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 UKSC 43, Supreme Court - Jane McNeill QC, Michael Ford QC
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How much must a worker be paid while on holiday? The Supreme Court today clarified that issue in the long-running litigation in British Airways v Williams, ruling that pilots were entitled to be paid their normal remuneration during their four-week period of statutory annual leave. Holiday pay must include all elements of remuneration, such as flying pay supplements, and not just basic pay. Only sums which are intended exclusively to cover expenses can be excluded. The case is important not only for all workers in the civil aviation sector, whose rights to annual leave are set out in the Civil Aviation (Working Time) Regulations 2004, but also for the level of holiday pay of all other workers, whose entitlements to annual leave are set out in the Working Time Regulations 1998.
The pilots in BA v Williams, supported by their union BALPA, claimed that their holiday pay should include two supplements: flying pay supplement (FPS) and the taxable element of a payment for time away from base (TAFB). BA claimed it was sufficient that they were paid their basic pay. The Supreme Court referred questions to the Court of Justice, which held that pay during annual leave under the Working Time Directives must include all elements of remuneration, if necessary calculated on the basis of an average over a representative period. Only payments "intended exclusively to cover occasional or ancillary costs" could be excluded; elements such as FPS had to be paid during holidays.
On return of the case to the Supreme Court, BA argued that the Civil Aviation (Working Time) Regulations could not be interpreted to give effect to the judgment of the Court of Justice. The Supreme Court unanimously rejected BA’s submission. An employment tribunal can assess, therefore, what should have been paid in respect of FPS during annual leave by using an average over a representative period. The Supreme Court remitted to the employment tribunal the question whether TAFB payments were intended exclusively to cover expenses or were part of pilots' remuneration.
Many thousands of claimants in the civil aviation sector, in addition to the 3,000 pilots in Williams, have already lodged claims for non-payment of various supplements during their holidays. But the rulings of the Court of Justice and the Supreme Court will inevitably lead to challenges to the level of payment for annual leave under the Working Time Regulations. Such payments fall to be calculated in accordance with the statutory formula for a week’s pay in ss 221-226 of the Employment Rights Act. Applying those provisions, the Court of Appeal in Bamsey held that holiday pay did not need to include payments for compulsory overtime. The rulings in Williams throw into doubt the correctness of that decision. If a worker’s pay during the four-week period of statutory holiday does not correspond with his or her normal remuneration while working – for example, if commission payments, bonuses or other allowances are excluded - this is probably in breach of the Working Time Directive, and the domestic legislation must be interpreted to avoid this result.
Jane McNeill QC and Michael Ford acted for the pilots in Williams, instructed by Victoria Phillips of Thompsons.