Recently, the Maritime and Commercial High Court ruled in three fundamental cases concerning compensation for loss of commission during holiday. The court attached importance to the fact that the possibility of earning commission was in fact conditional on the employee’s physical presence at the work place.
In the judgments, the court decided on the interpretation of the provision in the Holiday Act as to when employees paid on a commission basis are assumed to have lost commission due to taking holiday. If an employee is covered by the provision, the employee is entitled to holiday with pay (basic salary) as well as compensation for loss of commission equivalent to holiday allowance of the total commission in the qualifying year.
Several conditions must be met: First of all, the commission must constitute a “considerable part of the salary”. Secondly, “the loss of commission must be due to taking of holiday”. The parties disagreed on the first condition as the commission amounted to 27-39 % of the salary. The judgments show that if the working conditions of an employee paid on a commission basis imply that the commission is reduced due to holiday, for instance if it is necessary to be present at the work place in order to earn commission, the employee will be entitled to compensation.
No specific agreement concerning earning of holiday allowance of commission
In all three cases, the employees were involved with sales. The salary consisted of a fixed basic salary and commission. When taking holiday, they were paid the basic salary and did not receive holiday allowance or compensation for the commission. The specific contractual basis did not contain any provision on earning of holiday allowance of the commission. The parties agreed, however, that the commission constituted a considerable part of the salary.
The fundamental question was therefore when the condition stating that commission is lost due to taking of holiday may be considered met.
Commision conditional on physical presence
In two of the cases - both being car salesmen - commission was conditional on the customer’s signature on a contract of sale. The sale procedure physically took place at the car dealer. The commission thereby depended on the employee’s own efforts and contact to the customers. Consequently, the possibility of earning commission was conditional on the employee being physically present at the work place. And it was therefore not possible to earn commission during holiday.
A majority found that the condition for compensation for loss of commission had been met in these two cases as importance was attached to the fact that the condition concerning the employee’s physical presence implied that the commission was reduced due to holiday.
One judge found that the employee had not met the burden of proving the loss and referred to the fact that the employee could recover the loss of commission in the periods when the other employees were on holiday.
Earning of commission not affected during holiday
In the last case, the court found that the employee had not lost commission due to holiday. The employee sold security systems.
The employee earned commission of sales to his own customers in his fixed district. He also earned commission of sale to his own customers when his colleagues effected sales to these customers during his absence for instance due to holiday. The employee’s earning of commission was therefore not conditional on him being physically present. Also, the security systems were of such complexity that the employee’s knowledge and expertise of the systems implied that the customers were willing to wait for him to return from holiday. His absence due to holiday therefore only affected his earning of commission to a very limited extent.
The court therefore found that the condition for compensation for loss of commission due to holiday had not been met.