Tom Stenner-Evans
Posted on 30 Mar 2015

Holiday Pay Calculation / Equality Act

Holiday Pay Calculation – Has The Lock Case Unlocked The Calculation Of Sales Commission?

With many key issues still to be decided through the Courts, employers had been hoping that the long-awaited ET Judgment in the Lock v British Gas case might at least provide some clarity around the appropriate reference period for calculating sales commission.

In the event, the Leicester Employment Tribunal has only decided one component part, namely that the Working Time Regulations can be interpreted by the addition of extra wording to cover commission. Specifically it was agreed that 'the worker with normal working hours whose remuneration includes commission or similar payments, shall be deemed to have remuneration which various with the amount of work done…'  The Employment Tribunal also found that this only applies to the first four weeks' holiday minimum entitlement in any year ( i.e. the EU statutory minimum entitlement), and not to the additional 1.6 weeks UK domestic top-up.

What the Lock decision does not decide is exactly how commission is to be brought into account. The ruling could infer averaging commission over the previous 12 weeks, as with other forms of variable pay. However, the ET has left decisions on the correct reference period, and the quantification of the claim itself, to be decided at a Remedies Hearing in due course, always assuming the case doesn’t settle in the meantime. Mindful that in Mr Lock's case there is not a great deal at stake financially (only 12 days' alleged holiday underpayment), it is possible that the case will now settle, or for that matter be appealed.

If neither happens, then the Tribunal will reconvene in due course, but probably not until after expiry of the six weeks' time limit for any appeal to be lodged.

In the meantime, employers are really little further forward…

What is clear is that claims for holiday pay arrears are likely to be lodged during the next three months, ahead of the 1 July implementation of the Government's new two year back-stop for arrears. Therefore, the next few months may well see employers looking to string out internal grievances until after 1st July, and, conversely, employees being encouraged to lodge any claims which may going back further than the 2-year long stop. Such claims are likely to arise in sectors where holiday is taken regularly through the year, so that the 'Bear Scotland' ruling (that gaps of more than 3 months between underpaid holiday break in continuity) will not apply. Also there may be an increased risk of claims from employees with school-age children, who are more likely to be taking regular breaks around school holiday periods.

Numerous other uncertainties remain to be decided in the Courts, including whether or not interest is payable on holiday pay arrears, whether 'voluntary' overtime needs to be taken into account (highly likely, but yet to be decided specifically), how regular payments (e.g. bonuses) need to be to form part of 'normal remuneration' etc.

Doubtless there will be many further test cases on these, and other, uncertainties. In the meantime, employers will need to treat threatened claims seriously, and also take an informed strategic decision on the best way to tackle holiday pay calculations going forward.

The message therefore remains to be on your guard, to take specific advice on threatened claims, and to watch this space as further test cases hopefully start to clarify the ongoing areas of uncertainty.

Diet-Controlled Type 2 Diabetes was not a Disability

Metroline Travel Ltd v Stoute [UKEAT/0302/14]


The Claimant was employed by Metroline as a bus driver before being dismissed for gross misconduct. He suffered from Type 2 diabetes, which required him to follow a diabetic diet designed to avoid sugary foods such as fizzy drinks. He brought claims for unfair dismissal, discrimination arising from disability, and a failure to make reasonable adjustments.

At a preliminary hearing, the Employment Tribunal decided that the Claimant was disabled within the meaning of the EqA 2010, which states that 'where an impairment is subject to treatment or correction, the impairment is to be treated as having a substantial adverse effect if, but for the treatment or correction, the impairment is likely to have that effect'.

Metroline appealed against the decision at the preliminary hearing.


The Employment Appeal Tribunal ('EAT') allowed the appeal, finding that Type 2 diabetes does not amount to a disability per se.

In the view of the EAT, the Equality Act guidance to 'treatment' for an impairment was not wide enough to encompass an abstention from sugary drinks. The Judge held that 'while a particular diet may be regarded as something which is to be ignored when considering the adverse effects of a disability, I do not consider that abstaining from sugary drinks is sufficient to amount to a particular diet which therefore does not amount to treatment or correction'.

Tips for Employers

This is an unfortunate decision, as it seems to confuse the measures taken to avoid the impairment with the effect that the impairment would have if those measures were not taken. It is also surprising that, at no stage, did any party refer to paragraph B14 of the Equality Act 2010 guidance, which says: 'in the case of someone with diabetes which is being controlled by medication or diet should be decided by reference to what the effects of the condition would be if he or she were not taking that medication or following the required diet'.

The correct approach would likely be to assess the question of whether an employee with any of these particular conditions is disabled in the usual way, by applying the statutory definition of disability with reference to the statutory guidance. In some cases, it may be that, without the diet, the effects on the employee are still not sufficient to qualify as a disability. However, it should not be assumed that all individuals with a diet-controlled condition are incapable of satisfying the definition of a disabled person under the Equality Act 2010.