Employee was entitled to holiday allowance of commission

The case concerned an employee who worked at a dental clinic. Her salary consisted of a fixed salary and a variable commission. The employer and the employee agreed that the employee earned less in commission when she took holiday, because of her employment conditions, and that she was entitled to compensation for this.

However, they disagreed on how the employee should be compensated for the loss of commission during holiday. The employee claimed that the compensation should be calculated as an average of the commission she had earned the last three months. The employer argued that the compensation should be given in the form of holiday allowance of 12.5 % of the commission the employee had earned in the previous qualifying year.

The clinic also lowered the price of dental treatments temporarily, which meant that the basis for calculating the employee’s commission was reduced. The employee claimed that this was a material change in her employment conditions and that the clinic should have given her prior notice.

The case was referred to the Danish Eastern High Court as court of first instance, where these two questions were decided.

The employee was only entitled to holiday allowance

The High Court established that the provisions of the Danish Holiday Act applied, because it had not been derogated from in a collective agreement. According to the Holiday Act and the preparatory works, an employee is entitled to holiday allowance of the commission earned in the previous qualifying year, if commission makes up more than an insignificant part of the salary, and if the commission is reduced when the employee takes holiday. The commission earned was 14.4 % to 36.6 % of the employee’s total salary. The High Court found that this was not an insignificant part. The parties agreed that the commission was reduced during holiday. Therefore, the High Court found that the employee was entitled to holiday allowance of 12.5 % of the commission from the previous qualifying year.

The High Court did not find that the employee could be compensated in any other way, since the preparatory works of the Holiday Act explicitly mentions holiday allowance as the form of compensation. The Court also noted that this was in line with EU law, according to the case law of the Danish Supreme Court.

Reduction of the commission basis was justified

Next, the High Court examined whether it was justified that the clinic temporarily reduced the price of dental treatments and thereby also reduced the basis for calculating the employee’s commission.

The High Court found that the reduction was due to the fact that the Danish Regions had cut back on the public subsidy for dental treatments. Consequently, the clinic had lowered the price of treatments in order to avoid charging the customers a higher self-payment. This was justified, according to the High Court, and therefore, the clinic should not have given prior notice of the change.
For these reasons, the clinic was acquitted.

IUNO’s opinion

The judgment confirms that the compensation for loss of commission during holiday is holiday allowance of 12.5 %. However, for the employee to be entitled to compensation, the commission must be more than an insignificant part of the salary, and the employee must experience a decrease in commission during holiday because of his or her employment conditions.

It depends on a specific assessment whether the commission makes up more than an insignificant part of the employee’s salary. In this particular case, the High Court found that commission ranging between 14.4 % and 36.6 % of the total salary met this requirement.

IUNO recommends that companies make sure that their commission agreements clearly describe the terms for receiving commission, and that the companies in every case assess whether the employee will be able to uphold commission during holiday.

[The Danish Eastern High Court’s judgment of 14 December 2018 in case B-310-18]

The judgment has been appealed to the Danish Supreme Court. We will monitor the case and return when the Supreme Court delivers its judgment.