23 May 2014 #Employment
Last December we reported on the Advocate General to the European Court of Justice’s opinion in the referred case of ZJR Lock v British Gas that, in order to comply with the Working Time Directive, holiday pay should include commission payments that would otherwise have been earned had the individual not been on holiday. As anticipated, the ECJ, in issuing its full judgment, has confirmed this approach.
In this case, Mr Lock worked for British Gas as a salesman and received fixed basic pay plus commission, based on his sales. As his commission was based on actual sales, he brought a claim for “lost” commission which he was unable to earn whilst on leave.
Leicester Employment Tribunal referred the question to the ECJ as to whether holiday pay should be calculated with reference to commission payments that would have been earned had the individual been at work. The ECJ has concluded that holiday pay should include such payments, but stated that the calculation of these payments should be left to national courts.
The case has been remitted back to the employment tribunal who will need to review the application of the UK’s Working Time Regulations in light of the ECJ’s interpretation of the Directive.
The question is now whether the Working Time Regulations can be interpreted to give effect to the ECJ’s decision in the Lock v British Gas case. The Supreme Court has established already (British Airways v Williams 2012) that the related regulations that apply in the aviation sector can be interpreted to accord with the related Aviation Directive requirement to include certain allowances in the calculation of holiday pay. Whether the Working Time Regulations can be interpreted to accord with a similar interpretation of the Working Time Directive will be considered in the Neal v Freightliner Ltd case (concerning whether to include overtime in holiday pay) which is due to be heard by the Employment Appeal Tribunal on 30 and 31 July 2014. We will all need to await the outcome of that hearing, which may be in September or October this year. If the Working Time Regulations can be interpreted to give effect to the Directive, then the law as interpreted in British Airways v Williams will apply generally, without the need for amendment by the government. If that is the outcome, that will have major implications for employers.
For more detailed guidance see our Holiday Pay Time Bomb article.
The ECJ’s decision is a reminder of the importance of businesses reviewing how to calculate holiday pay and making provision for what could be considerable holiday pay arrears.