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Decision on Holiday Pay – “Judicial Vandalism?”
The Employment Appeal Tribunal (EAT) confirmed recently in the case of Lock v British Gas Trading Ltd that employers will have to pay commission as part of holiday pay. This was despite the employer, British Gas arguing it amounted to “judicial vandalism” to follow the European Court of Justice’s ruling which they said ignored the plain meaning of the Working Time Regulations.
Mr Lock was employed by British Gas as a salesman. His remuneration package included a basic salary plus commission. His commission was based on the number and type of contracts that he persuaded customers to enter into. When Mr Lock took annual leave, he was only paid his basic pay, a payment for commission was not included. As a result, he was disinclined to take holiday as he would be paid significantly less than his normal pay. Mr Lock challenged this at an Employment Tribunal. The case was referred to the European Court of Justice (ECJ) for clarification. The ECJ ruled in favour of Mr Lock and concluded that because his commission was directly linked to the work he carried out it must be taken into account when calculating holiday pay. The case was referred back to the Employment Tribunal to apply the ruling to UK law. The Employment Tribunal also ruled in favour of Mr Lock and applied an extra clause to the Working Time Regulations 1998 to make them compliant with the Working Time Directive.
The employer, British Gas appealed the tribunal’s decision claiming it would be “judicial vandalism” to follow the ECJ’s recommendations and interpretation of the Working Time Regulations. The EAT recently dismissed the appeal and ruled that an employee is entitled to holiday pay which includes an element for the amount of commission he would normally receive when working.
Employers need to be aware that failure to include commission in holiday pay could put them at risk of unlawful deduction from wages claims.
For further advice in relation to calculating holiday pay, contact our specialist employment law solicitors and employment team on 01392 207020 or e-mail email@example.com.