Supreme Court remits holiday pay case brought by British Airways pilots to employment tribunal

British Airways plc v Williams and others [2012] UKSC 43 SC

holiday pay | basic pay | flying allowances

The Supreme Court has remitted to the employment tribunal the case brought by British Airways pilots in relation to the inclusion of flying allowances in the calculation of their holiday pay, following the results of the reference to the European Court of Justice (ECJ) on whether or not "normal remuneration" during a period of annual leave should include allowances on top of basic pay. 

British Airways pilots received allowances for the amount of "flying time" and the amount of time that they spent away from their base airport. The allowances included:

• a "flying pay supplement" (FPS), paid at £10 per flying hour; and
• a "time away from base allowance" (TAFB), paid at £2.73 per hour. 

However, the pilots received only basic pay, without the additional allowances, during annual leave. The pilots claimed that British Airways was in breach of reg.4 of the Civil Aviation (Working Time) Regulations 2004 (SI 2004/756). The Supreme Court referred to the ECJ the question of whether holiday pay should correspond precisely with, or be broadly comparable to, the worker's "normal" pay and what period should be used to make the comparison. 

The ECJ held that any aspect of pay that is intrinsically linked to the performance of the tasks that the worker is required to carry out and in respect of which a monetary amount is provided has to be included in the calculation of the worker's total remuneration. This means that, in the case of airline pilots, an allowance for the time spent flying must be taken into account for the purposes of calculating the amount to which the worker is entitled during annual leave. 

The ECJ contrasted aspects of pay that are intrinsically linked to the performance of a task with the components of the worker's total remuneration that are intended exclusively to cover occasional or ancillary costs arising at the time of performance of the tasks that the worker is required to carry out. The ECJ gave the example of costs connected with the time that pilots have to spend away from the base, which do not need to be taken into account in the calculation of the payment to be made during annual leave. 

The ECJ concluded that it is for the national court to assess the intrinsic link between the various components that make up the total remuneration of the worker and the performance of the tasks that he or she is required to carry out. 

On the case returning to the Supreme Court, the pilots argued that their claims should be remitted to the employment tribunal for assessment, and that their remuneration on leave should include basic pay, the FPS and 18% (the taxable percentage) of the TAFB. British Airways submitted that the Civil Aviation (Working Time) Regulations 2004 are not detailed enough to give effect to the Civil Aviation Directive (2000/79/EC) and the requirement for an "average over a reference period which is judged to be representative" requires a detailed legislative scheme that cannot be supplied by an employment tribunal. 

The Supreme Court stressed that, because British Airways is not an "emanation of the state", the terms of the Civil Aviation Directive could be invoked against the company only if the Directive has been effectively implemented in the UK. The Supreme Court concluded that, given that the wording of reg.4 of the Civil Aviation (Working Time) Regulations 2004 simply repeats the wording of art.7 of the Civil Aviation Directive, the same principles must govern the interpretation of both. The Supreme Court highlighted that, because the UK legislators did not provide a detailed scheme in the Civil Aviation (Working Time) Regulations 2004 for calculating holiday pay (which might have risked being over-prescriptive), the choice of reference period is, in the first instance, for British Airways to make. This is a choice to be made by British Airways within the parameters of what can reasonably be "judged to be representative". British Airways cannot complain if a court or tribunal takes its own view of what best represents a representative period in an individual case. 

The Supreme Court rejected British Airways' argument that reg.18(1) of the Civil Aviation (Working Time) Regulations 2004 only contemplates complaints based on a refusal to permit a worker to take paid annual leave, not complaints about the level of payment for such leave. Even though the Regulations do not expressly address complaints relating to the payment of annual leave, a complaint is in fact permitted by reg.18(1) of the Civil Aviation (Working Time) Regulations 2004 in respect of a refusal by an employer to permit the exercise of any right enjoyed by the worker under reg.4. Compensation can be awarded under reg.18(4). 

Finally, the Supreme Court considered what proportion (if any) of the TAFB should to be included in paid annual leave, bearing in mind that the ECJ said that sums intended exclusively to cover costs should be excluded. The Supreme Court did not have the material before it to determine the real basis for the payment of TAFB and British Airways' genuine intention would need to be considered by the employment tribunal. The Supreme Court remitted the issues relating to TAFB to the tribunal. 

Additional resources

Review the history of this case as it passed up the UK appeal courts and went all the way to the ECJ:

• British Airways plc v Williams and others [2009] IRLR 491 CA The Court of Appeal held that British Airways was not in breach of statutory holiday pay requirements when it calculated pilots' paid annual leave by reference to their basic salary rather than what they would expect to earn when flying allowances were added. 
• British Airways plc v Williams and others [2010] IRLR 541 SC The Supreme Court referred the question of what is meant by "paid annual leave" in the Civil Aviation Directive (2000/79/EC) and the Working Time Directive (93/104/EC) to the European Court of Justice. The issue arises in a claim by pilots that British Airways breached the statutory holiday pay requirements when it calculated pilots' paid annual leave by reference to their basic salary rather than what they would expect to earn when flying allowances were added. 
• Williams and others v British Airways plc Case C-155/10 ECJ The ECJ considered whether or not "normal remuneration" during a period of annual leave should include allowances on top of basic pay, in the context of a dispute over how the holiday pay of British Airways pilots who are paid flying allowances as well as basic pay should be calculated. 

Case transcript of British Airways plc v Williams and others (PDF format, 131K) (on the Supreme Court website)