A2 workers and the right to reside in Ireland Genov and Gusa v Minister for Social Protection

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1 Trinity College Dublin, Ireland From the SelectedWorks of Mel Cousins July, 2013 A2 workers and the right to reside in Ireland Genov and Gusa v Minister for Social Protection Mel Cousins Available at:

2 A2 workers and the right to reside in Ireland Genov and Gusa v Minister for Social Protection 1 This case involves a judicial review case in the High Court of a refusal of jobseeker s allowance to two formerly self-employed persons (one Romanian, one Bulgarian) on the basis that they did not have a right to reside in Ireland (as required by the relevant provisions of the Social Welfare Acts). The case raises some similar issues to those raised in the recent Solovastru ruling, in particular, whether or not formerly self-employed workers retain a right to reside under EU law once their self-employment ceases. 2 It was also argued that if the two workers did not have a right to reside, to deny them access to social assistance would be incompatible with EU law, an argument rejected by the High Court. Unfortunately, the most obvious similarity between this case and Solovastru is the very limited understanding of social welfare and EU law issues displayed by the respective judges. 3 Background Unlike the position with the 2004 accession when Ireland allowed open access to its labour force for nationals of the new member states, in 2007 Ireland allowed only limited access to its labour market for Romanian and Bulgarian (A2) nationals. 4 In effect this meant that A2 nationals were still required to obtain a work permit in order to take up employment (as an employee). However, there was no restriction on the right of such nationals to establish themselves in a self-employed capacity (under Article 49 EU, now 56 TFEU). The restrictions on employment were dropped in July The two men who had formerly been self-employed in Ireland, became unemployed in late 2012 and claimed jobseeker s allowance (JA). Their claims were refused on the basis that they did not have a right to reside in Ireland. It appears that there was no appeal to the Social Welfare Appeals Office in this case. 6 It seems likely that this fact, combined with Mr. Justice Hedigan s failure to appreciate what facts were relevant, contributed to the very limited factual findings set out in the judgment. Hedigan J summarizes the facts in just over a page and it 1 Unreported, 11 July At the time of writing this case has yet to appear on the courts website and a neutral citation has not yet been allocated. 2 Solovastru v. Minister for Social Protection [2011] IEHC 532. This case is currently under appeal to the Supreme Court. For a commentary see G. Whyte and M. Cousins, Social Welfare Law 2011 in Annual Review of Irish Law 2011 (Round Hall, 2012). See also Hrisca v Minister for Social Protection, (High Court, unreported 16 February the judgement does not appear on the courts website and does not appear to have been assigned a neutral citation). 3 Mr. Justice Hedigan s 26 page judgement, after a short (and entirely inadequate) outline of the facts (see below) sets out a lengthy (and rather incoherent) account of the arguments made on both sides before a brief (4 page) engagement with the legal issues. The source of the incoherence is not apparent. 4 Annex 7 of the Act of Accession. 5 See 6 Arguably the judicial review application should have been rejected on the grounds that the applicants had not exhausted their remedies but the issue is not discussed by the court. In Hrisca v Minister for Social Protection, whihc invovled somewhat similar issues, White J (at p. 3) held that the applicants did not, in this case, have to exhaust other remedies including a right to appeal to the Social Welfare Appeals Office and held that judicial review was the more appropriate remedy given the complex issues of European law invovled in that case. It may be that Hedigan J. was adopting a similar approach.

3 seems that these are based on the applicants affidavits rather than being formal findings of fact. 7 Mr. Genov claimed that he had worked on a self-employed basis from January 2010 to September 2012 (2 years 9 months); Mr. Gusa from October 2008 to October 2012 (4 years). Unfortunately we know little if anything more about this employment. Even the area of work is unspecified. Did it amount to effective and genuine employment? 8 Was it carried out in compliance with legal requirements, such as income tax and VAT requirements? 9 The judge s failure to explore these issues means that we have a case where there are effectively no findings of relevant facts. The law In order to be entitled to jobseeker s allowance a person must be available for employment (or be deemed to be or exempted from being so available) and be genuinely seeking employment. 10 In addition, a person must be habitually resident in Ireland and, in order to show habitual residence, a person must have a right to reside in Ireland. 11 The instant claims were rejected on the basis that Messrs. Genov and Gusa did not have such a right under national or EU law. Did the applicants have a right to reside? As self-employed workers, the two men had a right to reside in Ireland under EU law. 12 An initial question might be whether, although now without actual work, the two men could still be considered to be self-employed (thereby retaining their right to reside). 13 It does not appear that this issue was argued and (while recalling the general absence of clear factual findings) all the indications in the judgment are that their self-employment had entirely ceased. 14 Therefore, their right to reside depended on whether self-employed workers retain such a right after ceasing their activity. Article 7(3) of Directive 2004/38/EC provides 3. a Union citizen who is no longer a worker or self-employed person shall retain the status of worker or self-employed person in the following circumstances: (a) he/she is temporarily unable to work as the result of an illness or accident; 7 The section is replete with he states and he claims. 8 Case 53/81 Levin [1982] ECR Mr. Genov stated that he registered as a self-employed person with the Revenue Commissioners. 10 Section 141(4) as substituted by SWPA 2009, s. 5. In Solovastru, the claim was rejected because Mr. Solovastru was (as the law then stood) unable to take up employment (as opposed to self-employment) without a work permit and he was, therefore, considered not to be available for work. However, these restrictions had been dropeed by the time the claims in this case were made. 11 Section 141(9). S. 246 (5) now states that a person who does not have a right to reside in the State shall not, for the purposes of [the] Act, be regarded as being habitually resident in the State. See generally M. Cousins, Social Security Law in Ireland, Kluwer, 2012, paras Article 7(1) of Directive 2004/38/EC. 13 See, for example, Secretary of State for Work and Pensions v AL [2010] UKUT See, for example, para 6.5.

4 (b) he/she is in duly recorded involuntary unemployment after having been employed for more than one year and has registered as a job-seeker with the relevant employment office; (c) he/she is in duly recorded involuntary unemployment after completing a fixed-term employment contract of less than a year or after having become involuntarily unemployed during the first twelve months and has registered as a job-seeker with the relevant employment office. In this case, the status of worker shall be retained for no less than six months;.... The interpretation of this article had been considered in Tilianu a rather similar English case also involving a self-employed Romanian worker who had claimed social benefits. The English Court of Appeal concluded that the apparent and natural meaning of article 7(3)(b) and (c) involved a distinction between workers (employed persons) and self-employed and that, whereas article 7(3)(a) applied to both groups, the references to employment and involuntary unemployment in (b) and (c) meant that these applied only to workers and not the selfemployed. 15 The Court of Appeal also rejected the argument that a purposive interpretation should be adopted holding that there was nothing in the travaux preparatoires or the recitals to indicate that it was intended to alter previous law which treated employed and self-employed persons differently. 16 The EU directive is implemented in Ireland by the European Communities (Free Movement of Persons) (No. 2) Regulations 2006 ( S.I. 656 of 2006) which provide in very similar terms that 6. (2) (a) Subject to Regulation 20, a Union citizen may reside in the State for a period longer than 3 months if he or she - (i) is in employment or is self-employed in the State, (c) Subject to Regulation 20, a person to whom subparagraph (a)(i) applies may remain in the State on cessation of the activity referred to in that subparagraph if - (i) he or she is temporarily unable to work as the result of an illness or accident, (ii) he or she is in duly recorded involuntary unemployment after having been employed for more than one year and has registered as a job-seeker with a relevant office of the Department of Social and Family Affairs and FÁS, (iii) subject to subparagraph (d), he or she is in duly recorded involuntary unemployment after completing a fixed-term employment contract of less than a year or after having become involuntarily unemployed during the first year and has registered as a job-seeker with a relevant office of the Department of Social and Family Affairs and FÁS, or (d) In a case to which subparagraph (c)(iii) applies, the right to remain referred to in paragraph (c) shall expire 6 months after the cessation of the activity concerned unless the person concerned enters into employment within that period. 15 R (Tilianu) v Secretary of State for Work and Pensions [2010] EWCA Civ 1397 at 22. See also the decision of the High Court: R (Tilianu) v Secretary of State for Work and Pensions [2010] EWHC 213 (Admin) at At See also R (Tilianu) v Secretary of State for Work and Pensions [2010] EWHC 213 (Admin) at 42 and Secretary of State for Work and Pensions v RK [2009] UKUT 209 (AAC) at 11.

5 In Solovastru, Dunne J adopted a similar interpretation to the Court of Appeal in Tilianu. She pointed out that there was a distinction in EU law between those in employment and the selfemployed. She agreed with the English High Court in Tilianu that it was not credible that a change in EU law to treat self-employed persons in the same way of employees would not have been flagged and that the wording of article 7 was not apt to cover self-employed persons. She felt that the wording of the Directive was quite clear and distinguished between the two groups. 17 This interpretation of Directive 2004/38 is plausible as a matter of statutory interpretation. However, although it has yet to consider article 7, the Court of Justice has taken a purposive approach to other articles of the same directive. For example, it has applied by analogy article 16(4) of the Directive which provides that once acquired, the right of permanent residence shall be lost only through absence from the State for a period exceeding two consecutive years to a person who remained in the country but without a right to reside. 18 It would seem somewhat strange that an employed person should be allowed to retain his or her status as a worker (possibly indefinitively) whereas a self-employed worker would (on this interpretation) be left without any right of residence as soon as his or her actual selfemployment ceased. In the instant case, however, Hedigan J did not engage with the issues raised at all and in three lines simply stated that the judgment in Solovastru was determinative of the issue. 19 Is the right to reside test compatible with EU law? Assuming that the Court was correct to find that the two men did not have a right to reside, the question arises as to whether making access to social benefits conditional on having a right to reside is consistent with EU law on free movement of persons. The European Court of Justice has held that the habitual residence test simpliciter is compatible with EU law in so far as that requirement may be justified on the basis of objective considerations that are independent of the nationality of the persons concerned and proportionate to the legitimate aim of the national provisions. 20 However, it has yet to consider the right to reside test. The EU Commission has recently announced that it intends to refer infringement proceedings against the UK in relation to its right to reside test to the Court of Justice. 21 However, the UK Supreme Court in Patmalniece has held that, in the context of a means-rested state pension to a person who was never economically active in the UK, that the right to reside is compatible with EU law. 22 The Court accepted that the right to reside was likely to have a disproportionate impact 17 At pages She further stated that the status of involuntary unemployment was only capable of being applied to a person in paid employment and that the term could not be applicable to a person who was selfemployed. This is passing strange given that she had earlier quoted the views of an experienced Department of Social and Family Affairs official who stated I wish to emphasise that a person who has been self-employed is not disqualified, by virtue of that fact, from receipt of jobseekers allowance. 18 Case C-325/09, Dias [2011] ECR I Para 6.4. Rather strangely, however, this conclusion appears at the end of the discussion about whether the right to reside test is objectively justified (see below). White J. in Hrisca also followed the decision in Solovastru and declined to refer this issue to the Court of Justice as it was under appeal to the Supreme Court. The judge emphasised that unless for a good reason and certainly at an interim stage it would not be appropriate for the Court to take an alternative view (at p. 22). 20 Case C-138/02, Collins [2004] ECR I The meaning of the proviso ( insofar as... ) remains obscure. See Collins v Secretary of State for Work and Pensions, [2006] EWCA Civ IP/13/475, 30 May Contrary to the predictions of the respondents in the instant case (at p. 19). 22 Patmalniece v Secretary of State for Work & Pensions [2011] UKSC 11. See Mel Cousins, Case Analysis (2011) 18(3) JSSL

6 on non-nationals and, therefore, required objective justification. This necessitated that the rule be justified on objective considerations independent of the nationality of the persons concerned and proportionate to the legitimate aim of the national provisions. It concluded (by a 4-1 majority) that the test was objectively justified on the basis that it was legitimate for the UK to limit access to social assistance to those with a sufficiently close economic or social link to the country. More recently, in a case which does not appear to have been opened to Hedigan J (presumably it was not decided at the time of hearing), the Chief Social Security Commissioner in Northern Ireland (Commissioner Mullan) distinguished Patmalniece and held that, in the case of a woman who had worked continuously in Northern Ireland for 8 years, the right to reside test could not be objectively justified as she was economically and socially integrated into the national society. 23 In this case, if we were to assume that Messrs Genov and Gusa were in fact employed for between 2 years 9 months and 4 years in Ireland, the facts fall somewhere between the two cases. Clearly there is an argument that employment for these periods of time means that the two men were also economically and socially integrated into Irish society and that the arguments for justification accepted in Patmalniece do not apply. Hedigan J referred to Patmalniece and appears to accept that the right to reside has a disproportionate impact on non-nationals. However, he accepted that the State s argument that the test was objectively justified in the interests of preserving the resources of this State in funding its social welfare system. In a rather contradictory sentence, Hedigan J goes on to say that This is clearly a logical and reasonable rationale, is one that stands independently of nationality of the applicants herein because it applies to all citizens of Member States other than Ireland regardless of their nationality and seems proportionate to the legitimate aim of best using the resources of the State. 24 This appears to suggest that a provision which differentiates between national and all nonnationals is independent of nationality. This is, of course, not the legal position. EU law was not (and is not) primarily concerned to prevent member States from discriminating between nationals of other Member States but rather to prevent them discriminating against nationals of other Member States. The legal status of the right to reside test seems likely to be considered in the infringement proceedings being brought by the Commission against the EU and/or in a pending appeal by the UK authorities against the ruling of the NI Social Security Commissioner. The absence of clear findings of fact in this case makes it difficult to come to any definitive conclusions, other than the obvious fact that Hedigan J s analysis is somewhat inadequate. Despite his references to that case, he does not, in fact, follow Patmalniece but rather comes up with a different justification, i.e. preserving the resources of this State in funding its social welfare system. The Court of Justice has recognized that control of expenditure and finance sustainability of social security schemes are important state objectives. 25 However, the High Court did not (explicitly) consider the extent to which the right to reside test was related to this objective nor the proportionality of such a measure. 23 AS v Her Majesty s Revenue and Customs (CB) [2013] NICom Para See, for example, Case C-372/04 Watts [2006] ECR I-4325.

7 It is difficult to argue with Commissioner Mullan s conclusions that a person in the position of the appellant in the Northern Ireland case (who has been in employment there since 2005) should be considered to be actually economically and socially integrated within the UK. Of course, the Court of Justice has on occasion allowed Member States to rely on a bright line approach, as in Förster. 26 However, that decision must be seen in its own particular context where it (albeit indirectly) questioned the legality of the EU Council s approach in this area. To the contrary, the right to reside rule is a purely national rule and a rigid application of this rule in all cases clearly has the potential to exclude even persons who are economically and social integrated into the Member State. However, where the Court of Justice will draw the line remains to be seen. In fact, there are perhaps three possible outcomes. First, the Court takes a bright line approach as in Förster and the test is objectively justified. Second, the test is not objectively justified, either because it is too closely bound up with nationality or, more likely, because it is not proportionate. Finally, I would think the most likely answer to come from the Court of Justice is that the right to reside test is not justified unless it is applied in a proportionate manner or to reverse this, the right to reside test is compatible with EU law if applied in a proportionate manner (as in Collins). Categorization of jobseekers allowance The lawyers for the applicants argued that jobseekers allowance should be categorized as social security under Regulation 883/2004 on social security for migrant workers. Although it is not very apparent from the judgment, 27 the point of this argument would appear to be that if so categorised, Ireland would be the competent state under Regulation 883 and the habitual residence clause (and the right to reside) would not apply. At present, jobseekers allowance is categorized as a special non-contributory benefit under Regulation 883. This means that it falls within the scope of the Regulation but such benefits are to be provided exclusively in the Member State in which the persons concerned reside, in accordance with its legislation and many of the general provisions of Regulation 883 do not apply. 28 The history of the classification of benefits under Regulation 883 (and its predecessor Regulation 1408/71) is too long to recount here and the Court of Justice has not shown much commitment to logic or principle in its approach to categorisation. 29 However, it is reasonably clear that a means-tested payment such as jobseekers allowance is correctly categorized as a special non-contributory benefit Case C-158/07, Förster [2008] ECR I In that case, the Court of Justice upheld a Dutch requirement of a five year residence requirement for non-nationals for entitlement to a maintenance grant even though economic and social integration could obviously be achieved in a shorter period (as in Case C-209/03 Bidar [2005] ECR I-2119). 27 Hedigan J states that he fails to see the significance of whether JA is social security or social assistance since in either case the applicants would be a financial burden on the state. 28 See articles 3 and 70 of Regulation See M. Cousins, 'Social security, social assistance, and "special non-contributory benefits": the never-ending story' European Journal of Social Security, Volume 9 (2007), No. 1, The Court of Justice has come to this conclusion in a series of social assistance-type payments from different countries: C-160/02, Skalka [2004] ECR I-5613; Case C-154/05 Kersbergen-Lap [2006] ECR I ; Case C-265/05 Perez Naranjo [2007] ECR I- I-347. The applicants argument that the Court of Justice had (in Cases C-22/08 and C- 23/08, Vatsouras and Koupatantze, [2009] ECR I-4585) ruled that a similar payment was not social assistance for the purposes of Directive 2004/38 is not relevant to the categorisation under Regulation 883/2004.

8 Conclusion Given the importance of the facts in this case and the absence of any clear findings of fact, it is not possible to say what the correct outcome of this case should have been. If one accepts that the applicants did not have a right to reside (as seems likely unless the Supreme Court or Court of Justice rejects the Tilianu line of authority), the key question was whether the right to reside rule was justified. But the consideration of this issue by the High Court is inadequate (especially given that this issue had been well-canvassed in Patmalniece). Given that such a rule is clearly likely to have a disparate impact on non-nationals, it must be objectively justified. But the Court s consideration of objective justification was very weak and there was effectively no consideration of proportionality. 31 This is not an easy issue and the UK courts continue to wrestle with it. 32 However, Hedigan J s approach is seriously flawed and should not be followed. The case unfortunately shows yet again the general inability of the Irish courts to deal in a competent manner with social welfare cases. In the period from January 2011 to July 2013 there have been eight High Court and one Circuit Court decisions directly involving social welfare issues. 33 Of these, three are so poor they would fail any appropriate standard (Solovastru, R.G. and the current judgment), 34 two (Jama and Brightwater - really an employment case as it involved the insurability of agency workers) might scrape a pass; 35 while Douglas is an extempore judgment which was correct as to the outcome but understandably did not need extended consideration of the law. 36 Hrisca involved a preliminary reference to the Court of Justice but, unlike Kelly, did not involve any detailed analysis of the law. 37 Only Neenan Travel (again really an employment case) 38 and Kelly (which is a preliminary reference to the ECJ) 39 are good judgements which show a clear understanding of the law. It is noteworthy that Kelly is the first Regulation 883 (formerly 1408/71) reference involving social welfare benefits in 40 years since we joined the (then) Common Market, although several such cases have been referred from Northern Ireland. 40 It is no coincidence that it was made by Hogan J. The purpose of judicial review is to correct errors below, while the right of appeal to the High Court from a decision of an appeals officer is intended to allow the High Court to provide some guidance on the correct interpretation of the law. However, it is currently the case that (with the possible exception of areas such as fair procedures or employment law) the High Court is more inclined to create error than correct it. Certainly the specialist social security adjudication system in the UK (now the Upper Tribunal in Great Britain, still known as the Social Security 31 See, in contrast, Burnip v Birmingham City Council [2012] EWCA Civ See M. Cousins Equal treatment and objective justification under the European Convention on Human Rights (2013) 20 (1) JSSL, These cases are reviewed in the social welfare chapters of the Annual Review of Irish Law. 34 R.G. v. Department of Social Protection (unreported judgment of Judge Lindsay, 5th July 2012). 35 Jama v. Minister for Social Protection [2011] IEHC 379; Brightwater Selection (Ireland) Ltd v. Minister for Social and Family Affairs [2011] IEHC Douglas v. Minister for Social Protection [2012] IEHC Unreported judgment of Mr. Justice White, 16 February It appears that the case was settled and no reference was actually made. 38 Neenan Travel Ltd. v. Minister for Social and Family Affairs [2011] IEHC Kelly v Minister for Social Protection [2013] IEHC Flood -v- Health Service Executive [2013] IEHC 192 (also a ruling by Hogan J.) which involves the right to health care appears to have been the first Regulation 883 reference on any type.

9 Commissioners in NI) does a much more competent job. Perhaps it is time to look to strengthen the capacity of the Social Welfare Appeals Office to deal with legal issues rather than seeking to bypass it.

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