Two weeks ago, the Supreme Court refused British Gas consent to appeal the Lock holiday pay case any further, finally putting an end to the five year saga of whether an element in respect of commission should have been included in Mr Lock’s holiday pay.  Mr Lock himself has long lost interest and left British Gas ages ago, but the issue has sailed on regardless, the length and route of its journey unknown but its destination (a compensation ruling in the Leicester Employment Tribunal) pretty much inevitable.

Companies which have been holding off individual and collective holiday pay grievances and claims now find the last door of their bastions kicked in by the Supreme Court, leaving them defenceless. Or do they?  Perhaps time for a quick re-cap of the arguments still open to employers facing actual or threatened holiday pay claims:

  • Remember that section 23(4A) Employment Rights Act 1996 limits claims to 2 years back in any proceedings started after 1 July 2015.
  • These holiday pay rulings only apply to the basic minimum 4 weeks’ leave under the Working Time Directive, not the additional 1.6 weeks added by the domestic Working Time Regulations. In some cases, making the distinction may be more trouble than it is worth for employers, but where commission or overtime forms a substantial percentage of the employee’s earnings, the saving may be significant.
  • As matters stand, judicial opinion favours the view that an employer can decide which holidays are from the basic 4 week allowance and which are out of the supplementary 1.6 weeks. The point is not beyond argument, but may be useful in any case where the employer can establish a 3 month gap between the last day of one year’s basic holidays and the first day of the next’s, as that may act to prevent the employee claiming that the prior year’s holidays were part of a series of deductions.
  • Most of all, however, do remember the principle underlying this whole series of cases, i.e. that the employee should not be “disincentivised”,i.e. worse off as a result of his taking the EU minimum leave entitlement, hence the consistent court rulings that he must receive his “normal pay”. Nothing in any of the decisions requires him to be better off by taking holidays than had he not done so. Ultimately, therefore, the question of that loss must either be conceded by the employer on the grounds of convenience or statistical inevitability (like Mr Lock, who earned commissions daily) or – surely – established by the employee
  • That burden of proof is not high, on a balance of probabilities rather than beyond all reasonable doubt. Nonetheless, I think it will represent a pretty tough call for many employees where the link between being at work and earning commission is much more elastic than Mr Lock’s case. Does a day off really prejudice your commission earnings? Are you sure you didn’t work extra-hard to close the same deal before you went on leave or after you returned?  This line of reasoning obviously works better for short holidays than long ones – if the employee could be away for a month without its affecting his output, you would have to begin to question what he was actually doing.  But that will be a function of the industry, of market conditions, of the individual’s past record, and not simply some mechanical ratchet off how long he is out of the office.
  • This is not an argument without judicial support. In a number of recent cases, the Judges have begun to confront the reality that someone soon is going to have to go beyond simply agreeing that commission (and possibly also overtime) must be taken into account in holiday pay and actually saying how. In Patterson –v- Castlereagh Borough Council, the Northern Ireland Court of Appeal suggested that “occasional voluntary overtime” could be left out of consideration In Brettle –v- Dudley Metropolitan Borough Council,, overtime worked “only rarely” was also excluded.  In Lock at the Court of Appeal stage, questions were asked (but not answered) around whether you should take commissions into account if there are some months where you don’t earn any.
  • But even though the case is based on EU law, don’t rely on Brexit as the key to Not only is our exit from the EU (and the technical disapplication of the Working Time Directive) still two years away, but all the signs are that one of the prices the EU may extract for still talking to the UK at all is the preservation of EU-derived labour principles in our domestic employment law.