Domestic case law regarding holiday pay is moving rapidly towards European rulings, says Wolters Kluwer’s HR experts. This is in light of another important decision on the calculation of holiday pay which ruled that the Working Times Regulations should be read so as to ensure that commission payments to be included in holiday pay calculations.
Last year, in a case of Lock v British Gas, the Court of Justice for the European Union ruled that workers must receive their normal remuneration during annual leave. This was favoured due to the purpose of holiday pay is to ensure that a person is paid during periods of holiday in a way that is consistent with the way they are paid during periods of work. The commission received by Mr Lock was directly linked to his work and so formed a part of his normal remuneration.
The case was referred back to the Leicester Employment Tribunal, which has confirmed that the ruling applies domestically. However, the decision is only applicable for a minimum four weeks’ leave provided under European Law. The 1.6 weeks’ leave provided domestically by the Working Time regulations is not included in the decision.
Commenting on the decision Andrew Willis, croner head of litigation at Wolters Kluwer says:
“This decision is consistent with the recent decision of the Employment Appeal Tribunal in the Fulton case. Although it may be subject to further appeal it is clear that domestic case law is fast moving towards the position adopted by recent European rulings, which is that payments for any tasks intrinsically linked to the performance of the worker’s contractual duties should be factored into the calculation of holiday pay.”
“However, employers will be pleased that the Fulton approach to the issue of back pay remains undisturbed by this ruling. That case decided that any tribunal action alleging an underpayment of holiday pay must normally be brought within three months, or within three months of the last deduction where a series of underpayments is alleged by an employee – and the EAT stated that any underpayments in such a series cannot be separated by more than three months. Although this point may be re-visited in the future, for now concerns about significant claims for back pay have been allayed.”