23 February 2016

Holiday Pay - there's more....but nothing new!

The EAT today handed down its judgment  dismissing the appeal of British Gas in the long-running holiday pay case of Lock v British Gas.   

The background

Readers may remember the saga of Mr Lock and British Gas. For new readers and those who need a refresher... Mr Lock was employed by British Gas as a salesman.   60% of his normal pay was made up of commission based on sales in the previous month.  Mr Lock made a claim for outstanding holiday pay because during periods of leave he only received basic pay and while on leave could not make sales resulting in his pay for the following month being lower than usual.  
The Employment Tribunal (ET) referred the case to the European Court of Justice (ECJ) who decided that the proper interpretation of the Working Time Directive required that an employee's commission payments should be taken into account when calculating leave to ensure there was no deterrent to taking leave.  The ECJ was asked how this commission based element of pay should be calculated but declined to answer this question, referring it back to the national courts to decide
The case went back to Leicester ET who decided to park some of the issues (see our earlier piece on this) but went on to deal with the question of whether the Working Time Regulations (WTR) are capable of being read purposively so as to be consistent with European law and/or whether words should be added to the WTR so that the calculation of a week's pay conforms with EU law.
The decision of the ET was that the WTR could be read purposively so as to mean that a worker who earns payments such as commission and overtime shall have their holiday pay calculated in the same way as a worker whose remuneration varies with the amount of work done.

The appeal

British Gas appealed on the basis that the ET's decision was wrong because it was based on the authority of a related case on holiday pay concerning overtime (Bear Scotland v Fulton) which they asserted was wrongly decided, and in any event did not apply to commission pay.

 Today's judgment

Dismissing the appeal the EAT set out that the EAT in Bear Scotland v Fulton had already decided that the WTR could be interpreted so as to conform with the WTD and so the ET had been right to follow this approach.  Although the general principle is that the EAT is not bound by its own decisions, they are of persuasive authority and should be followed unless an established exception applies.  British Gas argued that the exception in this case was that the decision in Bear Scotland v Fulton was "manifestly wrong".  The EAT disagreed  stating that in any event if the decision were wrong this would be for the Court of Appeal  to decide.  The EAT made clear that the decision in Bear Scotland v Fulton applies equally  to commission as to overtime payments.  
Today's judgment is no surprise and nor is it a landmark decision.  It moves things along but it does leave questions unanswered - particularly around how to calculate holiday pay for individuals receiving commission payments.  If British Gas apply for leave to appeal to the Court of Appeal, this long running saga may continue.  In the meantime, the remedy hearing to determine calculation of holiday pay in the present case is still outstanding and this might answer some practical questions.  
We'll be covering this and all the other latest employment law developments at our Spring Employment Law Update on 3 March.  Click here for more details.

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