British Airways Plc v De Mello & Ors

For statutory holiday pay, the governing requirement is payment equivalent to normal remuneration. A tribunal must decide whether an allowance is, in substance, compensation for performing the job or a payment made genuinely and exclusively to cover costs. It must evaluate the whole factual picture; the worker bears the overall burden, but the issue should not ordinarily be resolved by a rigid burden-of-proof analysis.

An allowance which meets the material and temporal requirements of normal pay cannot be excluded merely because its omission is unlikely to deter leave-taking. A series of holiday-pay deductions may be unified by the common failure to calculate holiday pay by reference to normal pay. There is no three-month rule, and leave from different sources is ordinarily a composite whole.

Six present or former British Airways cabin-crew members pursued claims for underpaid statutory holiday pay under the Civil Aviation (Working Time) Regulations 2004 and as unlawful deductions from wages. Their claims concerned numerous allowances within a complex pay system.

The Employment Tribunal held that meal allowances were in principle included in holiday pay, but rejected claims concerning duty-free commission and, for one claimant, Back-to-Back allowance. It also applied a three-month rule to break a series of deductions and accepted that statutory leave could be designated first.

British Airways appealed the meal-allowance ruling. The claimants cross-appealed the rulings on limitation, leave designation, commission and Back-to-Back allowance. The central issues were the meaning of normal pay, the scope of a series of deductions, and whether leave could be allocated between statutory and contractual sources.

1. Appeals allowed and remitted. The employer’s appeal on meal allowances and all four claimants’ grounds succeeded. The remaining issues were remitted to a different Employment Judge.

2. The overriding rule is that holiday pay must reflect normal pay. The inquiry has a nature component and a temporal component. The nature inquiry asks for the real basis of the payment: whether it compensates performance of job duties, or was made genuinely and exclusively to cover costs. Paragraphs 24 and 25 of Williams draw that distinction; they do not create an expenses exception to an otherwise established performance payment.

3. The worker bears the overall burden of establishing normal pay. However, the tribunal should normally decide the issue by considering all relevant facts and circumstances, drawing proper inferences, and assessing the factual mosaic. It should not place a discrete burden on the employer to prove that the payment was an expense payment. Nor should it apportion a payment between remuneration and expenses by assessing a reasonable level of expense. A very high payment may, exceptionally, support an inference that it was not genuinely and exclusively intended to cover costs.

4. The tribunal erred in its meal-allowance reasoning by treating expenses as an excluded subcategory of performance payments and deciding the issue because British Airways had not discharged a burden placed upon it. The issue of whether meal allowances formed part of normal pay required fresh determination.

5. Following Agnew, a gap exceeding three months does not as a matter of law break a series of deductions. Deductions need sufficient similarity and a temporal connection, assessed in their whole context. Here the failure to calculate holiday pay by reference to normal pay supplied sufficient similarity, despite variation in the relevant allowances. The tribunal must determine whether any temporal gaps break a series.

6. The tribunal also erred on designation. The 2004 Regulations conferred no statutory designation power, and the contractual arrangements did not establish that British Airways had in fact designated leave days. All leave days must therefore be treated equally as part of a composite whole.

7. Duty-free commission was intrinsically linked to the crew’s tasks. It could not be excluded because its omission was unlikely to deter leave-taking. The reference period for Back-to-Back allowance could not include months in which the claimant performed a different role and was ineligible for it; the tribunal must assess whether three payments in five eligible months constituted normal pay.

• Employment Appeal Tribunal: allowed British Airways’ appeal and all claimants’ appeals from the Employment Tribunal’s 2019 reserved decision; remitted outstanding issues to a different Employment Judge.
• Employment Tribunal, Watford: held in February 2019 that certain allowances were or were not included in statutory holiday pay, subject to limitation and remedy issues.