Holidays with pay – Employee airline pilots only receiving basic salary by way of remuneration for annual leave
British Airways Plc v Williams and others: Supreme Court (Lords Hope DP, Walker, Mance, Clarke and Sumption SCJJ): 17 October 2012
The appellant employees were airline pilots employed by the employer airline. Under their terms of employment, the employees were required to take at least 30 days' annual leave.
The employees received a fixed annual sum plus two supplementary payments, a Flying Pay Supplement (FPS) and a Time Away from Base allowance (TAFB) which varied according to the time spend flying. TAFB was designed to cover costs incurred by pilots whilst away from their base, however HMRC considered that TAFB was over-generous and that 18% was taxable as pure income. The Civil Aviation (Working Time) Regulations 2004, SI 2004/756 did not define the concept of paid annual leave. The employees sought to clarify the calculation of pay for annual leave purposes.
By its judgment in the instant case dated 24 March 2010 (see British Airways Plc v Williams and others  All ER (D) 237 (Mar)), the Supreme Court referred to the Court of Justice of the European Union five questions regarding the nature and assessment of the concept of 'paid annual leave' in articles 7 of Council Directives (EC) 93/104 (concerning certain aspects of the organisation of working time) and (EC) 2003/88 (concerning certain aspects of the organisation of working time) and clause 3 of the European Agreement annexed to and intended to be implemented under Council Directive (EC) 2000/79 (concerning the European Agreement on the Organisation of Working Time of Mobile Workers in Civil Aviation concluded by the Association of European Airlines (AEA), the European Transport Workers' Federation (ETF), the European Cockpit Association (ECA), the European Regions Airline Association (ERA) and the International Air Carrier Association (IACA)).
On 15 September 2011, the Court of Justice gave its responses to those questions (see Williams v British Airways Plc  IRLR 948). The Court of Justice held, inter alia, that an airline pilot was entitled, during his annual leave, to payment which put the worker in a position which was, as regards remuneration, comparable to periods of work, and further, that the assessment of that remuneration was to be carried out on the basis of an average over a reference period which was judged to be representative. The Court of Justice also drew a distinction between remuneration for all activities undertaken during employment and, on the other hand, payments intended exclusively to cover occasional or ancillary costs- which would not be incurred during holiday periods. The parties returned to the Supreme Court as they were at odds as to the consequences of the Court of Justice's decision.
In the light of the Court of Justice's judgment, the employees submitted that: (i) each of their claims could and should be remitted to the employment tribunal (the tribunal) for assessment of a representative period and of the relevant remuneration earned during that period; and (ii) that such remuneration should include not only basic pay and FPS, but also 18% of TAFB.
The Court ruled: (1) In the circumstances of the instant case, the choice of a reference period was in the first instance for the employer to make. That was a choice to be made by the employer within the parameters of what could (reasonably) be 'judged to be representative'. Failing such a choice, the employer could not complain if a court of tribunal took its own view of what best represented a representative period in the case of a individual employee who brought a case to it (see  of the judgment). The employees' claims would be remitted to the tribunal for further consideration of the appropriate payments to be made to the pilots in respect of the periods of annual leave in issue (see  of the judgment).
Officier van Justitie v Kolpinghuis Nijmegen BV: 80/86  ECR 3969 considered; Marleasing SA v La Comercial Internacional de Alimentacion SA: C-106/89  ECR I-4135 considered; Arcaro (criminal proceedings against): C-168/95  All ER (EC) 82 considered; Pfeiffer v Deutsches Rotes Kreuz, Kreisverband Waldshut eV: C-397/01 to C-403/01  IRLR 137 considered; Williams v British Airways plc: C-155/10  IRLR 948 considered; Dominguez v Centre Informatique Du Centre Ouest Atlantique: C-282/10  IRLR 321 considered.
(2) With regard to remuneration, in the instant case, the question arising was whether the payments by way of TAFB had been 'intended exclusively to cover... costs'. The Supreme Court was not in possession of the material to determine the answer to that question (see  of the judgment). It would be for the tribunal to consider and determine upon what basis TAFB had been agreed and paid during any relevant period (see  of the judgment).
Jane McNeil QC and Michael Ford (instructed by Thompsons Solicitors) for the employees; Christopher Jeans QC and Andrew Short QC (instructed by Baker and Mackenzie LLP) for the employers.