british_gasYou may remember some time ago we reported on the groundbreaking decision of the European Court of Justice in Lock v British Gas. The impact of this judgment was significant since this is the case that held that holiday pay should include provision for commission that the employee would have earned had they not been on holiday.

Given the financial implications of this decision to employers nationwide British Gas sought leave to appeal the decision on grounds that the Employment Tribunal should not have followed the Bear Scotland case because that decision was about whether overtime should be incorporated into holiday pay and argued that in doing so the EAT had wrongly interpreted the wording of the Working Time Regulations to conform with the EU Working Time Directive (No. 2003/88) that commission should be included in holiday pay.

The question in this appeal was whether the previous Employment Tribunal was right to insert wording into the Working Time Regulations to allow commission and similar payments to be included in holiday pay calculations. The Employment Appeal Tribunal held that they were, they rejected the appeal and upheld the previous decision that commission payments should be included in the calculation of holiday pay. Mr Justice Singh commented that such an interpretation would not go ‘against the grain’ of the legislation given that Parliament’s purpose in enacting the WTR was to comply with its obligation to fully implement the Directive. The EAT took the view that if the Bear Scotland case was wrongly decided then, that was an issue for the Court of Appeal to rule on.

However, we are not left without difficulty given that the EAT failed to provide any practical considerations or guidance on how the calculation of any holiday pay should be worked out. They simply said it was a matter for the National Courts to decide by taking an average over a period considered to be representative. Lack of guidance on the above will undoubtedly cause employers a huge administrative burden, although given that British Gas are seeking leave to appeal to the Court of Appeal I would hold off from implementing any firm rules until a final decision is known.

It is anticipated that leave to appeal will be granted as the Court of Appeal could find that the Working Time Regulations are incompatible with EU law and that new legislation is required to implement this. If leave to appeal is granted it is likely that the matter will not be decided until next year.