Tribunal ruling on commission opens doors to new pay claims

Employers may be facing claims for backdated holiday pay following a significant employment tribunal ruling.

The case involved a Mr Lock, who first took his claim against British Gas, where he worked as a sales consultant, to an employment tribunal in Leicester in 2012.

Mr Lock argued that he should be entitled to commission payments when taking annual leave because commission formed part of his pay. During annual leave, he lost more than 50 per cent of his average earnings because he could not generate the sales that earned him commission.

The tribunal referred the case to Court of Justice of the European Union before giving its final judgement and in May last year, the court ruled that workers should receive their normal remuneration for annual leave, including basic pay and commission.

The court then referred the case back to the employment tribunal  to decide what annual leave payments Mr Lock was entitled to under UK law.

The tribunal considered the case in February this year and in March issued a ruling that the UK Working Time Regulations (WTR) should be interpreted so that the holiday pay included commission where workers normally received this as part of their pay. It applies only to the four weeks of annual leave granted under by section 13 of the WTR.

Changes made to regulations under the Employment Rights Act 1996 mean that workers bringing claims to employment tribunals on the overtime issue cannot go back further than two years when calculating the pay they believe they are owed.

The changes will apply to claims made on or after 1 July 2015. Workers will be able to make claims under existing arrangements until that date.

Many employers may now be facing the potential for backdated claims in relation to commission and overtime, with significant financial consequences. To ensure compliance with the new rulings, and to protect their own interests, they may find it helpful to seek the advice of employment law specialists on their exposure to claims and how their existing pay, commission and holiday arrangements and employment contracts may need updating to bring them into line with the law.

For more information about how Palmers’ employment law team can help, please visit our website or contact Lara Murray or Charlotte Woolven-Brown.