Caspar Glyn QC considers the hotly anticipated EAT holiday pay judgment of Lock v British Gas


Caspar Glyn QC considers the hotly anticipated judgment in Lock-v-British-Gas handed down by the Employment Appeal Tribunal today.

In the long running appeal of Lock v British Gas the EAT considered whether UK Holiday Pay could include pay to make up for commission which a salesman did not earn because he was on holiday. The decision invites an appeal to the Court of Appeal by the employers.

Let us remind ourselves what happened to Lock before it was appealed to the EAT. The European Court recited the basic principles from previous cases such as the fact that holiday pay should reflect normal pay so that:

 …remuneration must be maintained and that, in other words, workers must receive their normal remuneration for that period of rest

 The overarching principle is that a worker must be paid to leave the workplace. If pay is not “normal”, the worker might lose out and then the right is not being effectively made available

 …entitlement to annual leave and to a payment on that account as being two aspects of a single right.

 Further, the European Court held (my emphasis) that:

 ….the commission received by Mr Lock is directly linked to his work within the company. CONSEQUENTLY, there is an intrinsic link between the commission.… and the performance of the tasks he is required to carry out under his contract of employment.

 I commented at the time of this decision that, if this passage is taken to its proper conclusion, it means that PAY LINKED TO WORK is pay for work that an employee is required to carry out as part of his contract of employment. Accordingly, it must be reflected in holiday pay.

The Employment Tribunal duly followed the conclusion of the CJEU. Its task was made easier as in Bear Scotland & Others v Fulton & Others [2015] ICR 221 the EAT had held that the Working Time Regulations 1998 could be interpreted so as to give effect to the meaning of the EU Directives when it came to considering non-guaranteed overtime. The Tribunal held that the same logic applied to commission and that it was able to re-write sections 221-224 Employment Relations Act 1996 so as to ensure that Mr Lock received commission which he was unable to earn because he was on holiday.

One of the greatest appellate Employment lawyers of our generation, John Cavanagh QC, sought to reverse the apparent and inevitable onrushing tide. He argued, and failed on each of the following points:

  1. Bear Scotland was distinguishable as it was about non-guaranteed overtime as that is covered by s.234 ERA 1996. If it was distinguishable it was not authority for any proposition in Lock. That argument was rejected. Bear Scotland affected the definition of ss.221-224 and these provisions are referred to in Regulation 16(2) of the Working Time Regulations 1998. Accordingly, the case was not distinguishable but covered the same ground. Lock in the European Court is merely an extension of Williams.
  2. Secondly, he asserted that Bear Scotland was wrong because the Court of Appeal decision of Bamsey was still binding. This was rejected as, not only had Bamsey been considered in Bear Scotland which had rejected this submission, but also perhaps by implication the European Court had overruled Bamsey in its judgment in Lock. It could not be said to be wrong
  3. Given its conclusions on the above, the Employment Appeal Tribunal declined to consider the merits of Bear Scotland because that decision was not reached as a result of a mistake, it was not an inconsistent decision, it was not manifestly wrong and there were no other exceptional circumstances.

Finally, it was submitted that the then President of the Employment Appeal Tribunal, Langstaff J, simply got it wrong and did not understand the principles which he applied. Singh J referred to another case in which Langstaff J had considered all the principles as to purposive interpretation and had his reasoning approved by the Court of Appeal. As the Judge put it, colourfully, although even Homer nods occasionally (referring to the great classics poet as being inattentive occasionally) it was unlikely that Langstaff J having got it right in 2014 would get it so wrong in another case so soon afterwards.

The EAT concludes that if the Bear Scotland decision should be considered anew, then that should be done by the Court of Appeal.

As in Bear Scotland permission to appeal will be a certainty if requested. In Bear Scotland permission was not sought as the employees and employers had fought to a score draw and did not want to risk the ground that they had won. Or, has British Gas achieved a goal already by taking the uncertainty past July 2015 thereby limiting all new claims to two years’ back pay where they can fulfil the demanding “series of deductions” test?

My prediction is that it will be appealed.

However, I take the view that the reasoning of Bear Scotland as to interpreting the Working Time Regulations 1998 and therefore ss.221-224 in accordance with the decision of the European Court in Lock will triumph. Why? Because the Court of Appeal was able to perform similar leaps of interpretation in NHS Leeds v Larner [2012] IRLR 825 when approaching sick pay where the language of the Working Time Regulations 1998 could NOT have been clearer.

Cloisters has significant expertise in advising and representing clients in relation to Holiday Pay. Please contact our clerks for further assistance.