Businesses Await Outcome From Landmark Holiday Pay Case

Impact Of Hearing Could Potentially Turn Issue On Its Head


David Shirt, Press Officer | 0161 838 3094

A landmark legal case examining the complex issue of how holiday pay should be calculated for employees who earn commission as part of their salary will be heard at the Employment Tribunal on 8th and 9th December.

The case focusses on Mr Lock, a sales employee at British Gas. In 2014 the European Court of Justice (ECJ) ruled that Mr Lock, whose salary included significant commission payments, should not be financially disadvantaged by the fact that he could not earn commission during his holiday.

The ECJ concluded that Mr Lock’s commission was directly linked to the work he carried out and must be taken into account when calculating holiday pay.   

The long-running case then returned to the Employment Tribunal to determine whether the UK’s Working Time Regulations can be read so as to be consistent with the ECJ’s decision. This was successful, but earlier this year, British Gas appealed this decision and the hearing for this will take place on the 8th and 9th December 2015. 

If the appeal is successful, it may lead to a declaration that UK law is incompatible with European law and the Government will be under pressure to amend the offending legislation. This will create further delay and widespread confusion for employers who are already struggling to understand how to calculate the holiday pay of those workers receiving commission payments.

If British Gas is unsuccessful, the case will be listed for a further hearing to determine how much Mr Lock is entitled to receive to compensate him for the reduction in his income over his two week holiday.  It could also provide much needed and binding case law as to what should and should not be taken in to account when calculating holiday and specifically how such holiday should be calculated.

Expert Opinion
“Businesses continue to monitor the issue of holiday pay in relation to both commission and overtime. The outcome here will be of interest to other employers with similar commission schemes and if the appeal is unsuccessful, it shouldn’t be long before some guidance is available on the appropriate reference period for any calculation and the rate of holiday pay.
“Different companies operate different commission arrangements and although the end is potentially in sight for this case, it is important to stress that there are many other schemes that do not ‘neatly’ fit into this pattern. At this stage, the only certainty for these businesses on the issue is more uncertainty
Glenn Hayes, Partner