The decision in Lock v British Gas Trading Ltd has been handed down today confirming that holiday pay must be calculated to include commission payments too.
This represents the latest development in the long running holiday pay litigation. It was last May when the European Court of Justice (ECJ) held that holiday pay should include an amount to reflect commission that would otherwise have been accumulated.
The case returned to the Leicester Tribunal on 4 and 5 February 2015. During the two day hearing submissions focussed only on the issue of whether the relevant legislation i.e. the Working Time Regulations 1998 and the Employment Rights Act 1996 could be interpreted so as to comply with what the ECJ had decided the EU Working Time Directive required of employers. The union on behalf of Mr Lock and the Government argued that the existing laws could be applied so as to reflect what was regarded now as ‘normal’ pay so as to include the ‘outcome’ of work done. The employer disputed this interpretation was possible as it would mean distorting the meaning of the law.
The Employment Tribunal found that holiday pay must be calculated to include commission and that a new paragraph would be added to the Regulations to reflect this.
However any claim will still be subject to the same principles as apply in relation to overtime and holidays so the enhanced sum will only apply to the first 4 weeks of paid leave as required by the EU Working Time Directive and any claim has to be brought within 3 months of the last ‘deduction’ i.e. holiday payment.
It should also be remembered that the Deduction from Wages (Limitation) Regulations 2014 come into effect on 1 July 2015. These Regulations will limit all unlawful deductions claims to 2 years before the date the claim is lodged (with the exception of certain categories of unlawful deductions claims such as claims for SMP, SSP and guarantee payments); and they explicitly provide that the right to paid holiday is not incorporated as a term in employment contracts so as to prevent any breach of contract claims going back up to 6 years.
How this will work in practice is sure be an issue that many employers will struggle to deal with in the coming months.