Within the last month the European Court of Justice (the ECJ) has issued two decisions in connection with holiday pay.
Lock v British Gas Trading Ltd
The first decision issued by the ECJ concerned the calculation of holiday pay and whether commission payments should be included. Mr Lock was employed as an Internal Energy Sales Consultant by British Gas. His salary was made up of both basic pay and commission which was based on the sales he achieved. The commission which Mr Lock receives did not depend on the time he actually worked but on the outcome of the work he did and essentially the number of new contracts concluded for British Gas. The commission was not paid at the time of the contract being concluded - it was paid in arrears.
Mr Lock was on annual leave from 19 December 2011 to 3 January 2012. For this period his holiday pay was calculated at his basic pay – given that he was on annual leave he could not earn any commission. Mr Lock raised a claim against British Gas in the Employment Tribunal for the holiday pay which he had not received.
The ECJ found that as Mr Lock’s contract of employment stated that his salary consisted of basic pay and commission, that his holiday pay should be calculated to include both of these elements. The ECJ stated that it is essential for workers to receive their normal remuneration for the period of rest they take, which for Mr Lock consisted of both basic pay and commission. The ECJ acknowledged that paid annual leave is an essential principle of European Law and workers should not be deterred from taking that leave if they are put at a financial disadvantage. The ECJ has left the national courts to decide on the actual calculation but a reasonable suggestion may be the average commission payments in the previous 12 months.
Bollacke v Klass & Kock BV & Co KC C-118/13
The second decision issued by the ECJ concerns payment of accrued but untaken holiday. Mr Bollacke was employed by Klass & Kock from 1 August 1998 until his death on 19 November 2010. Mr Bollacke had been seriously ill since 2009 and it was not in dispute that on the date of his death he had accrued but had not taken 140.5 days of annual leave. After a request was made to Klass & Kock and subsequently refused, Mr Bollacke’s wife, as sole beneficiary, raised a claim against her late husband’s former employer. She argued that she was entitled to receive payment in lieu of the paid annual leave which had accrued but was untaken at the time of his death.
The Working Time Directive states that workers are entitled to at least four weeks holiday each year. The Working Time Regulations 1998 implements the Directive in Great Britain.
The ECJ ultimately found that the death of an employee does not take away their right to payment in lieu of accrued but untaken holiday. As above the ECJ stated that the overall principle of entitlement to paid annual leave is an essential one in European Law and as a result no national legislation or practice can deviate from it. The ECJ also relied upon an earlier case which found that if a worker is unable to use his holidays as his employment has been terminated then he is entitled to payment in lieu. The ECJ found that in order to receive the payment in lieu it does not have to be the interested party, Mr Bollacke, making the request
These are not the only decisions that we can expect this summer concerning holiday pay. We are currently waiting for the Employment Appeal Tribunal decision in Neal v Freightliner Ltd ET/1315342/12 in relation to whether overtime should be included when calculating holiday pay. Once we have a decision we will provide a further case law update.
For further information, please contact Jennifer Tear, Alan Glazer or your usual contact at Murray Beith Murray.