British Airways Plc v Williams & Ors

This appeal concerns whether pilots employed by British Airways were entitled, under regulation 4 of the Civil Aviation (Working Time) Regulations 2004, to holiday pay calculated so as to include elements of pay received when working (in particular a flying time supplement and a taxable time-away-from-base allowance). The employment tribunal and the Employment Appeal Tribunal held that the phrase "paid annual leave" required pay comparable to normal pay when working and that the established formula in sections 221–224 of the Employment Rights Act 1996 should be applied. The Court of Appeal allowed the employer's appeal. It held that the Aviation Regulations are silent as to a minimum or formula for holiday pay, the Working Time Regulations' formula (incorporating sections 221–224 ERA) does not apply to aircrew, and Community law (as explained in ECJ decisions) sets only the broad principle of paying "normal" or "comparable" remuneration during leave while leaving precise calculation to national legislation or practice. Because no national legislation or industry-wide practice fixed the pilots' holiday pay at the levels claimed, the pilots could not show a breach of regulation 4 and their claims failed.

This case arose from claims by some 2,750 BA pilots that their holiday pay was underpaid because it excluded regular elements of their pay (a flying time supplement and part of a time-away-from-base allowance). Their contracts provided holiday pay at basic salary only. They relied on regulation 4 of the Civil Aviation (Working Time) Regulations 2004 (implementing the Aviation Directive and Agreement) which entitles crew to "paid annual leave of at least four weeks". The employment tribunal referred a preliminary issue: whether regulation 4 meant that holiday pay should be calculated under regulation 16 of the Working Time Regulations 1998 (which applies sections 221–224 ERA) or otherwise.

The employment tribunal and the Employment Appeal Tribunal concluded that "paid annual leave" required pay comparable to normal remuneration when working, and that sections 221–224 ERA (an averaging method over 12 weeks) provided an appropriate and recognised national measure to achieve that comparability. The employer appealed.

The Court of Appeal considered the legislative framework: the Working Time Directive and Regulations, the Aviation Agreement, the Aviation Directive (2000/79/EC), and the Aviation Regulations 2004. The court accepted the ECJ's statements (in Robinson-Steele and Stringer) that paid annual leave requires maintenance of "normal" remuneration or pay comparable to periods of work, but emphasised that the ECJ states a broad principle rather than prescribing a single method of calculation. The Working Time Regulations, the Inland Waterways and Sea-fishermen Regulations expressly adopt sections 221–224 ERA for calculation of a week's pay, but those provisions were expressly excluded in respect of aircrew. The Aviation Regulations contain no formula or minimum for the amount of holiday pay and did not incorporate sections 221–224 ERA. The court therefore held that the pilots could not point to national legislation or practice that fixed their holiday pay at the level they claimed.

Issues framed and decided:

• Nature of claim: pilots sought compensation under regulation 18 of the Aviation Regulations for underpayment of holiday pay under regulation 4.
• Primary legal issues: (i) the meaning of "paid annual leave" in regulation 4; (ii) whether regulation 16 of the Working Time Regulations or sections 221–224 ERA applied; (iii) whether Community law required a particular method of calculation; and (iv) whether an employment tribunal may fashion its own calculation to achieve comparability.

Reasoning in brief: the court held that (i) the Aviation Regulations do not prescribe a minimum or method for holiday pay; (ii) the Working Time Regulations' scheme (including sections 221–224 ERA) was expressly made inapplicable to aircrew; (iii) Community law supplies a general principle of comparability but leaves precise implementation to member states by national law or practice; and (iv) absent national legislation or industry-wide practice fixing the calculation, the pilots could not show a breach of regulation 4, and employment tribunals are not empowered to create a statutory calculation to fill that gap.

Appeal allowed. The Court of Appeal held that regulation 4 of the Civil Aviation (Working Time) Regulations 2004 does not itself prescribe a formula or minimum level of holiday pay and that the Working Time Regulations' incorporation of sections 221–224 ERA does not apply to aircrew. While Community law requires holiday pay to reflect a worker's "normal" or "comparable" remuneration, the ECJ only states a general principle and leaves precise calculation to national legislation or practice. Because no national legislation or industry-wide practice fixed the pilots' holiday pay at the higher level claimed, the pilots failed to establish a breach of regulation 4 and their claims were dismissed.

Appeal from the Employment Appeal Tribunal (Keith J, Mr C. Edwards and Mr I. Ezekiel) which had upheld an Employment Tribunal decision dated 11 May 2007. The EAT decision is reported at [2008] ICR 779. The Court of Appeal allowed the employer's appeal and set aside the decisions below.