Holiday Pay: Landmark Ruling Handed Down

British Gas Lose Appeal In Commission Case

22.02.2016

David Shirt, Press Officer | 0161 838 3094

British Gas has today (22 February) lost its appeal in the high profile case relating to how holiday pay should be calculated for employees who earn commission as part of their salary.

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 took place on the 8th and 9th December 2015. 

It was announced today that British Gas’ appeal was unsuccessful. However it is understood that British Gas has asked for permission to take the case to the Court of Appeal for a definitive ruling.

Expert Opinion
“It has been reported that British Gas have lost their appeal. Unless British Gas obtain leave to appeal this decision to the Court of Appeal, the case will go back to the Employment Tribunal to determine how much Mr Lock is entitled to receive as compensation for having taking a holiday. This is likely to be done by averaging his pay over a given reference period which the Tribunal will have to determine.

“This does not mean however that employers will have to include all commission payments made to staff in their holiday pay. The Tribunal made it clear in earlier cases that the requirement to include overtime in holiday pay only applies to the first 20 days of leave taken in any year, and not to any additional statutory or contractual leave. This principle will apply to commission payments.

“It is also doubtful that all forms of commission payments will have to be included in holiday pay. It is important to bear in mind that Mr Lock’s commission scheme is straightforward and he was paid according to the outcome of his own work and it was very clear that Mr Lock suffered a loss when he took a holiday. Ascertaining loss will not be as straightforward in other cases where, for example, commission is paid annually, or where the scheme involves discretionary assessments based on a worker’s broader contribution.”
Kirsty Ayre, Partner