Evans v Malley Organisation Ltd t/a First Business Support [2003] IRLR 156 (Court of Appeal)
The Working Time Regulations continue to produce a rich seam of cases. In Evans the Court of Appeal considered the meaning of a "week's pay" in the context of an employee who earned regular commission on top of his basic pay.
Mr Evans worked for First Business Support a firm of Employment Consultants (one who often appear in Employment Tribunals representing small employers. Mr Evans was a sales rep. He was paid a basic annual salary of £10,000 and on top he received commission on contracts he successfully obtained for his employers. His entitlement to commission was earned with a successful sale he did not see any commission until the new client had paid a percentage of the contractual sum to First Business usually up to nine months later. Mr Evans contract provided for holiday pay to be paid at his basic rate.
Mr Evans was suspended from work for allegedly being involved in a conspiracy with other colleagues to leave at the same time and work for a competitor. While on suspension he was paid at his basic rate of pay. Shortly afterwards he was dismissed. He complained to an Employment Tribunal that he was unfairly dismissed but also that his holiday pay during his employment had been calculated on the wrong basis as had his pay during his period of suspension. Both payments had been calculated on his basic pay of £10,000 rather than his pay including commission.
The Employment Tribunal rejected his claims but the EAT however allowed his appeal and found that his was entitled to be paid his working time holiday on a basis that included his commission. They did not determine whether he had been properly paid in respect of the period of disciplinary suspension but referred that matter back to the Employment Tribunal to hear what "suspension" with pay meant.
The Court of Appeal has now overturned this decision. They took as their starting point the provisions of the Employment Rights Act 1996, sections 221 -224 which are incorporated into Regulation 16 of the Working Time Regulations to determine the amount of a "week's pay". Section 221 applies where there are normal working hours and the employee's remuneration does not vary with the amount of work done in the period. Section 221 (2) provides that where the remuneration does not vary with the amount of work done in the period then a week's pay is the amount payable under the contract of employment in force. Section 221(3) provides for an averaging formula over 12 weeks where remuneration does vary with the amount of work done, and section 221(4) states "É references to remuneration varying with the amount of work done includes remuneration which may include any commission or similar payment which varies in amount".
The Court of Appeal found that section 221(2) applied, not section 221(4). The question is whether remuneration varies with work done in normal working hours. Here the amount of work was the same (the commission just reflected that work and was paid much later) and so Mr Evans came within section 221(2) and therefore could not include his commission payment. This means that just because a contract includes commission it does not necessarily fall within the wider averaging provisions of section 221(4). The Court therefore found that neither his working time or paid suspension cases succeeded.This case is also a warning for applicants to remember to include a claim under Regulation 14 for any working time holiday accrued but untaken at the time of termination in an originating application. Mr Evans failed to include such a claim and the courts refused to allow him to argue it at a later stage.It only looked at the calculation of the holiday pay he had actually received.