British Gas Trading Ltd v Lock & Anor

This appeal concerned whether the Working Time Regulations 1998 (regulation 16 read with regulation 13) could be interpreted so that a worker with normal working hours who receives results‑based commission should have holiday pay that includes an element referable to that commission. The Court of Appeal held that, applying the established principles of conforming interpretation (Marleasing, Ghaidan and authority summarised in Vodafone 2 and endorsed in Swift and Nolan), the WTR, as domestic implementing legislation, should be interpreted so far as possible to give effect to article 7 of Directive 2003/88/EC. The court concluded that it was permissible to read words into regulation 16 so that employees like Mr Lock are entitled to holiday pay reflecting their normal remuneration including results‑based commission, and dismissed British Gas's appeal.

Background and procedure. Mr Lock brought a claim before the Employment Tribunal that British Gas had underpaid his holiday pay by failing to include a results‑based commission element. The ET found in his favour by interpreting regulation 16 of the Working Time Regulations 1998 so as to bring such commission within the measure of a week’s pay. The Employment Appeal Tribunal (Singh J) dismissed British Gas’s appeal. British Gas appealed to the Court of Appeal. The case proceeded after a CJEU preliminary ruling in Lock v British Gas (Case C‑539/12) which held that article 7 of the Working Time Directive requires holiday pay to correspond to a worker's "normal remuneration" and that results‑based commission must be taken into account.

Nature of the claim / relief sought. The claimant sought to establish that his holiday pay should include an element referable to the results‑based commission he normally earned; the employer argued that, under domestic law (Employment Rights Act 1996 provisions incorporated into the WTR), holiday pay for a worker with normal working hours whose pay does not vary with the amount of work done is limited to basic pay.

Issues framed by the court.

• Whether regulation 16 of the WTR can be interpreted consistently with article 7 of Directive 2003/88/EC so that holiday pay includes results‑based commission for workers in Mr Lock’s position.
• Whether such an interpretation would require impermissible amendment of domestic legislation (the contra legem limit), or instead falls within the permissible scope of conforming interpretation.

Court’s reasoning. The court examined the authorities on conforming interpretation (Marleasing, Ghaidan, Vodafone 2, Swift, Nolan and CJEU authorities such as Pfeiffer), and earlier domestic authorities (Evans, Bamsey, Bear Scotland). It accepted the Pfeiffer presumption that implementing legislation should be taken to intend to fulfil the Directive's obligations. The court held that although Evans and Bamsey had applied domestic rules pre‑dating later CJEU elucidation of article 7, those earlier decisions did not prevent a conforming interpretation here. On an objective appraisal the WTR were enacted to implement the Directive and did not reveal a deliberate legislative choice to exclude commission in cases like Mr Lock’s. Accordingly the WTR can be interpreted so as to include results‑based commission in the calculation of holiday pay for such employees. The court limited its decision to the facts before it and noted that other factual permutations (for example annual bonuses or thresholded commission) raise issues it did not decide.

Appeal dismissed. The Court of Appeal held that regulation 16 of the Working Time Regulations 1998 can be interpreted, by implication of words consistent with the "grain" of the implementing legislation, so as to require holiday pay under regulation 13 to correspond to a worker’s normal remuneration including results‑based commission in cases like Mr Lock’s; the ET’s and EAT’s conforming interpretation was therefore correct.

The claim originated in the Leicester Employment Tribunal (Employment Judge Ahmed) with a judgment dated 23 March 2015. The Employment Appeal Tribunal (Singh J) dismissed British Gas’s appeal on 22 February 2016. The case had earlier been the subject of a CJEU preliminary reference which led to Lock v British Gas Trading Ltd (Case C‑539/12) (CJEU judgment 22 May 2014; reported [2014] ICR 813). The Court of Appeal heard the appeal on 11 July 2016 and delivered judgment on 7 October 2016 ([2016] EWCA Civ 983).