This was a case for employers to watch coming into 2016. On 22nd February 2016, the Employment Appeal Tribunal (EAT) handed down their decision, finding in favour of Mr Lock.
Despite this being one of the most (in)famous cases in the last year, it is useful to consider the basic facts again. Mr Lock was a salesman for British Gas and received a basic salary. However, most of his take home pay was, in effect, commission. When he signed up a customer to a contract he would receive commission. Mr Lock received only his basic pay when on holiday. He raised an action claiming that he should have been paid holiday pay based on his average earnings, including commission, rather than just basic pay. The Employment Tribunal found in his favour and this was subsequently appealed by British Gas.
Mr Lock argued that Article 7 of the Working Time Directive should be interpreted to mean that he should be given his normal pay, including the commission, during holidays. The tribunal agreed, following the reasoning in another landmark case on holiday pay, Bear Scotland v Fulton.
To confuse matters, the Directive only applies to holidays granted by EU law. EU law requires an employer to give their employees a minimum of 4 weeks holiday per year (20 days for an employee working 5 days a week). In the UK, employees are entitled to 5.6 weeks holiday (28 days for an employee working 5 days a week). For the extra 1.6 weeks, employers only need to take UK law into account and can disregard commission when calculating holiday pay.
EAT decisions are binding on other courts and tribunals, therefore this decision gives some degree of certainty to the law on holiday pay calculations. However, British Gas has indicated that they will appeal this decision so we are likely to see further litigation in the future. If you are an employer that pays commission, contact your Legal Manager for advice on how to calculate your holiday pay.