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British Gas V Lock ruling on holiday pay – all is not lost!

Mr Lock earned a basic salary, his argument focused on the additional commission payments that he earned

Mr Lock recently succeeded in his Court of Appeal bid, against energy giant British Gas, in relation to the way his holiday pay was calculated. Although Mr Lock earned a basic salary, his argument focused on the additional commission payments that he earned. Whilst this has the potential to impact employers, with a higher wage bill for holiday pay, the Court Of Appeal decision does not mean all employees can simply go ahead and make similar claims.

When Sir Colin Rimer delivered his judgement, he decided that it was acceptable for the Employment Tribunal to base its decision on the interpretation of UK legislation, which also takes into account the EU Working Time Directive, in the calculation of holiday remuneration. Whilst this means potentially rewriting elements of UK legislation in order to implement EU law, the overriding factor is that Mr Lock’s commission based payments should have been factored into his holiday pay calculation.

Sir Colin did emphasise, that the decision was based on the specifics of Mr Lock’s case and that other, similar cases would need to be looked at separately, in order to determine whether other employees have a viable claim. He drew some comparisons to other commission and bonus related pay, such as bankers’ bonuses.

Another area of continuing concern is the inclusion of overtime, when calculating holiday pay. This appears to be a very grey area and employers will be undoubtedly keen to get some substantive decisions on the matter.

Sir Colin also clarified that the Tribunal’s wording, in relation to UK legislation, was too generic in terms of it applying to all types of commission and not just contractual ‘results based commission’, which ultimately means that there are restrictions in how far the judgement can go.

What are the implications for employers?

Currently, other similar claims being brought before the Employment Tribunal are on hold, and the potential for UK law to be rewritten suggests this could be going to the Supreme Court.

Employers will be relieved that in the recent decision of Brettle v Dudley Metropolitan Council, it was ruled that whilst some voluntary overtime and standby payments could be included in holiday pay, this is restricted because it only applies to the ‘EU’ days, which are taken first during the annual leave year, and not to the eight extra ‘UK’ days, as per section 13A of the Working Time Regulations. This effectively means that as there will be a three month gap between the first and last ‘EU day’, claimants will be limited in how far back they can go.

  • The second important factor is that the Tribunal does recognises that some overtime is irregular and that this should not be included.
  • Brexit will undoubtedly have some level of impact in relation to the rules surrounding holiday pay.
  • In the Fulton v Bear Scotland case in 2014, the government intervened for British Gas and introduced secondary legislation in order to cap claims for historic holiday pay.

This continuing saga means all is not yet lost for employers, who have the difficult task of dealing with the rules surrounding holiday pay and the way it is calculated.

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