10 December 2013 #Employment
In advance of an ECJ decision, the Advocate General’s opinion in the referred case of ZJR Lock v British Gas, is that calculation of holiday pay should include taking account of commission payments, which would otherwise have been earned.
ECJ caselaw has previously held that workers should receive “normal remuneration” for time taken as holiday, in order to avoid deterring individuals from taking time away from work. Payments therefore which are “intrinsically linked” to the performance of the tasks required to be carried out by the contract of employment, should be included in holiday pay calculations.
The salesman in this case in addition to a basic salary, received commission payments which varied in proportion to the sales contracts generated by his work. The commission is not given at the time of the sales work performed, but paid in arrears after a sales contract has been entered into by British Gas. The Advocate General’s opinion is that this commission is directly linked to his performance of the tasks required by the contract of employment (and has a sufficient degree of permanence) in order for the required intrinsic link to exist.
An argument from British Gas that in setting its sales targets and commission payments, it already took into account periods of leave when no new sales could be generated was rejected by the Advocate General, as incompatible with European law prohibiting ‘rolled up’ holiday pay. To not include reflection of commission payments in pay for time spent on leave, (time when no new sales work would be performed for which future commission could be received) would lead to a reduction in payments after annual leave through lost commission. It was viewed that this could deter the taking of holiday entitlement and exercise of the right to paid leave given by Article 7 of the Working Time Directive.
The Advocate General stated it would be for national courts to determine the method of calculation of holiday pay, by taking into account average commission payments over a relevant reference period. He suggested that 12 months would be appropriate; however this was based on British Gas’ own commission payment policy, which in respect of calculating maternity, paternity or adoption leave payments, included calculation of average commission earned over the preceding 12 months.
We will keep you updated as to the decision of the ECJ in this case.