Upper Tribunal (Administrative Appeals Chamber)

IN THE UPPER TRIBUNAL Case No. CI/1553/2009

ADMINISTRATIVE APPEALS CHAMBER

Before Judge Nicholas Paines QC

Decision: The decision of the First-tier Tribunal is wrong in law. I set it aside and substitute a decision that the claimant is entitled to Retirement Allowance, and not Reduced Earnings Allowance, with effect from 4 November 2007.

REASONS FOR DECISION

1.               I reach this decision without enthusiasm because it seems to me that the legislation works harshly in the claimant’s case. But it seems to me to be the only decision that is compatible with the terms of the legislation.

2.               The claimant is a man born in August 1942 who previously worked in the mining industry. He has been assessed as permanently disabled with a disability assessment of 8%. His most recent employment has been at a museum, where he has worked 35 hours per week for 30 weeks per year. It appears that the museum was open from about March to October and the claimant would apply afresh for his job each January. It seems that he had been doing this for some ten years.

3.               In July 2007 the claimant completed from DL/IP 125, in which he reported that he would stop work on 30 October 2007. In August 2007 he became 65. In September 2007 the DWP informed the claimant by letter that he could not get Reduced Earnings Allowance (REA) from 4 November onwards but would get a Retirement Allowance (RA) instead. This was said to be “because when you are 65 you can only get Reduced Earnings Allowance if you are in regular employment for at least 10 hours a week”. This was a reference to paragraph 13 of schedule 7 to the Social Security Contributions and Benefits Act 1992, which provides that a person who has attained pensionable age and “gives up regular employment” ceases to be entitled to REA as from the day on which he gives up regular employment, and to regulations 2 and 3 of the Social Security (Industrial Injuries) (Regular Employment) Regulations 1990, which contain a definition of “regular employment” and prescribe when a claimant is to be treated as giving it up.

4.               The claimant was re-employed again at the museum with effect from 11 March 2008. In August 2008 the claimant appealed against the DWP decision, with the assistance of his Union; his appeal was heard by the First-tier Tribunal in January 2009. The claimant argued that it was unfair that the seasonal nature of his job was being used as a reason for stopping his REA, especially since having a seasonal job would prevent him being eligible for jobseeker’s allowance if he were claiming that. The DWP did not attend the hearing.

5.               The tribunal agreed with the claimant. They noted that seasonal workers such as school catering assistants were regarded as being in permanent full-time employment for JSA purposes even where they had no guarantee of being re-engaged each term. They held that the claimant would not have been eligible for JSA if he had claimed it while under 65, and thought it was unreasonable for the Secretary of State to argue that people like the claimant were in permanent employment for JSA purposes and to ‘reverse that argument’ so as to hold that the claimant had ceased employment and was no longer entitled to REA.

6.               The Secretary of State appeals with the permission of the First-tier Tribunal. His application referred to the use of ‘rolling five week averages’ in order to determine whether a person is in employment for at least ten hours per week, as stipulated by Judge Levenson in CI/3224/04. In giving leave, the tribunal chairman raised the issue of how the claimant’s resumption of employment affected the question whether he gave up regular employment. Judge Lane directed the Secretary of State to address in addition the application of the rolling five week average approach to the present case.

7.               The Secretary of State’s submission points out that the terms of the Regulations governing JSA and REA are different. The Jobseeker’s Allowance Regulations 1996 contain provisions for assessing average hours over cycles of work and a special provision (repealed in April 2009) for disregarding school holidays. He submits that under the provisions governing REA the claimant’s intention to resume work is irrelevant and the question is whether, applying the approach of taking the rolling five week average, the claimant’s average hours of work fell below ten. He notes the difference of view in Social Security Commissioners’ decisions on “whether or not the averaging process can continue beyond the point at which the employment ends”. He expresses a preference for the reasoning of Judge Levenson in CI/3224/04, to the effect that it can. The averaging process was not applied in the claimant’s case and the Secretary of State invites me to remit the case to him so that it can be.

8.               It may be that, if the benefit at issue had been JSA, the claimant would have been regarded as “engaged in remunerative work” throughout the year and therefore not entitled. Under regulation 51 of the JSA Regulations the claimant might, depending on the precise facts and the nature of his relationship with the museum, have been regarded as having an annual cycle of work that involved weeks of work from March to October and weeks without work from November to February. If so, then averaging his hours of work (35 in the weeks that he worked) over the year could have meant that he would have been treated as working an annual average of approximately 21 hours a week, which would have counted as being “engaged in remunerative work” throughout the year. The fact that he had no certainty of being re-engaged by the museum might not have prevented that conclusion if it was “reasonable to assume that a long standing practice of re-employment will continue”: R(JSA) 5/03.

9.               In those JSA cases where a cycle of work is in issue, the claimant’s intention to continue the cycle by resuming work in accordance with it will be relevant and the absence of a right to be re-engaged will not be fatal.

10.           It is unnecessary to reach a concluded view on whether for JSA purposes a cycle of work would have been in issue (as to which, see also R(JSA) 1/07). The provisions governing the cessation of entitlement to REA prescribe a different test from that in JSA, under which a claimant’s intention to resume employment is irrelevant and only a period of five consecutive weeks, rather than a cycle, can be looked at.

11.           The test is contained in the Social Security (Industrial Injuries) (Regular Employment) Regulations 1990. These Regulations are made under powers contained in paragraph 8 of schedule 7 to the Contributions and Benefits Act, which empower the Secretary of State to prescribe circumstances in which a person is to be regarded as having given up regular employment. Paragraph 9 of schedule 7 makes it clear that the Secretary of State has power to provide for a person to be regarded as having given up regular employment notwithstanding that he is working or intends to work. As Judge Howell QC put it in CI/16202/96, the Secretary of State is given power to “prescribe an artificial test of when a person is to be regarded as having ‘given up regular employment’ and if the facts of his case are caught by the regulations it is no answer to say that he always intended to go on working regularly, or had in fact done so”.

12.           Regulation 2 of those Regulations contains a definition of “regular employment” and regulation 3 says that a person is to be regarded as having given up regular employment “at the start of the first week in which he is not in regular employment” after he attains pensionable age. (“Week” means a benefit week commencing on Sunday, which is why the claimant’s entitlement to REA ceased with effect from Sunday 4 November.) The effect is that as soon as a week occurs after a male claimant’s 65^th birthday in which that claimant is not in “regular employment” (as defined), then that claimant is to be regarded as having given up regular employment for the purposes of REA whether or not he has given up regular employment in the ordinary meaning of the words.

13.           There are two definitions of “regular employment” in regulation 2. Regular employment is either

(a) gainful employment under a contract of service which requires a person to work for an average of 10 hours or more per week in any period of five consecutive weeks (disregarding holiday and other permitted absences) or

(b) gainful employment which a person undertakes for an average of 10 hours or more per week in any period of five consecutive weeks.

14.           As Judge Howell observed in CI/16202/96, there are thus two possible ways in which a claimant may be in “regular employment”: under regulation 2(a), by virtue of having a contract of employment with the necessary minimum average contractual working hours or, under regulation 2(b), by undertaking gainful work as, for example, a self-employed person or a casual employee, over the required average number of hours. In both cases the number of hours is to be measured over a period of five consecutive weeks containing the week under consideration.

15.           Judge Howell added that “as soon as there is a week … when he is over pensionable age and fails to meet one of these conditions, … he is then treated as having given up regular employment on the first day of that week, and transferred to retirement allowance from that date once and for all, without any second chance even if in some later week the conditions for being in ‘regular employment’ are once again satisfied in relation to him”.

16.           As regards the five week averaging process, Judge Howell held (with his own emphasis) that

the starting point has to be that to count as in “regular employment” under regulation 2(b) … [a claimant] has to meet the condition of being in gainful employment during that week. It cannot I think have been intended that a person whose contract of employment has come to an end and is doing no work at all in the succeeding weeks can nevertheless claim to be continuing in “regular employment” during those weeks, when his actual hours of work are zero, for so long as it takes to bring the weekly average below the magic figure of 10 by including hours worked in the full-time weeks before the contract came to an end. In my judgment therefore an employment, under a contract of service or otherwise, which has already ceased by the start of the week in question must be excluded from the reckoning. That is not gainful employment in which the claimant any longer “is” in that week. Conversely, however, the unrestricted use of the phrase “any period of five consecutive weeks” in regulation 2(b) appears to me to entitle a claimant who can establish on the facts that he was in some gainful employment – I think this should be fairly broadly defined to include taking odd jobs on a self-employed or casual basis – which did continue, or started, during the week in question, to count as in regular employment” so long as in some way or another the 10-hour weekly average condition is satisfied in relation to that employment even if his actual hours of work that week are less than 10. Thus any period of five consecutive weeks including that week can be taken: forwards in time, backwards, or both at once; whichever gives him the average for the employment that is current in that week.

17.           Judge Howell applied this approach in CI/2517/01, where the claimant had a contract of employment until 2 October and again from 23 November; in the intervening period she worked through a nursing agency and performed work in every week save one. Judge Howell set aside the decision of the tribunal, which had calculated the claimant’s average hours worked by only looking backwards from each week; he substituted a decision that the claimant had remained in regular employment throughout.

18.           The test applied in CI/2517/01 was cited with approval by Judge Levenson in CI/3224/04, where the claimant had a contract of employment until 30 September and again from 3 November. Although there were four weeks in which the claimant did not perform any work, Judge Levenson calculated – looking backwards and/or forwards from each week - that his average hours remained above ten at all times. Judge Levenson reasoned (with his own emphasis)

The use of the phrase “any period of five consecutive weeks” means that weeks after a particular job comes to an end can be included, and that weeks in which no work is done or expected to be done can also be included. In so deciding, I agree with the conclusions of the Commissioner in paragraphs 20 to 22 of CI/2517/2001. Further, I see no reason why a five week period under consideration cannot include some weeks calculated with reference to regulation 2(a) and some calculated with reference to regulation 2(b). Although 2(b) can only be assessed or calculated retrospectively, because it must be established for those purpose whether gainful employment has in fact been undertaken, future weeks can be considered from any vantage point. The calculation of five week rolling averages, as I show below, is a convenient way of assessing continuing entitlement.

19.           In the present case, the claimant’s contract ended on 30 October 2007; his new contract commenced on 11 March 2008. There is no suggestion that he performed any work in between. Application of Judge Levenson’s approach to the weeks following 30 October would lead to the conclusion that the claimant is to be regarded as having given up regular work in the week in which his average hours of work over the previous five weeks fell below ten – which would be a week in late November. The claimant cannot be assisted by looking forwards in time, since his resumption of work was well over five weeks later. By contrast, application of Judge Howell’s approach set out in paragraph 16 above would mean that the Secretary of State’s original decision was correct.

20.           The correct decision in this case therefore depends upon which of the conflicting approaches of two distinguished judges of the Upper Tribunal is correct. Having considered the matter,. I respectfully agree in part with Judge Levenson’s reasoning and in part with that of Judge Howell.

21.           Regulation 3 of the Regular Employment Regulations requires one to look at each benefit week following as claimant’s reaching pensionable age and to answer the question whether the claimant was “in” regular employment in that week. For these purposes ‘regular employment’ means one or other of the two sets of circumstances set out in regulation 2. So the question becomes, for the purposes of regulation 3 when read with regulation 2(a), whether the claimant was in employment under a contract (with, to put it loosely, average contractual hours of ten or more); for the purposes of regulation 2(b) the question is whether the claimant was in fact in gainful employment which he undertook for an average of ten hours measured over five consecutive weeks.

22.           Viewing the questions in that way, it seems to me to be impossible to hold that a person is “in” employment under a contract for the purposes of regulation 2(a) at a point in time at which the contract has ceased. In that regard I find Judge Howell’s reasoning set out in paragraph 16 above compelling.

23.           As far as regulation 2(b) is concerned, I agree with Judge Howell that it embraces both casual employment and self-employment. It is in addition self-evident that the employment or self-employment does not need to be full-time. The Regulations regard a person as being “in employment” in a week provided at least that he performs enough hours of casual or self-employed work to maintain the required ten-hour average; that is so despite the fact that, if the work is casual, the claimant will probably not be in an employment relationship except during the hours that he performs it. It is against that background that I address the question whether for the purposes of regulation 2(b) there is (as Judge Howell suggested) an implicit requirement that the claimant must perform some work in each week.

24.           I do not consider that there is such an implicit requirement. The question to be answered is whether, in the week under examination, the claimant is “in” employment undertaken for an average of ten hours per week measured over five consecutive weeks. Where a claimant remains in the habit of taking employment, and moreover the five-week rolling average of ten hours’ work per week is maintained, I do not find it necessary to hold that he is no longer in employment in a particular week merely because he performs no hours of work in that week.

25.           If it were otherwise, a self-employed person could not take a week off without being regarded as giving up employment for the purposes of the Regular Employment Regulations. I find it impossible to conclude that, despite specifically providing for employees’ holiday and other permitted absences to be disregarded for the purposes of the contractual hours calculation under regulation 2(a), the Regulations require self-employed persons to forego time off in order to avoid deemed giving up of employment. As a matter of language I have no difficulty in regarding a self-employed person taking time off as remaining “in” self-employment. Similarly, I would regard a person as remaining “in” self-employment even if no customers come his way in a particular week. Likewise I would regard a person who remains in the habit of taking casual employment as remaining “in” casual employment during a week in which (whether because of a wish to take time off or because of the unavailability of work) he does not actually perform any work. This seems to me to be consistent with Judge Rowland’s approach in R(JSA) 1/03 to the concept of “gainful employment” when used in the JSA Regulations; the same term is used in regulation 2 of the Regular Employment Regulations).

26.           It seems to me to be a matter of giving the concept of being “in” (for example) casual employment or self-employment its natural meaning. Following this approach, a casual employee or self-employed person will be regarded as giving up regular employment if he decides no longer to take work, or if his average hours fall below ten. The approach seems to me to be consistent with Judge Powell’s approach in CI/2517/01, where the nurse’s single week without agency work was not regarded as triggering regulation 3.

27.           I turn to the application of these principles to the present case. The claimant had employment under a contract, falling within regulation 2(a), until 30 October, when the contract ended. After October he could not in my view be said to be in employment under a contract, with the result that he must be regarded as having given up regular employment for the purposes of regulation 3 read with regulation 2(a). As far as concerns regulation 2(b), there is no suggestion that the claimant was undertaking or planned to undertake any casual or self-employment, or indeed any type of employment, in the weeks immediately following 30 October. In these circumstances, my preferred interpretation of the Regulations does not assist him and it does not seem to me that he could be said to be “in” regulation 2(b)-type employment in those weeks either.

28.           I therefore conclude, with reluctance, that the Secretary of State’s original decision, replacing the claimant’s REA with RA with effect from 4 November 2007, was correct. I repeat that I find this somewhat harsh. Judge Howell commented unfavourably in CI 16202/96 and CI/2517/01 on the withdrawal of entitlement to REA. Without entering into the merits of that, the fact remains that the policy of the Regular Employment Regulations is generally to permit those who continue working after pensionable age to retain their entitlement to REA. If the claimant’s employment had been all-year-round rather than seasonal, he would have kept his entitlement while he continued working. There is no obvious justification for treating seasonal workers less favourably. And, as the tribunal observed, the Secretary of State has prescribed a more flexible approach in the case of JSA. But the effect of the Regular Employment Regulations is clear and I am obliged to apply it.

Nicholas Paines QC

19 March 2010