British Airways plc v Williams and others

The European concept of paid annual leave may impose requirements concerning the level and composition of holiday pay, beyond ensuring that workers are able and encouraged to take leave. Existing European authority did not clearly determine whether holiday pay must correspond precisely, or only broadly, to normal remuneration where pay includes activity-based supplements subject to annual limits.

Domestic legislation implementing a directive must, so far as possible, be construed consistently with the directive. The meaning of the applicable European provisions was not acte clair. The questions concerning normal or comparable remuneration and the permissible scope of national calculation rules therefore required a preliminary ruling from the Court of Justice.

British Airways pilots received fixed annual pay together with a Flying Pay Supplement and a Time Away from Base Allowance. Their collective agreement provided holiday pay by reference to fixed pay alone. The pilots contended that regulation 4 of the Civil Aviation (Working Time) Regulations 2004 required payment based on all three components.

The Employment Tribunal and Employment Appeal Tribunal upheld the pilots’ case, calculating entitlement by analogy with sections 221–224 of the Employment Rights Act 1996. The Court of Appeal allowed British Airways’ appeal in [2009] EWCA Civ 281. Before the Supreme Court, it was common ground that those statutory calculation provisions did not apply directly to aviation crew.

The central issue was whether European law defined the nature or level of holiday pay and, in particular, whether it required remuneration precisely or broadly comparable to normal pay where supplements depended on activities subject to annual limits.

1. Questions referred to the Court of Justice. Lord Mance, delivering the judgment of the Court, held that the meaning of paid annual leave under article 7 of the Working Time Directives and clause 3 of the European Agreement was necessary to determine the appeal. Existing European authority did not make the answer acte clair. The Supreme Court therefore referred the questions rather than finally determining the pilots’ entitlement.

2. Sections 221–224 of the Employment Rights Act 1996 did not apply to aviation crew. The omission from the Civil Aviation (Working Time) Regulations 2004 of the detailed calculation machinery used elsewhere was deliberate. Employment tribunals might consequently face practical difficulty in calculating any required weekly rate.

3. The Court was not persuaded that the absence of domestic calculation machinery necessarily left holiday pay entirely to collective or individual agreement. Its provisional view was that regulation 4 was likely capable of being construed consistently with whatever meaning the applicable European provisions ultimately bore. The conforming-construction duty applied even though the Aviation Directive was not directly enforceable against British Airways.

4. Clause 3 of the European Agreement reproduced the language of article 7 of the Working Time Directive. In the absence of contrary material, the natural inference was that the provisions were intended to have the same legal effect.

5. The Court of Justice had described paid annual leave as requiring normal remuneration and a position comparable to periods of work. Those statements arose in materially different settings involving qualifying periods, rolled-up holiday pay and sickness absence. They did not clearly resolve how activity-based supplements should be treated where annual limits might have prevented the worker earning them during the leave period.

6. The reference accordingly asked whether payment need only enable and encourage the taking and enjoyment of leave; whether it must correspond precisely, or be broadly comparable, to normal pay; which working period supplies the comparison; and how supplements subject to annual activity limits should be assessed.

1. United Kingdom Supreme Court: The Court did not finally dispose of the substantive appeal. It referred questions concerning the meaning of paid annual leave to the Court of Justice in [2010] UKSC 16.
2. Court of Appeal: The court accepted British Airways’ case under domestic and European law in [2009] EWCA Civ 281, reversing the tribunals’ approach.
3. Employment Appeal Tribunal: The tribunal upheld the pilots’ argument that holiday pay should reflect all three remuneration components, calculated by analogy with sections 221–224 of the Employment Rights Act 1996.
4. Employment Tribunal: The tribunal upheld the pilots’ claims on the same basis.