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[2008] UKUT 40 (AAC) (30 December 2008)

 


IN THE UPPER TRIBUNAL Appeal No. CJSA/4053/2007

(ADMINISTRATIVE APPEALS CHAMBER)

Before JUDGE ROWLAND

Decision: The claimant's appeal is allowed. The decision of the Ipswich appeal tribunal dated 4 October 2007 is set aside and the case is referred to a different judge of the First-tier Tribunal for determination.

Directions: (1) The Secretary of State is directed –

(i) to obtain from his records and, if necessary to seek from the claimant, the information required to make a proper decision, in accordance with the guidance I give below, as to whether the claimant was engaged in remunerative work from 9 July 2007 and, if not, as to the calculation of the claimant's earnings; and

(ii) then either to revise the decision under appeal to the tribunal so that the appeal lapses or else to make, no later than 2 March 2009, a further submission to the tribunal.

(2) If the appeal does not lapse, there is to be an oral hearing before the tribunal.

These directions may be varied or set aside by a direction made by a judge of the First-tier Tribunal.

REASONS FOR DECISION

1. The claimant had been a self-employed carpenter since 1960. He had a period of entitlement to jobseeker's allowance up to 15 April 2007 and then he worked from 1 May 2007 to 8 May 2007. He claimed jobseeker's allowance again on 9 July 2007. His claim was disallowed on the ground that he was in remunerative work. This decision seems to have been made largely on the strength of the claimant having given the answer "12 weeks" to the question "How long are breaks between contracts or jobs normally?" when that question was asked over the telephone. The claimant was informed that a new claim would be accepted on 1 August 2007 and indeed it appears that his original claim was treated as an advance claim effective from that date, by which time 12 weeks had elapsed since he had last worked. Jobseeker's allowance was duly awarded with effect from 4 August 2007. The claimant appealed against the disallowance of his claim from 9 July 2007 but the tribunal dismissed his appeal on the papers with an extremely brief statement of reasons stating –

"Between the date of claim and date of decision [the claimant] considered himself to be still engaged in his trade as a carpenter suffering a temporary cessation of work. In consequence the decision-maker was correct to treat him as still engaged in remunerative employment and not entitled to jobseeker's allowance."

The claimant now appeals against the tribunal's decision with my leave and the support of the Secretary of State.

2. It is a condition of entitlement to jobseeker's allowance that the claimant not be "engaged in remunerative work" (see section 1(2)(e) of the Jobseekers Act 1995) By virtue of regulation 51(1) of the Jobseeker's Allowance Regulations 1996 (S.I. 1996/207), "remunerative work" means work in which the claimant is engaged on average for not less than 16 hours per week and for this purpose "work" is "work for which payment is made or which is done in expectation of payment".
3. The Secretary of State refers to my decision in R(JSA) 1/03, where I said –

"People may be engaged in work when not carrying out activities in connection with their employment in cases where periods of no work are ordinary incidents of their employment. That is particularly so in the case of self-employed earners. It is also true of those who work cycles that include periods of no work."

4. However, the Secretary of State also rightly submits that, if a claimant is engaged in work when he claims jobseeker's allowance, notwithstanding that he is not actually carrying out activities in connection with his or her employment in that particular week, it is necessary to calculate his average hours of work under regulation 51(2) of the 1996 Regulations in order to ascertain whether or not he is engaged in remunerative work. Regulation 51(2)(b) provides that, where the number of hours for which a person is engaged in work fluctuates, the number of hours for which he is engaged in work for the purpose of a particular claim or supersession is calculated by reference to the period of a cycle of work, if there is a recognisable cycle, or –

"(ii) in any other case, the period of five weeks immediately before the date of claim or the date of supersession, or such other length of time as may, in the particular case, enable the person's average hours of work to be determined more accurately".

If the claimant is not engaged in "remunerative work", because the average number of hours he works is fewer than 16, the Secretary of State submits, again rightly, that it is necessary to consider what earnings are to be taken into account as income.

5. However, although I agree with the main thrust of the Secretary of State's arguments, I do not agree with all the details of the reasoning. The Secretary of State relies heavily on CIS/166/1994, in which Mr Commissioner Goodman held that, under the equivalent provisions relating to income support (see the Income Support (General) Regulations 1987 (S.I. 1987/1967)), earnings from employment as a self-employed earner are to be taken into account for as long as the claimant remains in "gainful employment". The phrase "gainful employment" is used in the definitions of "employed earner" and "self-employed earner" in section 2 of the Social Security Contributions and Benefits Act 1992, which are adopted for the purposes of the definitions of those terms in the 1996 Regulations (see regulations 1(3) and 3) and the equivalent income support legislation, and Mr Commissioner Goodman held that the concept of "gainful employment" was thereby imported into the income support legislation so that it was necessary to consider whether the claimant was gainfully employed during the period in respect of which he had claimed income support so as to decide whether or not earnings from self-employment should be taken into account. In reaching this conclusion, he referred to the reference to "earnings from employment as a self-employed earner" in regulation 30(1) of the 1987 Regulations. The equivalent provision in the 1996 Regulations is regulation 95(1), which provides –

"Except where paragraph (2) applies, where a claimant's income consists of earnings from employment as a self-employed earner the weekly amount of his earnings shall be determined by reference to his average weekly earnings from that employment—

(a) over a period of one year; or

(b) where the claimant has recently become engaged in that employment or there has been a change which is likely to affect the normal pattern of business, over such other period as may, in any particular case, enable the weekly amount of his earnings to be determined more accurately."


6. Mr Commissioner Goodman appears not to have been referred to paragraph 3 of Schedule 8 to the 1987 Regulations, which is to the same effect as paragraph 4 of Schedule 6 to the 1996 Regulations. The latter provides that, in the calculation of earnings, there are to be disregarded –

"In the case of a claimant who has been engaged in remunerative work or part-time employment as a self-employed earner or, had the employment been in Great Britain, would have been so engaged and who has ceased to be so employed, from the date of the cessation of his employment any earnings derived from that employment except earnings to which regulation 95(2) (royalties etc) applies".

In the light of paragraph 20 of Schedule 6 and for reasons I have given in R(JSA) 2/03, "part-time employment" means work that is for fewer than 16 hours per week but would otherwise be "remunerative work". The term "part-time employment" appears to be used in that sense only in Schedule 6, but it is a useful term and I will use it in that sense throughout this decision.

6. It is important to note that paragraph 4 of Schedule 6, like paragraphs 1, 1A and 2 relating to employed earner's employment, uses two district concepts: being "engaged in remunerative work or part-time employment" and being "employed". For the purposes of paragraphs 1, 1A and 2, a person is "employed" for as long as there is a subsisting contract of employment (or at any rate a subsisting employment relationship of some sort) as an employed earner and, for the purpose of paragraph 4, a person is "employed" for as long as he or she is trading as a self-employed earner so as to be "gainfully employed … otherwise than in employed earner's employment" (the phrase used in section 2 of the 1992 Act). Therefore, while a person who is incapable of work during a week due to sickness will not be "engaged in remunerative work or part-time employment" during that week, he or she may still be "employed".
7. It is paragraph 4 of Schedule 6 that has the effect that, while earnings from self-employment may be taken into account while a person is still "employed" in such employment, they must be disregarded after a person "has ceased to be so employed" and I suggest that it would be a good deal less confusing to use the simple word "employed" that appears in that paragraph rather than the phrase "gainfully employed" favoured in CIS/166/1994.
8. In CIS/166/1994, Mr Commissioner Goodman accepted a submission by the adjudication officer to the effect that, in that case, findings of fact on nine specified issues were required in order to determine whether or not the claimant was "gainfully employed". I set the issues out in paragraph 8 of R(JSA) 1/03. However, in my respectful view, those issues are not all relevant to the question whether or not a person is "employed". Most of them are more relevant, or are only relevant, to the different question whether or not the person is "engaged in remunerative work or part-time employment as a self-employed earner". Running the determination of those very different questions together is unhelpful.
9. I also disagree with the Secretary of State's submission that the question whether a person is "employed" must be considered only if it has been determined whether the claimant is engaged in remunerative work. Logically, the question whether the claimant is "employed" (i.e., in work) comes before the question whether he is engaged in work (i.e., at work) during a particular week. I acknowledge that it has been held that a person may be engaged in remunerative work without having been employed (see, for example, R(FC) 2/90, where the claimant was an officer in the Salvation Army). I also accept that there are less rare cases where the question whether a person is employed turns on exactly the same issue as the question whether he or she is engaged in remunerative work. However, there are many cases where it is useful to keep the two issues separate, at least conceptually, and that particularly applies where there may be a question as to whether a claimant has ceased to be "employed" or whether a person is to be treated as "engaged in remunerative work or part-time employment" when not actually performing any activities.
10. Therefore, where a person who has been self-employed claims jobseeker's allowance, I suggest that the first question that must be determined is whether or not he or she is still "employed" as a self-employed earner or, in other words, whether or not he or she is still trading. If the answer is "no", it will necessarily follow that he or she is not "engaged in remunerative work or part-time employment" as a self-employed earner and that, by virtue of paragraph 4 of Schedule 6, any earnings from the past employment will be disregarded.
11. If the answer to the first question is "yes", the second question is whether, in the particular week(s) in issue, the claimant is "engaged in remunerative work or part-time employment". This involves considering whether or not the person is carrying out any activities connected with the self-employment in the relevant week(s). A person who is carrying out such activities will be "engaged in remunerative work or part-time employment", subject to regulation 53, but a person who is not carrying out activities will not necessarily not be so engaged. Under regulation 52, a person is "treated" as engaged in work when on holiday but, more significantly, periods of no activity that are a normal incident of self-employment, whether as part of a cycle or otherwise, are periods when the person remains engaged in work. On the other hand, as I have already said, a person will not be "engaged in remunerative work or part-time employment" while incapable of work (although obviously, so far as a claimant is concerned, this is more relevant to income support than to jobseeker's allowance).
12. If a person has not ceased to be "employed" as a self-employed earner but is not "engaged in remunerative work or part-time employment" in the material week(s), it will be unnecessary to consider the "third" question below but it will be necessary to consider whether earnings fall to be taken into account, which is the "fourth" question below.
13. If, on the other hand, the claimant is "engaged in remunerative work or part-time employment", the third question is whether he or she is engaged in "remunerative work" or merely "part-time employment", the difference being whether or not the claimant works for at least 16 hours per week. This can be a difficult question that is often given inadequate consideration. Where a person is self-employed, the hours worked may fluctuate and, as I have said, regulation 51(2)(b)(ii) requires that, where there is no clear cycle, an average must be taken over "the period of five weeks immediately before the date of claim or the date of supersession, or such other length of time as may, in the particular case, enable the person's average hours of work to be determined more accurately". For this purpose, weeks of holiday must clearly be ignored but other weeks in which there was no activity but in which the claimant was nonetheless to be regarded as engaged in work are taken into account as weeks in which no hours were worked with the result that they depress the average. The key issue generally is over what period the claimant's hours of work should be averaged. Is there a reason to depart from the five-week norm? If so, is it reasonable to take an average over a long period or has there been a change of circumstances making it reasonable to look at a much shorter period?
14. Where the claimant works on average for at lest 16 hours per week and is therefore in remunerative employment, he or she is not entitled to jobseeker's allowance by virtue of section 1(2)(e) of the 1995 Act. If the claimant works for fewer than 16 hours a week, he or she is potentially entitled to income-based jobseeker's allowance but it is necessary to consider whether any earnings fall to be taken into account.
15. This fourth question – whether earnings are to be taken into account – is to be answered by applying regulation 95(1) (and regulation 101(11)). Again, the key issue is over what period the claimant's earnings should be averaged. Has there be a change of circumstances making it reasonable to depart from the one-year norm and to look at a shorter period? Often jobseeker's allowance will be claimed precisely because there has been a change of circumstances, but a reduction in the number of hours worked may not be reflected in a reduction in income for the first month or two or even longer depending on the type of employment and the arrangements there are for payment. Thus, findings of fact relevant to the operation of regulation 51(2)(b)(ii) may also be relevant to the operation of regulation 95(1)(b), but they do not necessarily have an impact from the same date because what is relevant is the income being received rather than the income being generated by current employment. Presumably that is why, except in relation to royalties and similar payments to which regulation 95(2) and (2A) applies, there is no provision in relation to earnings from self-employment that is equivalent to regulation 94 which deals with the period over which an employed earner's earnings are to be taken into account. It appears to be assumed that a self-employed earner will always have earnings to be taken into account, although the amount may be nil. However, it is important to avoid the double counting of earnings. If earnings have already been taken into account when producing an average by reference to one period and that has resulted in a reduction of entitlement to income support or jobseeker's allowance, it may not be appropriate to take them into account again to produce a further reduction in entitlement. Thus, the period over which an average amount of earnings is to be calculated may be determined in part by the effect of a previous calculation.
16. This framework for making decisions, with its four questions, may seem complicated but it may be useful to keep it in mind because doing so is likely to ensure that relevant issues are not overlooked and that the dispute in any particular case is focused on the right question(s). In particular, the "second" and "third" questions are separate aspects of the question asked by section 1(2)(e) of the 1995 Act, which is simply whether the claimant is "engaged in remunerative work". I find it helpful to take the statutory question in those two stages. In some cases (particularly where income support is being claimed), the live issue arises on the "second" question; in others it arises on the "third". Having the distinction in mind is helpful as a reminder both that being "engaged in remunerative work or part-time employment" is not the same as being "employed" and that determining whether work is "remunerative work" requires a proper calculation of the average number of hours being worked. Obviously, it is not necessary to spend a great deal of time considering whether or not a person is currently engaged in work at all if the extent to which he is engaged would in any event be for less than 16 hours a week, because the answer to this issue does not determine entitlement or even whether any earnings are to be taken into account. However, if the tribunal in the present case had divided the statutory question into two parts, it might have avoided the error into which it fell.
17. I agree with the Secretary of State's current representative that the tribunal was not assisted by the submission made to it by the Secretary of State. The tribunal erred in apparently equating being "engaged in remunerative work" with being "employed" and in apparently not considering whether the claimant was engaged in "part-time employment" rather than in "remunerative work", a point that had also not been considered by the Secretary of State.
18. There was really no issue in this case as regards the first two of the four questions I have suggested. The claimant was clearly still "employed" in self-employed earner's employment at the date of his claim because, as the tribunal noted, he had said on Form B 16 that he had not ceased trading and that he was still looking for work as a self-employed earner as well as, presumably, work as an employed earner. As waiting for for new work to turn up was a normal incident of his self-employment, he was also "engaged in remunerative work or part-time employment" at the time of his claim. What the tribunal failed to do was to go on and consider the third and, if necessary, the fourth questions.
19. On Form B16, the claimant had said that he had normally worked for 60 hours a week before he had claimed benefit and that he hoped to get more work very soon but, in answer to the question "If the business is in decline or has temporarily stopped, do you … consider this to be the normal pattern of work?", the claimant had answered "Sometimes. Building work can be slow now and then." The problem with that question and answer is that it is unclear what either the form or the claimant meant by "this" and, although the claimant had said on the telephone that a twelve week gap between contracts was normal, it seems unlikely that his calculation that he worked on average for 60 hours a week took account of such gaps. Moreover, it is one thing sometimes to have a twelve-week gap between long contracts involving full-time work but it is quite another regularly to have such gaps between odd weeks of such work. In the former case, the average number of hours worked per week, calculated over, say, a year, is likely to be well in excess of 16, whereas in the latter case it may well be less than 16. The claimant in the present case had had only one week's work as a self-employed earner in the last three months and he had apparently been without work before then for a sufficiently long period to be awarded jobseeker's allowance. He had also felt the need to declare himself available for employed earner's employment as well as self-employed earner's employment. If he had been unemployed for a substantial period before doing what appears to have been a fairly isolated week's work in May 2007, the average number of hours a week he was working calculated over any period that realistically reflected his position at the date of claim may well have been less than 16, even if he had been usually engaged in remunerative work, say, six months earlier.
20. I agree with the Secretary of State's representative that the evidence gathered by the Secretary of State demanded that further enquiry be made about the claimant's pattern of work before 1 May 2007 for the purpose of deciding over what period to calculate the average number of hours for which he worked. Calculating it over the five weeks before the date of claim would apparently have produced a figure of nil but if a longer period was chosen it was necessary to consider whether it should be over a year or since the claimant was last regularly employed or over some other period that accurately reflected the claimant's current position. The practical issue was whether, looking at the claimant's working pattern over a substantial period, it could reasonably be said that he still worked on average for at least 16 hours per week, as he seems to have done in the past, or whether there had been an identifiable change of circumstances so that it could reasonably be said that his work had become part-time, at least temporarily. The Secretary of State presumably knew for how long jobseeker's allowance had been in payment and may have had documents from the previous claim. That information should have been made available to the tribunal. If further information was needed, further questions would have had to be put to the claimant and that might have necessitated an oral hearing before the tribunal.
21. I also agree with the Secretary of State's representative that, if the claimant was not engaged in remunerative work, there would have arisen the question whether there were any earnings to be taken into account, which would involve deciding over what period to calculate earnings. Again, the claimant's pattern of earnings before May 2007 would have been relevant. If, in the light of the period of time that had elapsed, it would not have been reasonable to have regard to earnings before May 2007, it seems to me to be highly relevant that, if the hours for which the claimant worked, calculated over a period including the week worked in May, averaged less than 16, he would not have been in remunerative work even in that first week in May. He might have been disentitled to jobseeker's allowance in that particular week because he was not available for work then but he could have been entitled to benefit during the following weeks, subject to his earnings. At the time, it may not have been apparent that that would be such an isolated week of work and ceasing to claim until July may have been quite reasonable both for that reason and because he had the earnings upon which to draw. However, if the claimant was paid fairly promptly in May and it would not reasonable to have regard to earnings from earlier employment, the effect of him ceasing to claim was that he had to live on his earnings from the one week's work in May until July. If that were the position, it might be reasonable in order to avoid what would in effect be double-counting to calculate his earnings for the purposes of the claim made in July by reference to payments received, say, only over the month of June, which would have been nil. It is noteworthy that the claimant's ground for appealing to the tribunal was that he had used his earnings and run out of money.
22. In any event, the evidence in this case raises questions that require further enquiries to be made, particularly as to the claimant's pattern of work and receipts before 1 May 2007 and as to the amount and date of the payment(s) he received for the work he did in May. For those reasons, I refer the case to another tribunal but with a direction to the Secretary of State to consider the case further and either to revise his original decision or else to make a new submission to the tribunal.

MARK ROWLAND

30 December 2008