Court of Appeal
JUDGMENT OF THE COURT OF APPEAL
Handed down: 3 April 2009
The Court of Appeal has today handed down its judgment in the case of British Airways plc v. Ms S Williams & Others in which BA was appealing against a decision of the EAT and there was a cross-appeal by the pilots. It has upheld BA's appeal and dismissed the cross-appeal. Jane McNeill QC and Michael Ford (both of Old Square Chambers) and Keith Bryant (of Outer Temple Chambers) appeared on behalf of the approximately 2,750 BA pilots who resisted BA’s appeal.
The claims affect many thousands of pilots and cabin crew in the civil aviation sector and the pilots are likely to petition the House of Lords for leave to appeal.
Relevant BA employees are remunerated by payment of (i) basic pay, (ii) flying pay and (iii) an allowance per hour of time spent away from their base airport ("TAFB"), part of which is treated as a repayment of expenses and part as taxable income. Holiday pay is paid only on the basis of basic pay and does not include flying pay or TAFB.
The pilots brought claims that BA, by paying basic pay only during holiday periods, had failed to comply with its obligations under Regulation 4 of the Civil Aviation (Working Time) Regulations 2004 (SI 2004/756) (the "Aviation Regulations").
The key issue was the proper interpretation of Regulation 4 of the Aviation Regulations which provides an entitlement to "paid annual leave of at least four weeks" but does not (unlike, for example, Regulations 13 and 16 of the Working Time Regulations 1998 (SI 1998/1833)) provide a formula by which such payment should be calculated.
Decisions of the ET and EAT
The employees were successful before both the ET and the EAT. In both the ET and the EAT it was held that "paid" in "paid annual leave" in Regulation 4 carried the ordinary, natural meaning of "an amount comparable to the contractual pay received when working" and that this was in line with the decision of the ECJ in Robinson-Steele v. RD Retail Services Ltd  ICR 932. Whilst no reliance could be placed on Regulation 16 of the Working Time Regulations, that did not prevent sections 221 to 224 of the ERA 1996 from being invoked as national law and practice for the purpose of determining the holiday pay of the pilots. The payment of basic pay did not meet the requirements of Regulation 4.
Decision of the Court of Appeal
The Court of Appeal accepted that the pay element of "paid annual leave" in Article 7.1 of the Working Time Directive means "normal" pay, or pay at a level "comparable" to that which a worker earns when working. The Court of Appeal came to this conclusion in accordance with the decisions of the ECJ in Robinson-Steele v. RD Retail Services Ltd  ICR 932 and the very recent Stringer v. HMRC  IRLR 214, decided after the hearings in the ET and EAT. It considered that those cases represented the Community law interpretation of "paid annual leave".
In spite of this, the Court of Appeal did not accept that the meaning of the pay element in "paid annual leave" in Regulation 4 is pay measured in some way by reference to the pay that a pilot can expect to earn whilst working. If that had been the interpretation intended by the domestic legislation then the Court of Appeal considered that the Aviation Regulations would have gone the further distance of explaining the required calculation since it considered that there was plainly a variety of ways in which the calculation could be carried out. The Regulations do not, unlike other Regulations incorporating EC law (such as the Working Time Regulations), expressly incorporate sections 221 to 224 ERA 1996 and as such those sections cannot be regarded as providing the necessary formula.
Whilst accepting that "paid annual leave" in Article 7.1 of the Working Time Regulations means pay that is "normal" or "comparable" in relation to pay earned whilst working and that Clause 3 of the Aviation Agreement, which uses the same phrase, must bear the like meaning, the Court of Appeal did not accept that the ECJ decisions in Robinson-Steele and Stringer relevantly inform the interpretation of regulation 4 "in a way sufficient for the pilots' purpose" for two reasons: first, neither Article 7.1 nor Clause 3 is directly effective; and secondly, in saying what it did about holiday pay, the ECJ was no more than stating a broad, general principle and was not attempting to explain how the principle is intended to work in practice throughout the EU. To do so would be to usurp the independent right of each member state so to decide by the adoption of its own "national legislation and/or practice". Thus, whilst paid annual leave means pay calculated at the level of or comparable to normal pay, it is for member states to decide upon the precise calculation applicable in any case. There is no UK legislation or practice to determine the level of holiday pay and as such no breach of statutory obligation imposed by Regulation 4. The Court of Appeal went on to state expressly that it is not part of the role of the ET to fill in any gap in the domestic implementation of the Aviation Agreement and Directive.
In spite of the Court of Appeal's disinclination to "interfere" with the amount paid in respect of paid leave, it did accept that the right to "paid annual leave" imposed some payment obligation on an airline. An employer which offered either unpaid annual leave or annual leave paid at only a token or derisory amount could properly be the subject of a complaint that it had failed to meet the statutory purpose of Regulation 4, which must at least be to provide annual leave at a level of pay which will enable the worker actually to take the leave. In such a case the employee would have a claim under Regulation 18(1) and be entitled to compensation under Regulation 18(3).
The Court of Appeal thought there might be a void in the regulations and the UK may have been in breach of its obligation properly to implement the Aviation Directive. It did not rule on this point, as the UK government was not represented before it.
Finally, the Court of Appeal refused to refer the case to the ECJ on the basis that there was no lack of clarity as to the interpretation of Clause 3 of the Aviation Agreement and that the case turned instead on the interpretation of Regulation 4 of the Aviation Regulations, which is a matter for the domestic courts.
Despite the clear acceptance by the Court of Appeal of the ECJ rulings that levels of holiday pay should be fixed by reference to "normal" or "comparable pay", the implication of its judgment is that pay which constitutes neither "normal" nor "comparable" pay will be sufficient to meet the obligation under Regulation 4. The only limit to that finding is that the amount paid should not be so low as to deter employees from taking holiday. This appears to be contrary to the European jurisprudence on holiday pay and to article 132 of the ILO Convention. It is also likely to lead to considerable difficultly and inconsistency in the tribunals if they are required to determine the level of pay which is so low as to deter individuals from taking holiday: a difficulty which is compounded by the fact that employees in the civil aviation sector are frequently required to take holiday in any event by their contracts of employment.
 IRLR 491,  ICR 906 CA
William Meade (Senior Clerk)