Case - Lock v British Gas – Commission and Annual Leave

European Court of Justice - Michael Ford QC, Simon Cheetham QC
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What does “paid” mean for the purpose of “paid annual leave” in Article 7 of the Working Time Directive? The judgment of the Court of Justice in Case C-539/12, Lock v British Gas, handed down on 22 May, is the latest to analyse this question, building on its earlier ruling in Williams v British Airways.

Mr Lock was employed by British Gas as a Sales Consultant. He was paid basic pay and commission on sales, with commission comprising about 60% of his total remuneration. When he took annual leave, Mr Lock received his basic pay together with commission earned on past sales. But he was not paid any sum in respect of commission he would have generated if not on annual leave.
Repeating its mantra that the right to paid annual leave is a fundamental social right, the Court rejected the argument of British Gas that it was sufficient he received pay for commission during annual leave. Because of the financial disadvantage he would suffer after annual leave, Mr Lock could be deterred from actually taking leave, contrary to the purpose of Article 7. The point in time when the reduction took effect was irrelevant.

The commission received by Mr Lock was, according to the Court, directly linked to his work for British Gas and so formed part of his normal remuneration for the purpose of Article 7.The method of calculating the sum due was for a domestic court or tribunal to assess on the basis of an average over a representative reference period.
The judgment has important implications for all workers whose pay includes supplements, such as commission, bonuses and overtime payment, which are not paid in respect of their annual leave – a common occurrence in some sectors. Several employment tribunals have already held that overtime pay, which does not form part of a “week’s pay” as traditionally interpreted unless the overtime is guaranteed, must be paid in respect of annual leave for the purpose of Article 7, and that the Working Time Regulations can be interpreted to achieve this result (e.g. Neal v Freightliner). Such claims can be brought going back in time as a series of deductions from wages. These issues, and others, are due to be considered by EAT at the end of July.

Michael Ford QC and Simon Cheetham, instructed by Shantha David and Camilla Belich of UNISON, represented Mr Lock.

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