Legal Updates

Is this Holiday Season Going to Cost Employers Even More?

Written by Rebecca Lynch
27/06/2014

As we draw nearer to the holiday season many of you as employers will associate this with a time of low productivity and low revenue due to employee absences.

Adding to your woes about the cost of the holiday season is the recent landmark decision of the European Court of Justice (ECJ) in the case of Lock v British Gas Trading Limited, a case which was referred to the ECJ by the Leicester Employment Tribunal.

In this case the ECJ held that Mr Lock’s holiday pay should include a payment in respect of the commission that he earned when he was normally at work. The reasoning behind this decision being that if a worker’s remuneration includes contractual commission, determined with reference to sales achieved, then if commission payments are not taken into account the worker will be placed at a financial disadvantage, in the form of less remuneration following a holiday. There is therefore a concern that the worker would be discouraged from taking annual leave, which was not the intention of the legislation.

For any employer that regularly pays commission to its employees, but bases holiday pay on basic pay only (as many do), this decision is potentially extremely costly.

You may well already be considering the repercussions of this case and the cost of the holiday season ahead.

Our advice for the time being is to sit tight as we do not yet have a UK ruling on the impact of this decision and, if the Judgment is adopted, how holiday pay should or could be calculated in these circumstances.

We will keep you posted of any further developments but having spoken to the Employment Tribunal this week we are informed that as yet the case has not been listed for a hearing.

Watch this space…

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Rebecca Lynch

I am a partner in the employment team and also head of business development for the firm.  I graduated from the University of Hertfordshire in 2001 with an Honours degree in Law with French, having spent a year in New York working at a niche law firm in Manhattan. When I returned to the UK I qualified at Seddons in 2004, moved to Davenport Lyons in 2007, and joined Gordon Dadds in 2014. I advise on all aspects of contentious and non contentious employment law, for both employers and employees, including unfair dismissal, discrimination, redundancy/restructure and TUPE.  I have extensive experience in employment tribunal litigation and I often advise both employers and senior executives negotiating new contracts of employment, exit packages and on the enforceability of restrictive covenants. Outside work, I enjoy travelling and sport, including social netball, yoga and running. I have completed marathons in London and San Sebastian. I am also (by marriage) a supporter of Crystal Palace FC and have recently been accepted onto the waiting list to become a member of the MCC.

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