Intrinsic link

Airline pilots are entitled by law to statutory, paid annual leave, but the law did not make clear how their pay should be calculated. In Williams and ors v British Airways plc, the Court of Justice of the European Union (CJEU) said that pilots were entitled not just to their basic salary, but also to be paid for any aspect of their work that was “linked intrinsically” to complying with their contract and which was included in their overall pay.

The claimants’ union, BALPA, instructed Thompsons to act on their behalf.

Basic facts

BA paid its pilots a basic salary plus a “flying time” supplement (FPS) and an allowance for any time spent away from their base airport (TAFB), as well as annual leave under their contracts. Their holiday leave was, however, paid at the level of basic pay and did not include an amount in respect of the additional allowances.

The pilots claimed that BA was in breach of Regulation 4 of the Civil Aviation (Working Time) Regulations 2004, entitling them to “paid annual leave of at least four weeks”. The Regulation did not, unlike the Working Time Regulations 1998, stipulate how the pay was to be calculated. The pilots argued that their holiday pay for this statutory period should include the additional supplement and allowance.

Decisions of the lower courts

And the Tribunal agreed. At a preliminary hearing it said that “paid annual leave” in Regulation 4 meant “an amount comparable to the contractual pay received when working”. BA should therefore have relied on sections 221 to 224 of the ERA when calculating the pilots’ holiday pay, by averaging their earnings over the preceding 12 weeks.

And the EAT agreed. Relying on the decision of the European Court of Justice in Robinson-Steele v RD Retail Services Ltd, it said that holiday pay had to be comparable to the pay that workers got when they were actually at work.

The Court of Appeal, however, disagreed. It said that the ordinary meaning of the pay element in “paid annual leave” within Regulation 4 was not “pay measured in some way by reference to the pay that a pilot can expect to earn whilst working”.

It said that sections 221 to 224 had nothing to do with fixing the pilots’ holiday pay and could only do so if they had “been expressly adopted and adapted for that purpose”. As the Working Time Regulations expressly stated that the provisions in the ERA did not apply to the aviation industry, they could not be relied on in this case.

The Supreme Court referred the case to the CJEU to determine whether paid annual leave meant the same under article 7 of the Working Time Directive as it did for pilots under clause 3 of the European Aviation Agreement.

CJEU decision

And the Court said that both agreements meant the same thing with the result that pilots were entitled to more than just their basic salary during their annual leave.

It held that as the whole point of being paid for annual leave was to put the worker in a position that was comparable to when they were working, it followed that pay when on leave must “correspond to the normal remuneration received by the worker”.

Even if the worker’s pay was made up of several components (as here), that “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”.

It followed, therefore that any aspect of their work that was “linked intrinsically” to complying with their contract (such as time spent flying) and which was included in their overall pay, must be included in holiday pay as well as remuneration relating to their personal and professional status.

Only payments which are exclusively connected with costs arising in connection with a particular activity (in the pilots’ case, for example, the expenses element of costs incurred whilst away from base) may be excluded.

It concluded that it was for the domestic courts to assess whether the various components of their total pay met those criteria, where appropriate using an averaging process. The case will now be remitted back to the Supreme Court for further consideration.