Holiday Pay Update: British Gas Loses Appeal In Commission Case In Court of Appeal

Irwin Mitchell Employment Lawyer Comments On Landmark Decision


David Shirt, Press Officer | 0161 838 3094

British Gas has today lost a high profile case in the Court of Appeal which could result in a flood of claims against thousands of UK businesses by employees who earn commission.

The long-running dispute between British Gas and sales employee, Mr Lock, focuses on whether the energy company was right to pay him and other staff who earn commission just their basic pay after they returned to work from a holiday.

Mr Lock argued his salary should have been enhanced to reflect the amount of commission he would have earned if he was in work rather than on annual leave.

In 2014, the European Court of Justice (ECJ) ruled that British Gas’ policy acted as a deterrent for someone taking time off. This is because the EU’s Working Time Directive is underpinned by the rationale that paid holiday is a health and safety initiative and ensures workers take a break from the demands and stresses of work. Workers therefore must not be discouraged from taking leave and the payment of basic pay only, rather than the inclusion of an element for the commission he would have earned, did that. 

The case returned to the UK where the ECJ’s decision was said to be consistent with the UK’s Working Time Regulations. British Gas disputed this but attempts to overturn the ruling at the Court of Appeal have now failed.

Glenn Hayes, partner at national law firm Irwin Mitchell, said:

“This ruling means that thousands of workers whose remuneration includes commission that is regularly earned or receive similar payments, should now have their holiday pay calculated in the same way as workers whose pay varies according to how much work they actually do. Commission will have to be included in the calculation if the worker can establish that taking a holiday realistically prevented him from earning commission.”

Unless the parties now settle their dispute, or British Gas seeks leave to appeal to the Supreme Court, which it has not announced whether it will do so or not and it remains open to the Supreme Court to look at it anyway, the Tribunal will have to determine, at another hearing, what compensation should be paid by British Gas to ensure that workers like Mr Lock are not disadvantaged by taking a holiday.  This is likely to be done by averaging his pay over a given reference period which it will have to determine (albeit we believe it is likely to be 12 weeks).

Mr Hayes added:

“It is also doubtful that all forms of commission payments will have to be included. Mr Lock’s commission scheme is straightforward and he was paid according to the outcome of his own work. It is also very clear that Mr Lock suffered a loss when he took a holiday.

“Ascertaining loss will not be as clear-cut in other cases however where, for example, commission is paid annually, where the scheme involves discretionary assessments based on a worker’s broader contribution, or where this is in part based on individual performance as well as team performance and this decision does not mean that all commission payments will have to be reflected in holiday pay.”

Commenting on how the Brexit vote will make any difference to how holiday pay is calculated, he added:

“The Brexit vote itself does not make a difference to how holiday pay should be calculated and whilst we remain a member of the EU, we are required to interpret UK legislation in line with European Directives and decisions of the ECJ.

“However, that is likely to change.  The Government has recently announced it intends to end the jurisdiction of the ECJ in the UK and, next year, will introduce the ‘Great Repeal Bill’ which, it says, will come into effect on the date we formally exit the EU (possibly March 2019). This will end the authority of EU law by converting all of its provisions into UK law and reasserting the supremacy of UK law.  According to the Government, this will give the UK the opportunity to scrutinise, amend, repeal or improve any aspect of EU law in the future and this could be one such area.

“This will not mean that all of our employment laws fall away, but the intention of the legislation appears to be that ECJ interpretations will no longer bind our UK courts and tribunals.  That is likely to have a profound effect on holiday pay cases as challenges have been based on failure to properly implement the social ambitions contained in the Working Time Directive and influenced by Europe, rather than the previously well understood UK position which referred to basic pay only.”