Holiday pay – the latest instalment

As we enter the first realms of spring with the sun finally making a very welcome appearance, it would seem fitting that this week the EAT delivered the latest judgment in the ongoing saga of holiday pay in the case of British Gas v Lock. For a summary of the story so far see these previous blog posts (Holiday Season for the Employment Appeal Tribunal, Lock v British Gas Trading Limited: Commission to be included in holiday pay calculations, Holiday Pay update and More Holiday Pay (as promised!)). In essence, in British Gas v Lock, the Tribunal confirmed that commission should be included in holiday pay calculations.

The employer appealed and the EAT was required to consider:

- Whether the decision in Bear Scotland should be distinguished because it concerned non-guaranteed overtime (which is specifically dealt with in s.234 ERA 1996).

- If not, that Bear Scotland was wrongly decided as the EAT should have followed the decision in Bamsey (ie that only guaranteed compulsory overtime should be included in holiday pay).

- In any event, Bear Scotland was not binding on the EAT and should not be followed.

The EAT dismissed the appeal. On the first point, the EAT concluded that it was not possible to distinguish Bear Scotland from the Lock case. The concept of 'normal working hours' in the ERA 1996 are equally relevant to a case concerning results-based commission as to one concerning non-guaranteed overtime.

In relation to other points, despite the submissions made on behalf of British Gas, the EAT concluded that the decision in Bear Scotland was not manifestly wrong. Further, there were no exceptional circumstances such as to justify a departure from the Bear Scotland decision in this case. The EAT took the view that it is ultimately for the Court of Appeal to determine whether Bear Scotland was wrongly decided.

For HR practitioners, there is no further guidance in relation to the appropriate reference period over which holiday pay should be calculated. As highlighted previously, the reference period must be one that provides a representation of normal pay. The Advocate General suggested a period of 12 months in the Opinion in Lock but in its final judgment, the ECJ did not take this forwards and instead confirmed that it is for the national courts to determine a reference period which is representative. With further appeals likely in relation to the holiday pay litigation, this is unlikely to be the last we hear on the matter.