The UK’s future membership of the EU dominated today’s headlines and ironically the Employment Appeal Tribunal’s decision in Lock v British Gas Trading Ltd was finally published today too. It’s a reminder of just how much EU membership has had a direct impact on national employment laws. The Working Time Regulations were introduced in 1998 in order to implement EU legislation that included the right for all workers to receive paid annual leave. There didn’t appear to be anything controversial about that but nearly 18 years later and the question of how to calculate that holiday pay continues to generate more and more disputes.
British Gas operated a commission scheme which accounted for a substantial proportion of some worker’s wages in sales positions. Mr Lock was one of these workers. He would receive basic salary plus results-based commission during his annual leave but when he returned to work he would receive only basic pay having been unable to generate commission whilst on leave. He brought a claim that this contravened the EU Working Time Directive. The European Court of Justice agreed. The employers disputed that the UK legislation could be read in a way that gave effect to this decision.
The employer’s argument was rejected by the Employment Appeal Tribunal. It has held that words can be read into the UK legislation in order to give effect to the European Working Time Directive. In reaching this decision it was held that the same principles should be applied as those relating to non-guaranteed overtime in last year’s case of Bear Scotland v Fulton in November 2014. In that case further wording was added to the statutory provisions to enable overtime to be included in the holiday pay calculation. It was decided the cases could not be distinguished and the earlier decision would be followed.
The impact of these decisions is that where wages vary with overtime or commission a 12 week average calculation may need to be used when calculating what holiday pay is actually due. This is despite the UK laws as originally drafted appearing to give a right to be paid basic pay only during holidays. The complicating factors are that EU laws only relate to four weeks holiday per year and un-amended UK laws apply to anything in excess. It has previously been indicated that the Lock case will proceed to the Court of Appeal but the impact of that decision may be interlinked with the result of this year’s referendum .