British Airways Plc v De Mello & Ors

This appeal concerned the calculation of statutory holiday pay for British Airways cabin crew and the time limits for claims for unlawful deductions from wages. The Employment Appeal Tribunal restated the established principle that holiday pay must correspond to a worker's normal remuneration, applying the tests in Williams, Lock and related authorities: (i) a substantive (or "nature") test asking whether a payment is intrinsically linked to the performance of contractual tasks, and (ii) a temporal test requiring regularity over a representative reference period.

The Tribunal held that the employment tribunal had erred in approach to meal allowances by treating expense-type payments as an excluded sub-category and reversing the burden of proof; that the employment tribunal had been wrong to apply a rigid three-month rule to break a "series" of deductions (in light of Agnew); that it had wrongly applied a deterrence/de minimis test when excluding duty-free commission; and that reference periods must be representative of the employee's actual working pattern when assessing eligibility for an allowance (Back-to-Back allowance). Key statutory provisions considered included Regulation 4 and Regulation 18 of the Civil Aviation (Working Time) Regulations 2004 and section 23 ERA 1996.

Background and parties. Six cabin crew members pursued long-running group claims that various allowances paid by British Airways should have been included in statutory holiday pay. The original merits hearing was before Employment Judge R Lewis in February 2019; the present decision is an appeal to the Employment Appeal Tribunal.

Nature of the claim. The claimants sought remedies for underpayment of statutory holiday pay and unlawful deductions from wages, relying on the Civil Aviation (Working Time) Regulations 2004 and Part II of the Employment Rights Act 1996.

Issues before the EAT.

• whether specific allowances (notably meal allowances, duty-free commission and a Back-to-Back allowance) form part of "normal pay" for holiday pay purposes;
• the appropriate allocation of the burden of proof on whether allowances are performance payments or expense reimbursements;
• whether the employment tribunal erred in applying a three-month rule to determine whether deductions formed a "series" under section 23(3) ERA 1996 and related Regulation 18 CAWTR 2004;
• whether the employer could designate particular days as statutory rather than contractual leave for the purpose of assessing series and limitation.

Reasoning and outcome. The EAT reaffirmed that the correct test is whether the allowance is intrinsically linked to the performance of contractual tasks and whether it is sufficiently regular over a representative reference period. On meal allowances the EAT found that the employment tribunal had proceeded on an incorrect and compartmentalised approach: it had effectively treated expense payments as an excluded subclass and placed the onus on the employer to prove exclusive expense purpose, rather than weighing all relevant facts and drawing inferences. The matter was remitted for fresh determination. On limitation, the EAT held that the tribunal had erred in applying a three-month rule to break a series; it followed Agnew and held that whether deductions form a series is a fact-sensitive enquiry and substituted a conclusion that, on the facts found, the impugned holiday-pay deductions were sufficiently similar to amount to a series. The tribunal had erred in excluding duty-free commission on an asserted absence of deterrent effect, which is inconsistent with the requirement that holiday pay correspond to normal pay; that ground was allowed and remitted. The tribunal also erred in treating the full 12-month reference period as representative in respect of the Back-to-Back allowance where the claimant had only become eligible partway through the year; that ground was allowed and remitted.

Remedy and case management. The EAT allowed the appeal in part and remitted the issues to a different employment judge for fresh determination of meal allowances, commission, Back-to-Back allowance and time-limit/series issues, and for final quantification of awards.

Appeal allowed in part. The Employment Appeal Tribunal held that the employment tribunal had erred in law and in approach in several respects: it misallocated the burden and compartmentalised the analysis concerning meal allowances instead of weighing all factual features to determine whether those payments were performance pay or expenses; it wrongly applied a three-month rule to break a "series" of deductions (now corrected by reliance on Agnew); it wrongly excluded duty-free commission by applying a deterrence/de minimis test contrary to the requirement that holiday pay correspond to normal remuneration; and it used an unrepresentative reference period for the Back-to-Back allowance. The EAT remitted those matters for fresh determination by a different judge for remedy and quantification.

Appeal from the Employment Tribunal (reserved judgment of Employment Judge R Lewis following a merits hearing at Watford in February 2019). The EAT heard argument on 12–13 March 2024 and handed down judgment on 19 April 2024 ([2024] EAT 53).