Our Founding Partner, Mayo Wynne Baxter explore potential changes to the laws of holiday pay.
Traditionally workers have only been entitled to their basic salary whilst on annual leave. In the case of Lock v British Gas Trading Limited an employee decided to bring a claim over lost commission during a period of annual leave, as he was not able to make any sales and therefore generate commission. The case was initially heard at the Leicester Employment Tribunal but was referred to the European Court of justice (ECJ) as the it asked fundamental questions under EU law
The ECJ held that where a worker’s pay included contractual commission arrived at by reference to sales achieved the EU Working Time Directive precludes a national law that calculates statutory holiday pay based on basic salary alone. In other words, commission payments should be included when calculating the rate to be paid when someone is on holiday.
The ECJ considered that in the event that commission payments were not taken into account, the worker would be placed at a financial disadvantage when taking statutory annual leave. This was because no commission would be generated during that holiday period. This could deter workers from exercising the right to annual leave, which was contrary to the EU Working Time Directive.
The hearing is set to return to the Leicester Employment Tribunal to consider whether the domestic legislation can be interpreted in line with the ECJ’s decision. If it can, it is also likely to consider the level of holiday pay to which the Claimant would be entitled.
The outcome is likely to have far reaching ramifications particularly for anyone working in an industry that pays commission such as sales based industries. It should be noted that in the travel industry unions are already seeking to strike a bargain with Thomas Cook for increased rates of holiday pay citing the view of the ECJ to back up their cause.
If the Employment Tribunal decides to interpret the domestic legislation in accordance with the findings of the ECJ it could lead to claims being made on various fronts. Potentially those claims may look to revisit holiday pay rates dating back 16 years, to when the EU Working Time Directive was implemented in this country by way of the Working Time Regulations of 1998.