British Airways plc v Williams and others

This appeal concerned the meaning of "paid annual leave" in regulation 4 of The Civil Aviation (Working Time) Regulations 2004, implemented to give effect to clause 3 of the European Agreement annexed to Council Directive 2000/79/EC (the Aviation Directive) and to article 7 of the Working Time Directive. The question was whether pay in respect of leave must reflect only fixed basic pay or must include variable supplements (Flying Pay Supplement and Time Away From Base Allowance) so as to put the worker, during leave, in a position comparable to periods of work.

The Supreme Court held that the domestic Regulations could and should, if possible, be construed consistently with the requirements of the Directive but that the meaning of "paid annual leave" in the present circumstances was not acte clair. The Court therefore referred specific questions to the Court of Justice of the European Communities to determine whether European law prescribes the level or nature of payment for paid annual leave, and if so how "normal" or "comparable" pay should be assessed where pay includes activity-related supplements and where annual limits apply.

Background and parties: The appellants were pilots employed by British Airways whose contractual remuneration comprised a fixed annual sum together with variable payments: a Flying Pay Supplement (FPS) linked to flying hours and a Time Away From Base Allowance (TAFB). Under a collective Memorandum of Agreement pilots were obliged to take specified annual leave. The appellants challenged the employer's practice of calculating pay in respect of leave on the basis of fixed pay only.

Procedural history: The Employment Tribunal and Employment Appeal Tribunal found for the pilots, treating the entitlement as requiring calculation by analogy with sections 221–224 of the Employment Rights Act 1996. The Court of Appeal ([2009] EWCA Civ 281) allowed British Airways' appeal. The matter then proceeded to the Supreme Court.

Nature of the claim: The appellants sought payment in respect of annual leave based on all components of remuneration (fixed pay plus FPS and taxable element of TAFB) so that remuneration during leave would be "comparable" or "normal" relative to periods of work.

Issues framed: (i) The meaning and scope of the phrase "paid annual leave" in the Aviation Regulations and the Aviation Directive; (ii) whether European law requires that pay during leave correspond to "normal" remuneration or be otherwise defined by Member States or by collective/contractual arrangements; (iii) if a requirement of "normal" or "comparable" pay exists, on what basis the comparison should be made where remuneration includes supplements tied to particular activities and where statutory annual limits might have precluded those activities during the leave period.

Court's reasoning and disposition: The Supreme Court analysed the relevant Directives (Working Time Directive 93/104/EC and its consolidated 2003/88/EC), the Aviation Directive and the domestic implementing Regulations. The Court noted authoritative statements of the Court of Justice indicating that pay for leave should place the worker in a position comparable, as regards remuneration, to periods of work, but observed that those authorities arose in different factual contexts. The Court concluded that the meaning of "paid annual leave" in the present factual matrix (variable pay tied to activity and annual statutory limits) was not free from doubt (not acte clair). It therefore referred a set of detailed questions to the Court of Justice for a preliminary ruling, including whether European law prescribes the level or nature of payment and how "normal" or "comparable" pay should be assessed where supplements and annual limits operate.

Observations: The Supreme Court added guidance and observations on relevant authorities and on the interaction between national freedom to implement details and the Directive's objectives of protecting workers' health and safety, but declined to decide the ultimate entitlement pending the Court of Justice's ruling.

Remitted to the Court of Justice for a preliminary ruling. The Supreme Court concluded that the meaning of "paid annual leave" in the Aviation Regulations and the Directive was not acte clair in the context of pay comprising fixed and activity-related supplements and where statutory annual limits might prevent earning such supplements during leave; it therefore framed and referred specific questions to the Court of Justice, with observations on relevant Strasbourg and domestic authorities and on the interpretative duty to construe domestic law consistently with Community requirements.

Employment Tribunal and Employment Appeal Tribunal: held for the appellants (pilots). Court of Appeal: allowed British Airways' appeal ([2009] EWCA Civ 281). Supreme Court: [2010] UKSC 16 – reference made to the Court of Justice of the European Communities for preliminary rulings on the meaning of "paid annual leave" under the Aviation Directive and the Working Time Directive.