The Court of Appeal has recently passed judgement in a case which has important implications for businesses that regularly pay employees or workers payments in addition to their basic salary, such as commissions, overtime or payments for being on stand-by (available for call-out).
The Claimant, Mr Lock, was a salesman employed by British Gas. Mr Lock claimed that he was owed money by British Gas due to the fact that his holiday pay did not provide for the commissions he would have earned had he been working. Mr Lock’s commission is paid monthly and varies according to sales made.
The case was heard at an Employment Tribunal, which ruled in favour of Mr Lock, determining that since the commission was directly linked to the work he undertakes it should be considered as part of the calculation which determines Mr Lock’s holiday pay.
The case proceeded to the Court of Appeal where questions were raised in respect of whether the Working Time Regulations 1998 can be interpreted in such a way as to include commission in the Claimant’s holiday pay calculation. In addition, questions were raised as to whether a decision in the Claimant’s favour in this case, may have unintended consequences, such as in cases where there are annual discretionary bonuses based on organisational or team performance.
The Court held that the decision should only apply where a worker has normal working hours, where their pay does not vary according to the amount of work completed but where the worker receives commission based on individual results as part of regular remuneration.
The implications of the decision in this case for British Gas are potentially substantial; it is reported that approximately 1,000 additional British Gas workers have similar claims that are pending the result of this case. It is widely expected that British Gas will therefore seek to challenge the decision in the Supreme Court.
The Claimant’s success in arguing the point in the Court of Appeal raises a further important question which will seemingly be the subject of its own legal argument – how is the amount of commission to be paid as part of the holiday to be calculated? Clearly this amount will have to be the amount of a mean average calculated from reference to previous commission payments to the worker, but over what period should the average be calculated? Employers should consider this question with reference to their own commission scheme and the frequency with which commissions are paid, as well as the industry within which they operate and whether a standard practice materialises.
Clearly, employers that pay worker regular commissions, overtime or call-out/stand-by payments should review their holiday pay calculations and they would be wise to seek advice from an employment lawyer on this issue, to protect from potential claims by employers. Inevitably, cases involving household names British Gas do attract coverage by the mainstream media and as such do raise awareness of employment rights issues among the working population. Therefore, employers cannot, and in any case should not, rely on their workers not being privy to the latest developments in employment law for protection from claims.
To get Employment Law advice for employers, speak to David Dixey, Holmes & Hills Solicitors' Employment Law specialist by calling 01376 320456.
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