Posted on Wednesday 2nd Nov 2016
Holiday Pay and Commission - British Gas v Lock
“Today's decision is very technical, dull, and says nothing new”.
This was the verdict of one of the most respected legal commentators on employment law, Daniel Barnett of Outer Temple Chambers, on the judgment of the Court of Appeal in British Gas v Lock handed down 07 October 2016. Nevertheless Lock remains an important case on the calculation of holiday pay. It has been reported on before in our Newsletters and little has changed since we first dealt with it.
For those that are unaware of the case here is a reminder of the key facts: Mr Lock was a salesman on a relatively modest basic salary but with variable commission paid in arrears. Commission on sales achieved made up a sizeable element of Mr Lock's pay. Because Commission was paid in arrears this led to an unusual aspect of the case. Although Mr Lock could not earn commission whilst on leave he may well have received commission for past sales during the “pay packet” nearest his holiday. He did not therefore necessarily receive less than normal pay during holidays. However he would lose income as a consequence of taking holiday. He brought a claim for his 'unpaid' holiday pay after taking leave in December 2011 to January 2012.
In 2014, the European Court of Justice held that, when calculating holiday pay, Member States must ensure that a worker taking leave is paid by reference to commission payments that the worker would have earned if at work since not to do so could deter the worker from taking holiday. It was for national courts or tribunals, the ECJ said, to work out how to take commissions into account when calculating holiday pay.
The issue for the Court of Appeal was whether the UK Working Time Regulations 1998 could be interpreted so as to include holiday pay in respect of commission... The Court of Appeal confirmed the approach of the EAT and employment tribunal before it that the Working Time Regulations 1998 should be read as though a new subsection were added to it. The Court could and should interpret the WTR so as to include Lock’s commission payments in the calculation. This required the inclusion of words necessary to make that meaning clear. The outcome is that when calculating holiday pay, workers are entitled to be paid an amount which reflects the commission they would have earned if not on holiday. This was not an entirely surprising outcome.
The ECJ’s point about national courts setting out how commissions should be calculated was left unanswered by the Court. Referring to the questions arising from calculating how to factor in bonuses and commissions, the Court said ”nothing in this judgment is intended to answer them”. The Court also declined to speculate as to the position of other workers – for example, the banker who receives a results-based annual bonus, or the worker who receives commission only when a particular level of turnover or profit is achieved.
Early Judicial Assessment of ET cases to be introduced
The President of the Employment Tribunals in England and Wales has published Presidential Guidance on a new process for the early judicial assessment of the merits of an employment tribunal claim with the intention of encouraging the early settlement of employment litigation. This process is different from the current system of “judicial sift” where manifestly weak cases or those where the ET lacks jurisdiction are weeded out.
The process will be confidential and voluntary and will involve an employment judge making an initial assessment of the strengths and weaknesses of the parties’ cases, at a case management hearing. That judge will play no further part in the hearing of the merits of a case that proceeds to a full hearing.
Both parties must consent to the assessment and it will only take place after the issues in the case have been fully clarified and case management orders made. There will be no hearing of any evidence.
Our initial thoughts are we would always submit our defence to this process .
Unsettling News about Settlement Agreements
Settlement agreements (formerly known as compromise agreements) are meant to bring certainty to employment disputes in that once an employee has signed the agreement, having taken advice from a suitably qualified individual, he is unable to bring a case to employment tribunal. Usually that is: Glasgow City Council -v- Dahhan 2016 shows one exception.
Mr Dahhan was employed as a teacher by Glasgow City Council. In 2013, he settled his claims for direct discrimination, harassment and victimization on grounds of race against the Council by signing a settlement agreement. A short time later Mr Dahhan wrote to the Tribunal, stating that at the time the agreement was signed he had lacked capacity to instruct his solicitor and to make decisions and he sought to have the agreement withdrawn so he might proceed with his claims. The Council objected, and a preliminary issue arose as to whether in fact the Tribunal had jurisdiction to assess whether a Claimant had mental capacity at the relevant time.
The Tribunal held, and the EAT confirmed, that the Tribunal does in fact have the jurisdiction to assess whether a settlement agreement which is otherwise valid was nonetheless unenforceable because one of the parties lacked the mental capacity when s/he entered into it. The Tribunal has a duty to consider such a question when it is raised by one of the parties. If upon the evidence it considers that the individual did not have capacity, then the agreement will be unenforceable in its entirety.
The case will now proceed to Tribunal.
Mr Dahan fairly speedily came to realise that he had lacked capacity to make a decision about whether to compromise his claims. The case throws up some difficult issues, however. What about the employee who does not realise for many months that he was not mentally well enough at the time to understand the consequences of signing the settlement agreement? In the light of this decision what further safeguards do employers have to put in place if the settlement agreement concerns an employee that has been absent with any sort of mental illness?
Construction Industry: Hard Hat Colours Code Initiative
Some of our clients may have seen in the national press and perhaps local paper that various companies in the building industry have agreed upon a colour code system for construction hard hats / safety helmets. The safety helmet colours standard was devised by Build UK in consultation with its members.
The UK safety helmet standard promotes best practice on construction sites through the use of colour-coded safety helmets for on-site workers. The implementation of a consistent approach to hard hat colours is designed to ensure that various groups of site workers are easily identifiable, thus resulting in better on-site communications between various personnel, and possibly increased safety on construction projects.
Highways England recently announced that they will adopt the new standard from 2017, for all their construction and maintenance contractors.
In brief, the Build UK’s colours scheme standard is as follows:
• Black – Supervisors
• Blue – Everyone else
• Orange – Slingers / Signallers
• White – Site Managers / Competent Operators / Vehicle Marshalls
Vehicle Marshalls shall have a different colour hi-vis vest or coat.
First Aiders and Fire Marshalls are to have decals.
This is one standard and it is not compulsory but considered to be best practice.
Should clients require any further supporting information then do not hesitate to contact our offices.
Sharp Rise in Prosections
According to data released by the Health and Safety Executive (HSE the number of company directors prosecuted for health and safety offences has risen threefold in a year, The HSE prosecuted 46 company directors and senior managers in the 12 months to 31 March 2016, compared with 15 in the previous 12 months. Expressed in monetary terms , £20.6m of company fines were imposed between February and August 2016, which is an increase of 43% compared with the corresponding period last year.