CFC/3635/2000

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1.	My decision is that the decision of the tribunal is erroneous in point of law.  I set aside the tribunal’s decision, but since I can do so without making any fresh or further findings of fact, I substitute my own decision for that of the tribunal.  My decision is the same as that made by the tribunal, namely, that the claimant was entitled to working families tax credit at the weekly rate of £24.52 for 26 weeks from 14 March 2000.

2.	This appeal, brought with the leave of a district chairman, arises out of a claim for working families tax credit made on 9 March 2000.  The claimant had been employed as a term-time only school worker since 31 January 2000.  She had elected to be paid weekly during term-time, instead of monthly throughout the year, so that the amount of wages which she received each week during term-time was more than her average weekly wage calculated on an annual basis by dividing the claimant’s  annual salary by 52.  The claimant’s normal weekly earnings were estimated under regulation 14(6) of the Family Credit (General) Regulations 1987 (the “1987 Regulations”) on the basis of  the weekly wages which she was paid in the weeks when she actually worked, so that the weekly amount of tax credit awarded to the claimant was less than it would have been if her normal weekly earnings had been taken as her gross average weekly earnings, calculated annually.

3.	The claimant contends that a greater proportion of women than men are term-time only workers and that the provisions in the 1987 regulations which prevented her earnings from being calculated on the basis of her average weekly earnings, calculated annually, were indirectly discriminatory and therefore contrary to Council Directive 79/7/EEC on the progressive implementation of the principle of equal treatment for men and women in matters of social security.  I held an oral hearing of the appeal on 24 July 2002, at which the claimant was represented by her husband and the Respondents were represented by Mr Thomas Linden of Counsel, instructed by the Solicitor of the Board of Inland Revenue.  At the conclusion of the hearing, I adjourned determination of the appeal pending the decision of the Tribunal of Commissioners in CJSA/5732/1999, CJSA/5836/1999 and CJSA/3444/2000, concerning term-time only workers and jobseeker’s allowance (now reported as R(JSA) 4/03).  I gave liberty to each party to apply to restore the oral hearing, but both parties were content to make their further submissions on the appeal by way of written observations.

4.	The claimant was employed as a support assistant at a special school, working 27.5 hours a week during term-times only.  Since she had been employed for less than six weeks at the date of her claim, her normal weekly earnings were determined under regulation 14(6) of the 1987 Regulations by reference to her employer’s estimate of her likely earnings for the pay period for which she was normally paid.  The claimant’s employer estimated the claimant’s average gross earnings for a normal pay period as £150.43 per week in term time.  The claimant had received no wages in the week prior to the claim, which was half-term, but the weekly wages estimated by the claimant’s employer as her gross earnings for a normal pay period corresponded with the amounts actually paid to the claimant in the preceding three weeks.  The employers also stated in the earnings enquiry form  that the 52 week equivalent of the claimant’s wages was £127.00 per week (although if the claimant worked 39 weeks each year her correct average weekly wage, calculated on an annual basis, was £112.82 per week).   

5.	The claim for working families tax credit was made in respect of the claimant, her husband and one dependent child.  The claimant’s husband was a student in receipt of a maintenance grant, and it is not disputed that his income was properly treated as that of the claimant under regulation 10 of the 1987 Regulations.  After taking into account his income and applying notional deductions in respect of income tax, national insurance and pension contributions under regulation 20(4), the claimant’s normal weekly income was assessed as £176.61, resulting in an award of working families tax credit on 24 March 2000 at the weekly rate of  £24.52. for 26 weeks from 14 March 2000.

6.	On 30 March 2000 the claimant’s husband applied on her behalf for the decision awarding benefit to be reconsidered, on the ground that the claimant’s normal weekly income ought to have been assessed on the basis of her average weekly wage calculated annually.  However,  the decision was not revised and on 19 April 2000 the claimant appealed.  In her appeal the claimant stated that when she started work she had been given the choice of being paid monthly and having her salary averaged out over 12 months, or being paid weekly and having her salary paid to her only during the 39 weeks of the year when she worked.  The claimant contended that the purpose of the 1987 Regulations was to ascertain a claimant’s true income and that she should not be penalised for having chosen to be paid on a weekly basis, not knowing that it would affect her entitlement to benefit.  On 14 June 2000 the claimant’s husband wrote a letter making a number of submissions in support of the appeal and raising his argument under Council Directive 79/7/EEC, but the chairman made no reference to any of those issues in his statement of reasons for dismissing the appeal.

7.	 Working families tax credit has now been replaced by the new tax credits introduced by the Tax Credits Act 2002, but section 128 of the Social Security Contributions and Benefits Act 1992 formerly conferred entitlement to working families tax credit on persons whose income was below the applicable amount who were engaged, and normally engaged, in remunerative work. Regulation 4(1)(a) of the 1987 Regulations treated a person as engaged in remunerative work only if the work undertaken was for not less than 16 hours per week.  Regulation 4(4)(c) provided for the working hours of claimants engaged in a cycle of working to be calculated by reference to the average number of hours worked in a week, calculated over the period of one complete cycle, but including any periods where the claimant did not normally work.  Since that provision had the effect of bringing some term-time only workers below the sixteen hour qualifying threshold, regulation 4 was amended by the addition of paragraph (4A) by the Income-related Benefits Schemes (Miscellaneous Amendments) Regulations 1995:

“(4A)  Where for the purpose of paragraph (4)(c)(i), a person’s recognised cycle of work at a school, other educational establishment or other place of employment is one year and includes periods of school holidays or similar vacations during which he does not work, those periods and any other periods not forming part of such holidays or vacations during which he is not required to work shall be disregarded in establishing the average hours for which he is engaged to work.”

8.	Similar provisions were introduced into the regulations governing income support and jobseeker’s allowance, but since those benefits are not payable to claimants in remunerative work, the amendment worked to the disadvantage of some term-time only workers claiming those benefits.  Jobseeker’s allowance is within the scope of Council Directive 79/7/EEC and in R(JSA) 4/03 a Tribunal of Commissioners held, following a concession by the Secretary of State, that regulation 51(2)(c) of the Jobseeker’s Allowance Regulations 1996, as construed by the House of Lords in Banks v Chief Adjudication Officer [2001] UKHL 33 [2001] 1 WLR 1411 (also reported as (R(IS) 15/01), operated to the disadvantage of more women than men.  The tribunal rejected an argument that the disproportionate effect was justified and held that the regulation was to be regarded as having no effect.

9.	Regulation 13 of the 1987 Regulations provided that for the purposes of  working families tax credit:

“…the income of a claimant shall be calculated on a weekly basis-

(a)	by ascertaining in accordance with this Chapter…the amount of his normal weekly income;
(b)	…
(c)	…”

Regulation 14 of the 1987 Regulations provided that the normal weekly earnings of a claimant were to be determined on the basis of earnings actually received during the “assessment period”, which was fixed by reference to the claimant’s pay period.  Regulation 14(1) provided:

“Where a claimant’s income consists of earnings from employment as an employed earner, except where those earnings arise from employment as a director, his normal weekly earnings shall, subject to paragraphs (3) to (6), be determined by taking account of his earnings from that employment which are received in the assessment period relevant to his case, whether the amount so received was earned in respect of that period or not, and in accordance with the following provisions of this regulation.”

“Pay period” was defined in regulation 14(7)(b) as “…the period in respect of which a claimant is, or expects to be normally paid by his employer…”. 

10.	By regulation 14(2), the assessment period for weekly paid claimants was six weeks and for monthly paid claimants three months immediately preceding the week of claim, so that at the date of her claim the claimant had been employed for less than the length of the assessment period, irrespective of whether the pay period in her case was one week or one month.  In such cases regulation 14(5) provided for normal weekly earnings to be estimated, in accordance with regulation 14(6):

“(6) In a case to which this paragraph applies, the Board shall require the claimant’s employer to furnish him with an estimate of the claimant’s likely earnings for the pay period for which he is or will normally be paid and the claimant’s normal weekly earnings shall be determined by taking account of that estimate”.

Regulation 20(3) of the 1987 Regulations prescribed the deductions which were to be taken into account in order to calculate net earnings, which was the basis of calculating entitlement to working families tax credit, and regulation 20(4) provided for equivalent standard deductions where gross earnings had been estimated under regulation 14(6).  Regulation 20(5) provided for pay periods in which earnings were 20% higher or lower than average net earnings to be disregarded in calculating average net earnings. 

11.	I consider that those provisions were correctly applied in this case.  Regulation 14(1) provided for “normal weekly earnings” to be determined on the basis of the amounts actually received by a claimant by way of earnings in the assessment period, even if the amount received as wages was earned in a different period.  Because the claimant had worked for less than the length of the assessment period, her normal weekly earnings were estimated under regulation 14(6) on the basis of an estimate by her employer of the claimant’s likely earnings “for the pay period for which she would normally be paid”.  The claimant was employed to work in term times only and was paid weekly only during those periods, so that whatever the position would have been if she had been paid monthly, the pay period for which the claimant was in fact normally paid was the period of one week.  There is no basis for holding that the correct amount of the claimant’s normal weekly earnings for that period was anything other than her normal weekly wage, and  I am therefore satisfied that the claimant’s income was correctly  assessed on the basis of normal gross weekly earnings of  £150.43.

12.	In Meyers v Adjudication Officer (Case C-116/94 [1995] ECR 1-2131 it was held that family credit was within the scope of  Council Directive 79/7/EEC on the progressive implementation of the principle of equal treatment for men and women in matters of social security, and it is not in dispute that working families tax credit, which replaced family credit, was also within the scope of the Directive.  Article 4 of the Directive provides:

“The principle of equal treatment means that there shall be no discrimination whatsoever on ground of sex either directly, or indirectly by reference in particular to marital or family status, …”

In Nolte v Landesversicherungsanstalt Hannover (Case C-317/93) [1995] ECR I-4625 it was held by the European Court of Justice (paragraph 28 of the judgment):

“…Article 4(1) of the directive precludes the application of a national measure which, although formulated in general terms, works to the disadvantage of far more women than men unless that measure is based on objective factors unrelated to any discrimination on grounds of sex.  That is the case where the measures chosen reflect a legitimate social policy aim of the Member State whose legislation is at issue, are appropriate to achieve that aim and are necessary in order to do so.”

13.	In response to a direction which I gave on 17 September 2001, the claimant’s representative submitted statistical evidence showing that in the area where the claimant was employed far more women than men were term-time only workers, and that nationally a greater proportion of women (8.1%, rising to 11.4% of women with dependent children) than men (1.4%) worked on a term time only basis.  At the oral hearing the claimant’s representative submitted that, as a result of the implementation of Council Directive 97/80, on the burden of proof in cases of discrimination based on sex, it is for the Inland Revenue to show that the 1987 Regulations were not discriminatory in effect.

14.	There can be no dispute that a greater proportion of women than men are employed as term-time only workers, and in R(JSA)4/03 the Secretary of State conceded that regulation 51(2)(c) of the Jobseeker’s Allowance Regulations operated to the disadvantage of disproportionately more women than men.  The Inland Revenue does not accept that the same was true of working families tax credit, which was a family-based credit not confined to a particular worker in the family, and entitlement to which was affected by matters such as the number of hours worked, the level of a family’s income, family structure and contractual pay arrangements.  Moreover, regulation 4(4A) of the 1987 regulations specifically advantaged term-time only workers claiming working families tax credits by providing for holiday periods to be left out of account in  applying the ‘cycle of work’ provisions, thereby enabling term-time only workers who worked a little over 16 hours a week to be regarded as in remunerative work-see paragraph 15 of R(JSA) 4/03.

15.	I have come to the conclusion that Mr Linden is correct in submitting that the decision in R(JSA)4/03 is not relevant in this case.  Article 3 of Council Directive 97/80 specifies the provisions to which the Directive applies, but those provisions do not include Directive 79/7.  It is therefore for the claimant to show that regulation 14(6) is indirectly discriminatory  in its effect, rather than for the respondents to show that the provisions are not discriminatory.  Regulation 4(4A) of the 1987 Regulations applies to term-time only workers and operates to their advantage in relation to the calculation of working hours.  However, the operative provisions in this case were regulations 14(5) and (6), which applied to all workers who did not have an unbroken period of six weeks employment for the same number of hours per week prior to their claim for working families tax credit.  The mechanism under regulations 14(5) and (6) worked to the disadvantage of those claimants whose wages were abnormally high during the period immediately preceding their claim for benefit, and to the advantage of those whose earnings were abnormally low during that period, but I can see no basis for holding that the provisions disadvantaged proportionately more women than men.

16.	In relation to justification, Mr Linden submitted that regulation 20(5), which required pay periods in which earnings were 20% higher or lower than average net earnings to be disregarded, achieved a result consistent with regulation 4(4A), in that a term-time only worker who was entitled to have holidays disregarded for the purpose of deciding whether she was in remunerative work was not entitled to have periods of holiday taken into account so as to reduce net earnings in order to increase the level of benefit to which she was entitled.  However, since I have held that regulation 14(6) is not discriminatory, I do not consider it necessary to deal with the justification arguments.  

17.	The tribunal’s statement of reasons consists simply of a re-calculation of the benefit to which the claimant was entitled and does not deal with any of the arguments put forward by the claimant in bringing the appeal. The statement of reasons was therefore inadequate and, for that reason only, I allow the appeal.  However, for the reasons I have given, my decision is the same as that given by the tribunal.

	(Signed)	E A L BANO
		Commissioner

		14 January 2004