Employment Appeal Tribunal rules that holiday pay includes commission

In the case of Lock v British Gas, Mr Lock was paid commission based on sales, the greater part of his salary comprising commission payments.

Commission payments were not dependent on the amount of work done; rather, commission payments were made on the basis of the outcome of that work, namely sales – whether or not they were due to good performance. When Mr Lock went on holiday he was unable to earn commission and was paid his basic salary only (plus any commission he had earned before he went on holiday).

Mr Lock complained to the Employment Tribunal that his employer’s failure to pay basic salary plus a sum representing what he would have earned by way of commission had he not taken holiday was contrary to regulation 16 of the Working Time Regulations 1998 and the requirements of section 221 of the Employment Rights Act 1996. In summary, section 221 provides that a week’s pay for workers whose remuneration does not vary with the amount of work done is the amount payable under the contract of employment; but if remuneration does vary with the amount of work done, a week’s pay is based on an average earnings figure.

The Employment Tribunal referred the question to the Court of Justice of the European Union (EJEU) which ruled that the Working Time Directive, on which the UK’s Working Time Regulations are based, requires commission which is not dependent on the amount of work done to be included in the calculation of holiday pay. In order to achieve the result required by the EJEU, the Employment Tribunal inserted words into Regulation 16 so that the pay of a worker with normal working hours whose remuneration includes commission should be deemed to have remuneration which varies with amount of work done. Accordingly, an average earnings figure would apply.

British Gas appealed to the Employment Appeal Tribunal which has now ruled that the Employment Tribunal properly inserted words into the Working Time Regulations to give the required effect to the ruling of the EJEU. This case follows that of Bear Scotland v Fulton in which it was similarly ruled that words should be inserted into UK legislation so that non-guaranteed overtime would be included in holiday pay. So where do the UK courts and tribunals find their authority to amend or add words to legislation enacted by Parliament, the UK’s supreme law-making body, so that it accords with EU legislation? They answered that it was Parliament itself which enacted the European Communities Act 1972. As Mr Justice Langstaff said in Bear Scotland: “It can be presumed that the intention of Parliament was to fulfil its obligation to do so fully and accurately. If, seen through a modern lens, the words do not achieve that, then to adopt a conforming interpretation is not doing violence to the intention of Parliament but instead respecting it.”

It not yet known whether British Gas will appeal further.

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