British Airways Plc v Williams and Others
| Jurisdiction | England & Wales |
| Judge | Lord Clarke,Lord Sumption,Lord Mance,Lord Walker,Lord Hope |
| Judgment Date | 17 October 2012 |
| Neutral Citation | [2012] UKSC 43 |
| Date | 17 October 2012 |
| Court | Supreme Court |
[2012] UKSC 43
Lord Hope, Deputy President
Lord Walker
Lord Mance
Lord Clarke
Lord Sumption
Appellant
Jane McNeill QC
Michael Ford
(Instructed by Thompsons
Solicitors)
Respondent
Christopher Jeans QC
Andrew Short QC
(Instructed by Baker and
Mackenzie LLP)
Heard on 23 July 2012
Lord Mance (with whom Lord Hope, Lord Walker, Lord Clarke and Lord Sumption agree)
By its judgment in this appeal dated 24 March 2010 the Supreme Court referred to the Court of Justice five questions regarding the nature and assessment of the concept of "paid annual leave" in articles 7 of Council Directives 93/104/EC and 2003/88/EC and clause 3 of the European Agreement annexed to and intended to be implemented under Council Directive 2000/79/EC. The Court of Justice by its judgment dated 15 September 2011 gave its response: British Airways plc v Williams ( Case C-155/10) [2012] ICR 847. The parties are now at odds as to its consequences for the dispute between them.
Clause 3 of the European Agreement reads:
"(1) Mobile staff in civil aviation are entitled to paid annual leave of at least four weeks, in accordance with the conditions for entitlement to, and granting of, such leave laid down by national legislation and/or practice.
(2) The minimum period of paid annual leave may not be replaced by an allowance in lieu, except where the employment relationship is terminated."
In the United Kingdom, The Civil Aviation (Working Time) Regulations 2004 (SI 2004/756) ("the Aviation Regulations") were introduced to comply with this country's obligations to give effect to Directive 2000/79/EC. The Aviation Regulations provide:
"4. (1) A crew member is entitled to paid annual leave of at least four weeks, or a proportion of four weeks in respect of a period of employment of less than one year.
(2) Leave to which a crew member is entitled under this regulation—
(a) may be taken in instalments;
(b) may not be replaced by a payment in lieu, except where the crew member's employment is terminated."
As the Supreme Court explained in its judgment dated 24 March 2010 the Aviation Regulations are part of a wider complex of legislation requiring paid annual leave, starting with a general requirement introduced by Directive 93/104/EC ("the Working Time Directive"). The Working Time Directive excluded various sectors, including air transport. Further, when the Working Time Directive was implemented by the Working Time Regulations 1998 (SI 1998/1833) ("the Working Time Regulations"), these made specific reference to sections 221 to 224 (and by implication sections 234 to 235) of the Employment Rights Act 1996, which contain a detailed scheme (originally introduced in the context of redundancy pay) for ascertaining a week's pay in the cases of employments with and without "normal working hours". In contrast, the Aviation Regulations neither contain nor refer to any such scheme. They leave the concept of "paid annual leave" undefined. Hence, the issues arising in this appeal.
The appellants are British Airways pilots. Their terms of employment, negotiated by their union, British Air Line Pilots Association ("BALPA"), are found in a Memorandum of Agreement ("MOA") which requires them to take 30 days' annual leave and entitles them to take a further two weeks' leave, save in the case of pilots with a Gatwick base, who are obliged to take 35 days' holiday and are entitled to a further seven days of leave. The MOA provides for pilots to receive (a) a fixed annual sum, plus two supplementary payments varying according to the time spent flying, consisting of (b) the Flying Pay Supplement ("FPS") paid at £10 per flying hour and (c) the Time Away from Base allowance ("TAFB") paid at £2.73 per hour. British Airways explains that TAFB was "introduced to replace meal allowances, sundries and the Gatwick Duty Allowance" and to be "increased in accordance with the UK Retail Prices Index for Catering – Restaurant Meals". Her Majesty's Revenue and Customs' attitude is that the TAFB is over-generous and that 18% of it is taxable, in effect as pure remuneration.
When the appeal first came before the Supreme Court, British Airways' primary submission was that the United Kingdom legislator, by omitting to introduce any detailed scheme for the calculation of "paid annual leave" like that provided under the Working Time Regulations, must be taken to have left this to be determined by collective or individual agreement between the parties, whatever might be the effect of the Aviation Directive. The Supreme Court was not at that time persuaded by this submission, and thought it likely to be possible to construe the Aviation Regulations to reflect what meaning the Aviation Directive might have. Hence, the reference made to the Court of Justice.
British Airways' second submission was that the Aviation Directive was to like effect, leaving the calculation of "paid annual leave" to collective or individual agreement between the parties. Its third submission, if this was wrong, was that the only constraint imposed by the Directive was that pay during annual leave must not be so low as to prevent or inhibit the taking of leave. Finally, it submitted that the fixed annual sum – (a) above – constituted the pilots' normal pay and was sufficiently comparable to remuneration received while working to satisfy the requirement for paid annual leave.
The questions referred to the Court of Justice by the Supreme Court were in these circumstances:
"(1) Under (a) articles 7 of Council Directives 93/104/EC and 2003/88/EC and (b) clause 3 of the European Agreement annexed to the Council Directive 2000/79/EC: (i) to what, if any, extent does European law define or lay down any requirements as to the nature and/or level of the payments required to be made in respect of periods of paid annual leave; and (ii) to what, if any, extent may member states determine how such payments are to be calculated?
(2) In particular, is it sufficient that, under national law and/or practice and/or under the collective agreements and/or contractual arrangements negotiated between employers and workers, the payment made enables and encourages the worker to take and to enjoy, in the fullest sense of these words, his or her annual leave; and does not involve any sensible risk that the worker will not do so?
(3) Or is it required that the pay should either (a) correspond precisely with or (b) be broadly comparable to the worker's "normal" pay?
Further, in the event of an affirmative answer to question (3)(a) or (b):
(4) Is the relevant measure or comparison: (a) pay that the worker would have earned during the particular leave period if he or she had been working, instead of on leave, or (b) pay which he or she was earning during some other, and if so what, period when he or she was working?
(5) How should "normal" or "comparable" pay be assessed in circumstances where: (a) a worker's remuneration while working is supplemented if and to the extent that he or she engages in a particular activity; (b) where there is an annual or other limit on the extent to which, or time during which, the worker may engage in that activity, and that limit has been already exceeded or almost exceeded at the time(s) when annual leave is taken, so that the worker would not in fact have been permitted to engage in that activity had he been working, instead of on leave?
The Court of Justice gave a compendious answer. It ruled (para 31) that article 7 of Directive 2003/88/EC and clause 3 of the European Agreement:
"must be interpreted as meaning that an airline pilot is entitled, during his annual leave, not only to the maintenance of his basic salary, but also, first, to all the components intrinsically linked to the performance of the tasks which he is required to carry out under his contract of employment and in respect of which a monetary amount, included in the calculation of his total remuneration, is provided and, second, to all the elements relating to his personal and professional status as an airline pilot. It is for the national court to assess whether the various components comprising that worker's total remuneration meet those criteria."
The Court of Justice's reasoning makes clear that it was ruling against British Airways on questions (2), (3) and (5)(a):
"20 The purpose of the requirement of payment for that leave is to put the worker, during such leave, in a position which is, as regards remuneration, comparable to periods of work …
2. … remuneration paid in respect of annual leave must, in principle, be determined in such a way as to correspond to the normal remuneration received by the worker. It also follows that an allowance, the amount of which is just sufficient to ensure that there is no serious risk that the worker will not take his leave, will not satisfy the requirements of European Union law."
The court went on, in further answer, to say that where, as here, pay was structured to involve several components, "a specific analysis" was required (para 22), because (para 23):
"that structure cannot affect the worker's right … to enjoy, during his period of rest and relaxation, economic conditions which are comparable to those relating to the exercise of his employment"
and
"24 Accordingly, any inconvenient aspect [sic] which is linked intrinsically to the performance of the tasks which the worker is required to carry out under his contract of employment and in respect of which a monetary amount is provided which is included in the calculation of the worker's total remuneration, such as, in the case of airline pilots, the time spent flying, must necessarily be taken into account for the...
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