Holiday pay (again) and EAT decisions

24 February 2016

This week the Employment Appeal Tribunal (EAT) gave judgment in the long-running case of Lock v British Gas Trading Ltd. The case had been heard at the Leicester Employment Tribunal who referred a question to the CJEU (formerly ECJ) on the calculation of holiday pay.

The CJEU determined that holiday pay must be based on “normal remuneration”. In this case it meant that the results-based commission Mr Lock received as a British Gas salesman should be included in calculating his holiday pay.

When Mr Lock took holiday he received basic salary and the commission he had earned prior to his holiday; his earnings after holidays were lower as a result of the commission he missed out on during his annual leave. The CJEU determined that he should not lose out by taking holiday.

After the CJEU’s decision, the Employment Tribunal found in Mr Lock’s favour. British Gas appealed to the EAT on the grounds that the UK legislation (the Working Time Regulations) could not be interpreted in line with the CJEU’s decision on the European legislation (the Working Time Directive (WTD)); and, further, that the EAT’s decision in the Bear Scotland case (i) could be distinguished and (ii) was manifestly wrong. On Monday British Gas lost their appeal.

The EAT’s judgment noted that “although the Appeal Tribunal is not bound by its own decisions, they are of persuasive authority and it will follow them” other than in very narrow circumstances.

As a reminder – all of the European case law relating to holiday pay concerns the 4 weeks’ entitlement that stems from Reg. 13 of the WTD and not the further 1.6 weeks’ entitlement that make up the remainder of the 5.6 weeks statutory minimum and stem from Reg. 13A of the WTD.

Questions remain about other supplements to pay and whether they should be factored in to holiday pay calculations (e.g. bonuses). Another significant omission in current law is that no reference period has been specified for calculating commission as part of holiday pay (e.g. do you look back 4 weeks/16 weeks/other).

Last year, we delivered a seminar on this topic in conjunction with the CIPD. If you would like to read through the slides please click here.

If you would like to speak with someone in our team about these issues and whether you should now implement a change to how you pay holiday pay – please contact us.