What is ‘normal remuneration’ during periods of annual leave?

The Supreme Court has recently handed down judgment in British Airways- v- Williams and others and in so doing, overturned the Court of Appeal’s decision that BA was not in breach of the Civil Aviation (Working Time) Regulations (the Aviation Regulations) by only paying pilots basic pay during annual leave.

Ms Williams acted as the lead Claimant for 2,750 pilots employed by BA.  Collective Agreements between BA and the British Airline Pilots Association incorporated terms into the pilots’ contracts that entitled them to two supplementary payments (for time spent flying) in addition to basic salary and an allowance for periods spent away from home – stop-overs.  The initial claim was brought in the Tribunal where it was found in the pilots favour that pay for annual leave should be calculated in accordance with the Employment Rights Act (ERA) which states that where a worker’s remuneration varies with the amount of work done in a week, a ‘weeks’ pay’ for holiday pay purposes will be calculated using the hourly rate of pay over an average period.

BA made an unsuccessful appeal to the EAT but following a further appeal to the Court of Appeal, the appeal was upheld.  The Court of Appeal held that the Aviation Regulations would have referred specifically to the ERA if it was intended those provisions to apply. The pilots appealed to the Supreme Court which concluded that the Working Time Directive and the Civil Aviation Directive (the implementing EU legislation) were unclear on this issue and they referred a number of questions to the ECJ.

The ECJ held that the annual leave provisions in the Civil Aviation Directive, in line with the Working Time Directive, entitle pilots not only to basic salary but also to “normal remuneration” during statutory annual leave. Remuneration intrinsically linked to the performance of tasks which workers are contractually required to perform (such as payments for time flying in the case of a pilot) must be taken into account when calculating holiday pay.  The ECJ clarified that remuneration which is intended to cover ancillary costs arising at the time these contractual duties are performed, do not need to be taken into account.

The Supreme Court overturned the decision made by the Court of Appeal and referred the claims to the ET to assess the payments to be made in respect of flight supplements and to consider whether the allowance for stop-overs fell into the ancillary costs category.

Whilst this decision is clearly directly linked to the airline industry, it will also have an impact on the calculation of holiday pay for all workers under the Working Time Directive and the corresponding domestic legislation, the Working Time Regulations will need to be interpreted to take account of this decision. It is likely that workers may now seek to include certain commission payments, overtime or discretionary bonuses as part of “normal remuneration” that would have normally been excluded from the calculation of a ‘weeks’ pay’.

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1 Response to What is ‘normal remuneration’ during periods of annual leave?

  1. Mary Salas says:

    It’s hard to seek out educated folks on this subject, but you sound like you recognize what you’re speaking about! Thanks

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