By Steve Peers

The EU’s Working Time Directive is frequently a source of contention in the UK. However, certain workers, especially those who might not otherwise receive it, appreciate the four weeks of paid annual leave it guarantees. A recent Court of Justice of the European Union (CJEU) ruling in the Lock case addressed a crucial question concerning holiday pay calculation for commissioned employees.

Commission often constitutes a significant portion of a worker’s earnings, highlighted by Mr. Lock’s situation. In 2011, his base salary was considerably lower than the national average. However, factoring in his commission, his total earnings exceeded the average.

EU law doesn’t dictate worker salaries directly. However, the Working Time Directive mandates four weeks of paid annual leave for every worker, aligning with national legislation or practices governing such leave.

While this appears to grant Member States significant leeway, the CJEU has consistently interpreted it narrowly, emphasizing the importance of this social right. The right to paid leave cannot be denied to fixed-term workers or those on maternity leave. It can be carried over during long-term sick leave, though Member States retain some control over limitations. Regarding payment calculation, it cannot be incorporated into monthly salaries and must consider various pay supplements.

The question arises: Does this requirement to include pay supplements extend to commission? Previously, the English and Welsh Court of Appeal ruled against it. However, the CJEU in Lock, drawing on prior rulings, determined it does. Additionally, the court clarified the commission calculation method. Based on the Williams judgment, the court determined that Mr. Lock’s commission was directly tied to his work performance within the company. Consequently, it had to be included in his holiday pay, similar to allowances based on seniority, tenure, and professional qualifications. Conversely, payments meant solely for occasional or supplementary expenses are not mandatory during annual leave.

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This ruling will be welcomed by employees who receive commission, particularly those who don’t already receive it while on leave. Conversely, it will be met with resistance from their employers. However, this isn’t unexpected given the CJEU’s history of judgments regarding annual leave and the Working Time Directive, spanning almost 15 years.

National law still holds a minimal role: the CJEU states it can determine the “representative” period for calculating average commission. Therefore, employees can’t select periods with exceptionally high commission, and employers can’t manipulate the ruling by choosing periods with unusually low commission.

Given the CJEU’s consistent limitation of Member States’ discretion in implementing the Directive, the question arises: what happens in disputes between private employers and employees regarding working time if national law contradicts the Directive? The CJEU avoided this in Dominguez, but it resurfaces in Fenoll, with the Advocate General’s opinion due in June.

Meanwhile, in the AMS case, the court began clarifying the EU Charter’s legal impact on private entities. The Working Time Directive’s practical significance necessitates a clear response from the CJEU regarding Article 31 of the Charter.

Barnard & Peers: chapter 9, chapter 20