What did we get up to last month?
This month, we mainly want to flag up the judgment in Lock v British Gas Trading Limited which was issued from the European Court of Justice at the end of May – please see the case report below. This case is likely to have a very significant impact on the cost of staff holidays for businesses whose staff receive commission as part of their remuneration package. Although the decision has not yet been implemented by the domestic courts, in our view it is only a matter of time before it is and businesses should brace themselves accordingly. We would advise that all employers should start carrying out a calculation of the potential increased cost now so that plans can be put in place to support the additional expenditure, should it be necessary to do so. However, a few issues still remain up in the air and therefore we think that it is probably too soon for employers to start paying holiday pay which includes commission, unless they really want to pay a higher amount as a staff benefit, or if they want to start the clock ticking in respect of the time limits for employees’ claims for any underpayment.
We saw this article querying whether the reported 79% decrease in Tribunal claims is accurate on the basis that a number of employees are choosing to pursue claims such as unpaid wages and notice pay through the County Courts rather than the Tribunal in order to avoid paying the high Tribunal fees.
We hosted our fourth HR Breakfast Club on 3 and 6 June on the subject of redundancy and received some very good feedback – thanks to those who attended. The next HR Breakfast Club meeting will take place after the summer holiday – keep an eye out for the invitation in due course.
Any plans for this month?
Our annual employment conference is on 24 June and will be held at our Peterborough office from 9am to 11:30am. This year we will have guest presenters from Origin Workplace Solutions who will update you on pensions auto-enrolment and GreenStones Accountants who will share their wisdom about improving business performance. Katharine and I will provide you with a summary of employment law changes over the past 12 months and important impending changes. The conference is free to attend and open to everyone with an interest in HR issues – to book your place visit our website.
We are also getting excited about the Tour de France which will be coming to the region at the beginning of July. If you’re planning on going to Cambridge on 7 July to watch the start of Stage 3, look out for Katharine who will be volunteering as a Tourmaker for the day!
Any new cases to be aware of?
• In Lock v British Gas Trading Limited, the European Court of Justice has held that the Working Time Directive (the European legislation from which the Working Time Regulations 1998 (WTR) are derived) does not permit payment of holiday pay to be calculated with reference to basic salary only. If commission payments are not included in the calculation, the worker will be placed at a financial disadvantage which may act as a disincentive for that worker to take his or her annual leave entitlement since he or she will not be able to generate commission during their annual leave.
The case had been referred to the ECJ by Leicester Employment Tribunal at which Mr Lock had issued his claim for under payment of holiday pay. Mr Lock’s remuneration package is comprised of a basic salary plus commission on the sales that he achieves. The commission is paid several weeks or months after a sale is concluded and makes up approximately 60% of his remuneration.
Mr Lock went on statutory annual leave between 19 December 2011 to 3 January 2012. During this time, he was paid his basic salary plus the commission from previous sales that fell due during the period. However, he suffered a reduced income in the months following his return to work because he had not secured sales, and had therefore not generated commission, while he was on holiday. He brought a claim in an Employment Tribunal, arguing that his reduced income amounted to a breach of the WTR.
Following the ECJ’s judgment, Leicester ET will now need to decide if the WTR can be interpreted in accordance with the ECJ’s reading of the Working Time Directive and, if it holds that it can, it will compensate Mr Lock for the underpayment.
The ECJ gave no guidance as to the correct period over which commission income should be averaged for the purposes of calculating holiday pay, nor did it state whether the calculation is only necessary in respect of the 4 week minimum annual leave entitlement set out in the Working Time Directive, or if it would have to be paid for the 5.6 week minimum entitlement provided for in the WTR. These questions will need to be answered in domestic case law (assuming, that is, that the Tribunal and appellate courts interpret the WTR in accordance with the ECJ’s judgment).
The outcome of this case will likely have significant consequences for employers who pay commission to their workers, not just in relation to future annual leave costs, but also in respect of claims for failure to pay the correct holiday pay for holidays already taken.
• In Clyde & Co LLP v Bates van Winkelhof, the Supreme Court has held that a member of a Limited Liability Partnership (LLP) had the status of “worker” and was therefore entitled to protection under whistleblowing legislation. The facts of this case are quite unique but the decision could have far reaching consequences: the finding that an LLP member is a “worker” means that such members are entitled to benefits and protection to which all workers are entitled. This includes the entitlement to paid annual leave, protection under whistleblowing legislation and the right to be automatically enrolled in a pension scheme.