In our February article we reported that the Employment Appeal Tribunal (EAT) had upheld the decision of the Employment Tribunal in the case of Lock v British Gas (2014). The decision was that an employee who is on holiday should be paid the commission that they would have earned had they not been on holiday. This follows the European Court’s earlier ruling in the case that employees who are on holiday should not be financially worse off because they are taking their holiday. As we anticipated, British Gas did appeal this decision to the Court of Appeal, and the decision of the Court of Appeal has now been released.
Unsurprisingly, the Court of Appeal has upheld the decision of the EAT and held that holiday pay should include the commission which an employee would have earned had they not been on holiday. Arguments were put to the Court that including commission in holiday pay for employees like Mr Lock might have unintended consequences, such as an effect on staff who receive a periodic bonus based on the performance of their team or organisation. However, the Court dismissed those arguments.
The big question which remains unanswered is: what is the reference period which needs to be taken into account when making the calculation of holiday pay? It was hoped that the Court of Appeal would give some guidance on this, not only with regard to commission payments, but also with regard to regular overtime payments. Unfortunately, but perhaps understandably, the Court said that this should be decided on a case by case basis. Employers will therefore have to continue to try to make sensible assessments which take into account the seasonal variations of their particular business.
British Gas have not yet indicated whether they will seek leave to appeal to the Supreme Court in this case. We understand that there are approximately 1,000 potential similar claims from Mr Lock’s colleagues in the pipeline (no pun intended!).
If you need help in deciding how to calculate holiday pay for your employees, or indeed with any employment matter, do please contact any member of the Pure Employment Law team (01243 836840 or [email protected]).