The EAT has handed down its decision in British Gas Trading Ltd v (1) Lock (2) Secretary Of State For Business, Innovation And Skills as to whether the Working Time Regulations (WTR) can be interpreted to comply with the EU Working Time Directive (WTD) to ensure that commission and similar payments, which form part of normal remuneration, are included in the calculation of statutory holiday pay.

Mr Lock‘s remuneration package included a basic salary plus commission which was based on the number and type of contracts he persuaded customers to enter into. He complained that his holiday pay was calculated just on his basic pay and and did not include his commission. The Employment Tribunal (ET) referred the question as to whether there was a breach of the WTD to the ECJ who ruled that EU law did not allow a worker whose remuneration consists of a basic salary and commission (normal remuneration) to only have paid annual leave calculated solely on the basis of basic pay.

When the case returned to the ET, it held that it was possible to interpret the WTR to conform with the WTD by making Regulation 16(3)(e) read as follows: “As if, in the case of the entitlement under Regulation 13, a worker with normal working hours whose remuneration includes commission or similar payment shall be deemed to have remuneration which varies with the amount of work done for the purpose of section 221.” The ET took into account the EAT’s decision in Fulton v Bear Scotland that payments for overtime which a worker is required to work but which an employer is not required to offer (non-guaranteed overtime) is normal remuneration for the purposes of the WTD, and the WTR must be interpreted accordingly.

British Gas appealed. It argued that the ET was wrong in law to conclude that it is possible to interpret the WTR in a way to conform with the WTD. Mr Lock disagreed. So did the BIS who also argued that the decision in Bear Scotland should be followed. The EAT dismissed the appeal. It ruled that Bear Scotland had recently decided that the WTR can be interpreted in a way to conform with the WTD.  While the EAT is not bound by its own decisions, they are persuasive authority and will be followed.  None of the exceptions to that general principle applied (see points 1-5 in the summary) so there could be no justification for departing from the Bear Scotland ruling.

The Lock and the Bear decisions mean that we have a consistent approach to the principle that the WTR must be interpreted in a way which ensures that a worker’s normal remuneration, i.e. basic pay + any other payments intrinsically linked to the performance of the tasks that the worker is required to carry out under his or her contract, must be used as the basis for calculating statutory holiday pay. Bear Scotland specifically includes ‘non-guaranteed overtime’. Lock includes ‘commission or similar payment’. In addition, the NI Court of Appeal held that Bear Scotland does not preclude voluntary overtime counting towards statutory holiday pay. Readers with any doubts about the way to calculate ‘normal remuneration’ for statutory holiday pay, should take legal advice.

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