 60% of his remuneration so it constituted an important chunk of his remuneration. When the Claimant took annual leave, he would receive commission during that period, based on sales made before he went on holiday.
However, Mr Lock claimed unlawful deduction of wages following a period of annual leave. As Lock was on holiday, he could not complete sales and therefore could not achieve the usual level of commission following a period of annual leave. Mr Lock took his case to the ECJ who decided that holiday pay should incorporate the income a worker would have received had that worker been working as normal, and therefore holiday pay should be enhanced to take into account the commission which would ordinarily have been achieved if the employee had been at work. It was held that if commission payments are not included in holiday pay, it deters workers from taking annual leave as they will know that their earnings will drop.
The Employment Tribunal has now found that the WTR could be found to conform with the Directive by by adding the following paragraph (e) to regulation 16(3) of the WTR:
“(e) as if, in the case of the entitlement under regulation 13, a worker with normal working hours whose remuneration includes commission or similar payments shall be deemed to have remuneration which varies with the amount of work done for the purposes of section 221.”
Please note that this interpretation by the Tribunal will only apply to the European minimum 4 weeks of annual leave and not the extra 1.6 weeks that UK legislation confers.
Although this part of the Lock litigation confirms the legal method by which commission and similar payments should be included in holiday pay, employers will still be left wondering what those “similar payments” might be and whether all kinds of commission payments should be included. There is anticipated to be a further hearing in Lock on what the reference period will be for calculating which commission payments should be included in holiday pay and how to quantify such claims. There is no doubt that this area of employment law will remain an active arena for some time. Stay tuned for more updates….
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