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UK HR e-briefing: Holiday pay – latest developments in Lock litigation

  • United Kingdom
  • Employment law - HR E-Brief


The Employment Appeal Tribunal (EAT) has today rejected an appeal against last year’s Employment Tribunal ruling in the case of Lock v British Gas. British Gas has asked for permission to take the case to the Court of Appeal for a definitive ruling.

The Lock case concerns whether employers are obliged by the Working Time Regulations 1998 (WTR) to take into account commission payments when calculating holiday pay. It has already been established that holiday pay under EU law must take account of elements of normal pay such as commission. This aspect of EU law is only binding directly on public sector employers. In the case of Bear Scotland v Fulton, however, the EAT ruled that our domestic law, which applies to all employers, must be interpreted in a way that conforms to EU law by requiring employers to take into account non-guaranteed overtime payments when calculating pay for the basic four week holiday entitlement under WTR. The tribunal in Lock ruled last year that the same approach applies to commission payments.

In the appeal against the tribunal’s decision in Lock, the employer argued that Bear Scotland was wrongly decided and, in any event, did not apply to commission pay. The EAT, however, considered it would be inappropriate to go behind the decision in Bear Scotland, and said it is for the Court of Appeal to rule on whether the case was wrongly decided. That being the case, the EAT said the tribunal had been right to follow the Bear Scotland approach, which, the EAT said, applies just as much to commission payments as overtime.

An appeal against today’s decision will raise, once again, the question of whether Bear Scotland was correctly decided and the outcome could affect claims that involve payments other than commission, including overtime. Any appeal is unlikely to be heard until next year. Many thousands of other claims, against other employers in England, Wales and Scotland, have been stayed pending today’s decision. No doubt most of those employers will now be asking for that stay to remain in place until we have a definitive ruling. In the meantime, the case of Bear Scotland is itself expected to go back before the EAT later this year, with the employees challenging the rule that the right to claim historic arrears of holiday pay is lost if there is a gap of more than 3 months between under-payments.

In light of the ongoing uncertainty in this area, employers would be well advised to take specialist advice before making changes to the way holiday pay is calculated or compromising actual or potential back pay claims.

Eversheds acts for British Gas in the Lock litigation.