British Gas Trading Ltd v Lock & Anor

Domestic legislation made to implement an EU directive must, so far as possible, be interpreted to achieve the directive’s purpose. The court may depart from the ordinary meaning and imply words, provided the result accords with the legislation’s grain or underlying thrust and does not alter a fundamental feature.

Working Time Regulations 1998 must therefore be read, for the four weeks’ leave under regulation 13, to include contractual results-based commission in holiday pay where that commission normally forms part of remuneration. The exclusion produced by section 221(2) of the Employment Rights Act 1996 was an anomalous consequence, not a deliberate legislative choice contrary to article 7.

Mr Lock was employed in sales by British Gas. He received a basic salary and contractual commission based on completed sales. During statutory annual leave he received basic salary, but his absence prevented him from generating future commission.

The Court of Justice held, in the same litigation, that article 7 required holiday pay to reflect his normal remuneration, including a commission element. The Leicester Employment Tribunal held that the Working Time Regulations 1998 could be interpreted conformingly by deeming his remuneration to vary with the amount of work done. The Employment Appeal Tribunal, Singh J, dismissed British Gas’s appeal.

British Gas appealed, contending that this construction improperly amended the Regulations and was precluded by earlier domestic authority.

1. Appeal dismissed. The Employment Tribunal was entitled to interpret the Working Time Regulations 1998 conformingly with article 7 of Council Directive 2003/88/EC. The Employment Appeal Tribunal was right to uphold that result.

2. The Marleasing obligation is broad. It may require departure from an unambiguous domestic meaning and the implication of words. The decisive limit is whether the interpretation is compatible with the legislation’s grain or underlying thrust. It must not contradict a fundamental feature or require decisions for which a court is not equipped. This approach follows the principles explained in Ghaidan v Godin-Mendoza [2004] UKHL 30 and Vodafone 2 v Revenue and Customs Commissioners [2009] EWCA Civ 446.

3. On ordinary domestic construction, section 221(2) of the Employment Rights Act 1996 would confine holiday pay to basic salary. Evans v The Malley Organisation Ltd [2003] ICR 432 establishes that result. It did not, however, decide whether the Regulations could be read conformingly after the Court of Justice had explained article 7’s normal-remuneration requirement.

4. Bamsey v Albon Engineering and Manufacturing plc [2004] EWCA Civ 359 did not bind the court to reject a conforming interpretation. It proceeded on the since-displaced premise that article 7 left the measure of holiday pay entirely to member states. It did not decide that a normal-remuneration interpretation was impossible.

5. The Regulations were enacted solely to implement the Directive. They ordinarily produce normal remuneration, including commission, but produce an anomalous lower payment for workers within section 221(2) and for workers with non-guaranteed overtime. There was no objective basis to infer a deliberate legislative choice to exclude those workers. Reading in words to include Mr Lock’s contractual results-based commission therefore gave effect to, rather than amended, the statutory scheme.

6. The ruling is confined to contractual results-based commission of the kind earned by Mr Lock and to the four weeks’ leave under regulation 13. It does not determine the treatment of annual bonuses, threshold-based commission arrangements, or the proper reference period in other cases. The Employment Tribunal’s wording should be narrowed accordingly.

• Court of Appeal (Civil Division) Dismissed British Gas’s appeal and upheld the conforming interpretation of the Working Time Regulations 1998.
• Employment Appeal Tribunal Singh J dismissed British Gas’s appeal from the Employment Tribunal: UKEAT/0189/15/BA.
• Leicester Employment Tribunal Held that regulation 16 could be read to include a commission element in holiday pay for regulation 13 leave.