A2 self-employed workers and social welfare rights - Solovastru v Minister for Social and Family Affairs

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1 Trinity College Dublin, Ireland From the SelectedWorks of Mel Cousins September, 2011 A2 self-employed workers and social welfare rights - Solovastru v Minister for Social and Family Affairs Mel Cousins, Glasgow Caledonian University Available at:

2 A2 self-employed workers and social welfare rights - Solovastru v Minister for Social and Family Affairs This note examines the recent decision of the Irish High Court in Solovastru v Minister for Social and Family Affairs. 1 The case concerned the rights of a Romanian migrant worker to benefits under the Irish social welfare scheme and, in particular, (i) whether a person who requires a work permit to take up employment can be considered to be available for work ; and (ii) whether the applicant was habitually resident in Ireland. This, in turn, raised the issue as to whether, under EU law, a self-employed person retains a right to reside under Article 7 of Directive 2004/38/EC in the event on involuntary unemployment. 2 As readers of the Annual Review of Irish Law will know, very few social welfare cases ever reach the Irish courts. In the past number of years, only one or two judgements per annum have been issued on social welfare issues. This compares with at least 20 decisions of the UK superior courts in 2010 (in addition to numerous decisions by the judges of the Upper Tribunal (formerly the Social Security Commissioners). 3 This lack of familiarity with social welfare law may create difficulties in understanding the finer points of the issues in dispute when cases do impinge on the court system. The facts Mr. Solovastru is a Romanian national who came to Ireland in September He worked initially as a carpenter and from September 2006 to April 2007 for a different company. This work was unlawful as he did not have a work permit and his presence in Ireland was also unlawful (at least to 1 January 2007 when Romania joined the EU). 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 Romanian nationals were still required to obtain a work permit in order to take up employment (as an employee). 5 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). Therefore, Mr. Solovastru was legally able to take up self-employment and he did so from May 2007 until November During this period he was registered as self-employed with the Revenue Commissioners. Mr. Solovastru s wife and three children joined him in Ireland in February 2007 and a further three children were born in Ireland June At the time of writing over two months later- the final version of the judgment has yet to appear on the court s website and no neutral citation number has been assigned. 2 An issue recently considered by the UK courts in R (Tilianu) v Secretary of State for Work and Pensions [2010] EWCA Civ In Northern Ireland the title of Social Security Commisisoner continues. 4 Annex 7 of the Act of Accession. 5 This restriction applies until the end of There was an exemption for nationals working legally in Ireland at the date of accession and admitted to the labour market for 12 months but as Mr. Solovastru was working unlawfully he was not able to avail of this. 6 The citizenship of these children was not specified.

3 In November 2008, Mr. Solovastru s self-employed work ceased and on 12 November 2011 he claimed jobseeker s allowance (JA) a means tested payment. 7 Pending a decision on his claim for this benefit, in December 2008 he claimed supplementary welfare allowance (SWA - a residual payment for persons with low or no income) 8 and rent supplement. 9 There was a very considerable (and unexplained) delay in deciding on his claim for JA and it was not until 28 August 2009 that a decision was made refusing the claim on the basis that he was not available for employment. This was on the basis that as a Romanian national he required a work permit and was not, therefore, available for full-time work. 10 This decision was appealed to the Social Welfare Appeals Office and on 12 May 2010 an appeals officer upheld the refusal on the basis that the appellant had no work permit. 11 Arising from the refusal of JA, it appears that a review of Mr. Solovastru s entitlement to SWA and rent supplement was also carried out 12 and in June 2010 he was notified that he did not satisfy the habitual residence condition (required for both payments) as he did not have a valid work permit, he did not have a work permit for any employment prior to 2007 and he had maintained himself through self-employment for less than two years. 13 An appeal to the Health Services Executive (HSE) appeals officer was submitted but had not been heard at the time of the application for judicial review in October The issues It would be more normal to set out the court s approach and to conclude with some comment on the approach adopted. However, there is an element of confusion about the 7 S. 140 et seq. Of the Social Welfare (Consolidation) Act, 2005 (as amended) (the Act). See generally M. Cousins, Social Security Law Ireland, International Encyclopaedia of Laws, Kluwer, 2010 (2nd. Edition). 8 S. 187 of the Act et seq. 9 S. 198 of the Act. Mrs. Solovastru also claimed child benefit in May 2008 which was refused in April 2009 on the basis that she was not habitually resident. A challenge to this decision was not considered by Dunne J who ruled that Mrs. Solovastru was disentitled to relief by reason of delay in bringing her application (not made until October 2010). See pages 9-13 of the judgement. This aspect of the case is not considered further here. 10 S. 141(4)(b). The deciding officer incorrectly cited s. 62(5)(a)(ii) the equivalent provision relating to the contributory jobseeker s benefit. This is given in the judgement as s. 65(5)(a)(ii), the source of the additional error being unclear. 11 Again there is a rather long (and again unexplained) delay and if the 13 words quoted in the judgement are the sum total of the appeal officer s decision it would appear to be quashable for failure adequately to state the reasons for the decision. It appears that the chief appeals officer was requested to revise the appeal decision under s. 318 of the Act but a hearing scheduled for December 2010 was postponed at the request of the applicants. 12 Although Dunne J states that the review of the SWA and rent supplement claim was as a result of the refusal of JA, the time gap of 19 months between the refusal of JA and the refusal of the other payments is not explained. 13 Page 16 of the judgement. 14 Unlike most social welfare payments, SWA is administered by the Health Services Executive (HSE) and an initial appeal lies to a HSE appeals officer under s. 323 of the Act. It appears that the appeal was rejected on 21 October 2010 but no further details are provided. A further appeal to the Social Welfare Appeals Office lies under s. 312 of the Act.

4 issues in this case so that it may be easier to set out first what the answer should have been before proceeding to examine the (rather different) approach adopted by the High Court. Availability In order to qualify for jobseekers allowance, a claimant must be available for employment. 15 This availability should not be unreasonably restricted. The relevant regulations provide that a person will not be regarded as being available for employment if he or she imposes unreasonable restrictions on (a) the nature of the employment, (b) the hours of work, (c) the rate of remuneration, (d) the duration of the employment, (e) the location of the employment, or (f ) other conditions of employment that he or she is prepared to accept. 3 In this case, the restrictions on Mr. Solovastru were imposed on him by the fact that, under Irish law, he was obliged to obtain a work permit before he could take up employment (as an employee). Thus his immediate availability for work was confined to self-employment. The rationale for not providing jobseekers allowance in such circumstances was set out in evidence by an official of the Department (Mr. Colm O Neill) who said From a public policy perspective it follows therefore that eligibility for job seeker payments must be confined to those who are not constrained in any way, whether by virtue of personal choice or by way of legal restrictions, in taking up employment. Where a person is available only to take up a particular form of employment e.g. self-employment he is not as a consequence in a position to satisfy the condition. 16 In principle this approach seems correct and has long been adopted in the UK. For example, in a UK case the claimant had been permitted to enter the United Kingdom and had been granted a work permit enabling him to accept employment in a specific job. The permit was valid only for the particular employment for which it was issued and the claimant was not allowed to take other employment without the prior permission of the Department of Employment. A Tribunal of Social Security Commissioners held that to be available for employment a claimant must not only be ready and willing to take up employment but he must also be able to do so in accordance with the legislation of the United Kingdom. In the circumstances, the Tribunal held that he was not available to be employed within the meaning of the Act. 17 Of course, the Irish courts are not bound by this decision and it might be argued that Mr. Solovastru was available for employment in the sense that he was able to seek work and could apply for a work permit if and when he was offered a job. 18 However, the approach adopted by the Commissioners and the Department seems consistent with the intention of the legislation. It appears that the applicant did not seriously contest this view but, instead, sought to argue that Mr. Solovastru had a right to reside in Ireland as a result of EU law. Dunne J states that 15 S. 141(4)(b). 3 Art. 15 of the Social Welfare (Consolidated Claims, Payments & Control) Regulations, Quoted at page 17 of the judgement. 17 R (U) 1/82(T). 18 Unfortunately Dunne J. did not discuss at all the meaning of available for employment although she appears to have assumed (at page 17) that the Department s view was correct.

5 at the heart of the question as to whether Mr. Solovastru was available for employment was his entitlement to reside in this jurisdiction. 19 But this does not appear to be correct. Directive 2004/38/EU relates to rights of residence not to access to the labour market. Whether or not Mr. Solovastru retained a right of residence (discussed below) this did not alter the fact that his access to the labour market was restricted by the terms of the Act of Accession. 20 Habitual residence In order to be entitled to JA, SWA or rent supplement, a person must be habitually resident in the State at the date of making the application. 21 Irish law, following decisions of the Euroepean Court of Justice, provides that when determining whether a person is habitually resident in the State, the relevant officer shall take into consideration all the circumstances of the case, including, in particular: (a) the length and continuity of residence in the State or in any other particular country; (b) the length and purpose of any absence from the State; (c) the nature and pattern of the person s employment; (d) the person s main centre of interest; and (e) the future intentions of the person concerned as they appear from all the circumstances. 22 In the case of the claims for SWA and rent supplement, only the initial decision has been given at the time of the application for judicial review. A first-tier appeal decision was given by the HSE appeals officer on 20 October 2010 which apparently upheld this initial decision. 23 However, an appeal to the Social Welfare Appeals Office was still open and in the absence of a decision, the application for judicial review should have been rejected on the basis that the applicant s remedies had not been exhausted. 24 Dunne J adverted to the question as to whether it was appropriate to deal with the matter by way of judicial review in circumstances where the applicants continue to pursue appeals from the decisions complained of but no further consideration of the issue appears in her judgement. 25 It 19 At page Annex 7 of the Act of Accession provides that persons admitted to the [Irish] labour market... following accession for an uninterrupted period of 12 months or longer should enjoy access to the labour market. It might be argued that Mr. Solovastru was admitted to the labour market as he worked (legally) as a selfemployed persons for 19 months but it would appear that the relevant provisions of the Annex should be read a relating to admission to the labour market as an employee. 21 This issue does not appear to have been considered in Mr. Solovastru s case presumably because his claim was, in any case, being rejected on availability grounds. 22 S. 246(4) inserted by s. 30 of SWPA No other details are given. 24 Maher v. Minister for Social Welfare [2008] IESC 15. This case would suggest that an applicant should also exhaust the possibility of seeking a review of the appeals officer s decision under s. 318 but it submitted that the courts should not oblige claimants to follow this additional procedure given that the decision of the appeals officer is stated to be final and conclusive (s. 320). 25 At pages 4-5.

6 appears that the application for judicial review was made because it was perceived as being a faster remedy than provided by the appeals procedure. 26 If the High Court reached the merits of the case (which it should not have but did), the initial decision that Mr. Solovastru was not habitually resident was based on the facts that he did not have a valid work permit, did not have a work permit for any employment prior to 2007 and had maintained himself through self-employment for less than two years. In fact none of these issues are directly relevant to habitual residence. The absence of a current work permit does raise the issue of financial support and what Mr. Solovastru s future intentions might be but a bald reference to the absence of a work permit could not, in itself, justify a decision that he was not habitually resident. The absence of a work permit prior to 2007 was entirely irrelevant. Finally the fact that he had only supported himself for less than 2 years is, in fact, evidence in favour of habitual residence not against. 27 Therefore, the decision should have been quashed on the basis that the decision maker erred in law and took irrelevant considerations into account. There is insufficient evidence in the judgement to form a definitive view as to whether Mr. Solovastru was habitually resident although the period of time he had worked in Ireland was strongly in favour of a positive answer. The judgement That was what should have happened. Dunne J approached the issues rather differently. 28 Firstly, she considered whether Mr. Solovastru was habitually resident in relation to his JA claim an issue not raised by either the deciding or appeals officer. Secondly, she (entirely incorrectly) took the view that the decisions in relation to SWA and rent supplement flowed from the decision to refuse JA. 29 Although the review of the SWA and rent supplement claim may have been triggered administratively by the refusal of the JA claim, in fact the claims for the different benefits were entirely separate and involved different qualification conditions. However, because the SWA and rent supplement claims were refused on the basis of HRC and because JA would also have been subject to the HRC, Mr. Solovastru was probably not prejudiced by these decisions. More importantly, Dunne J appears to have taken the view that in 2008 Mr Solovastru had to have a right to reside in order to satisfy the HRC (an issue which again does not appear to 26 At page 14 of the judgement and see the comments of counsel for Mr. Solovastru reported in the Irish Times, 3 March While the delay in deciding the appeal for JA would appear excessive, the reasons for the delay are not discussed. It appears that a number of appeals hearings (subsequent to the May 2010 decision on JA) were postponed at the request of the applicants (see pages 7 and 10). 27 See, for example, in Case 76/76 Di Paolo [1977] ECR 315 the Court of Justice stated that Whenever a worker has a stable employment in a member state there is a presumption that he resides there, Despite the delay in bringing the application for various declarations, Dunne J ruled that it was appropriate to extend time having regard to the overall circumstances of the case (at pages 13-15). 29 At pages 13 and 14. At page 39 Dunne J similarly states that the issue in relation to SWA and rent supplement was at all times dependent on the outcome of the situation in relation to jobseekers allowance. Even if there had been a decision as to the applicant s HRC status for the purposes of JA (which there was not), the HSE officials would not have been bound by this in relation to the claim for SWA and rent supplement. See, in relation to an analogous issue under UK law, R (Tilianu) v Secretary of State for Work and Pensions [2010] EWHC 213 (Admin) at

7 have been considered in the initial decision). 30 In setting out the HRC legislation she includes the right to reside requirement which, she notes, was introduced in the 2009 Act. 31 Although she does not mention this, the provision came into force in December Now Mr. Solovastru s claim had been made in October 2008 under the existing law. The HRC has to be satisfied on the day of claim and is not an ongoing requirement. Dunne J never discusses why she takes the view that the right to reside requirement existed in It could be that she read the amendment as having retrospective effect. The wording of the amendment does not require this and as it would trench on the rights of individuals the presumption against retrospectivity would seem to apply. 32 Alternatively, Dunne J might have considered that the habitual residence test in itself included a right to reside requirement. This seems very unlikely although Department of Social and Family Affairs guidelines did (at one point) suggest that this was the case. 33 However, a similar issue was considered by the UK House of Lords in R v Barnet LBC ex parte Shah in which it held that persons who did not have a right to reside were ordinarily resident for the purposes of UK education grants. 34 Arising from these errors, the focus of much of the case was on whether Mr. Solovastru retained a right to reside by virtue of article 7(3) of Directive 2004/38/EC. Article 7 provides that 1. All Union citizens shall have the right of residence on the territory of another Member State for a period of longer than three months if they: (a) are workers or self-employed persons in the host Member State; For the purposes of paragraph 1(a), 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; (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 fixedterm 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; Newspaper reports of the hearing suggest that this view was shared by counsel for Mr. Solovastru: Irish Times, March 3, At pages Minister for Social, Community and Family Affairs v. Scanlon [2001] 1 IR The relevant HRC guidelines (now replaced) stated that Residence for the purpose of this HRC factor implies a legal right to reside, not mere presence only. 34 [1983] 2 AC 309.

8 This issue has been considered in Tilianu a rather similar English case also involving a selfemployed 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. 35 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. 36 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. 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 self-employed. 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 35 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.

9 felt that the wording of the Directive was quite clear and distinguished between the two groups. 37 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. 38 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. Dunne J went on to conclude that Mr. Solovastru was only entitled to reside in Ireland as a self-employed person, that he was no longer a self-employed person, and that he was therefore not entitled on any basis to remain in the jurisdiction. 39 Now, with respect, there was no finding below as to what Mr. Solovastru s current employment status was (as far as can be established from the judgement) not would it be appropriate to determine such a factual issue on judicial review in the absence of clear findings of fact. In the circumstances Dunne J s comment as to Mr. Solovastru s current employment and legal status in Ireland can only be seen as obiter (and entirely unnecessary obiter at that). As we have seen, Mr. Solovastru did not have to have a right to reside in 2008 in order to be habitually resident. However, the Irish courts might take the view that he needed to be legally present in Ireland. In Shah, Lord Scarman stated If a man s presence in a particular place or country is unlawful, e.g. in breach of the immigration laws, he cannot rely on his unlawful residence as constituting ordinary residence... But even without this guidance, I would conclude that it was wrong in principle that a man could rely on his own unlawful act to secure an advantage which could have been obtained if he had acted lawfully. 40 However, for obvious reasons, the High Court did not consider this issue in Solovastru. If the Court had decided that a person must be legally present in Ireland in order to be habitually resident, the case should have been remitted to the appropriate officer to establish whether he in fact was so present. It might, for example, be the case that Mr. Solovastru could be considered to have retained his status as a self-employed person notwithstanding his loss of 37 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. 38 Case C-325/09, Dias [2011] ECR I Page R v London Borough of Barnet, Ex parte Shah [1983] AC 309, 343. The latter view (that one should not be able to rely on an unlawful act to secure an advantage which could have been gained lawfully) was clearly not shared by the Court of Justice in Case C-325/09, Dias [2011] ECR I-000 which refused to follow the Advocate General on this very point (judgement at 61-66; opinion at ).

10 work (as in a recent post-tilianu UK case). 41 If so, he would, of course, have retained his right to reside in any case. Alternatively, the officer would be required to establish the legal status of Mr. Solovastru s residence in Ireland from October Section 5 of the Immigration Act, 2004 provides that (1) No non-national may be in the State other than in accordance with the terms of any permission given to him or her before the passing of this Act, or a permission given under this Act after such passing, by or on behalf of the Minister. (2) A non-national who is in the State in contravention of subsection (1) is for all purposes unlawfully present in the State However, this is subject to various exemptions including those concerning persons with rights under EU law (section 2 of the 2004 Act). Thus it would have to be established whether Mr. Solovastru retained a legal position under EU law which prevented him from being deemed to be unlawfully present in the State. Given the complexity of the issues, a reference to the Court of Justice might be required (although given the long delays involved this may be of little practical assistance to the applicant). 43 Conclusion In summary, the original decision that Mr. Solovastru was not available for employment (and therefore not entitled to JA) was probably correct. Although the facts of the case are too unclear to come to a definitive conclusion, it would seem arguable that Mr Solovastru was habitually resident in Ireland in late 2008 (leaving aside the issue of his legal status in the country). As to this later, he did not need to have a right to reside in If the Irish courts (following Shah) took the view that a person who was unlawfully present in Ireland 41 Secretary of State for Work and Pensions v AL [2010] UKUT Non-national is defined as an alien within the meaning of the Aliens Act of 1935 other than an alien to whom, by virtue of an order under S. 10 of that Act, none of the provisions of that Act applies (Immigration Act, 1999, s. 1 and Immigration Act, 2004, s.1). In turn, alien means a person who is not a citizen of Saorstát Eireann (Aliens Act, s.2). Thus the rather convoluted legislation provides that a non-national (i.e. a person who is a not an Irish citizen) must have Ministerial permission to be in the State and a person without such permission is for all purposes unlawfully present in the State. 43 In a similar UK case Judge Rowland argued that it was difficult to see why a person who ceases to be selfemployed but who seeks employment as a worker should not retain a right of residence. I am quite satisfied that such a person does ordinarily retain a right of residence because it would be quite inconsistent with Article [14](4)(b) of the Directive not to do recognise such a right. There is no reason why a person who was formerly self-employed in a member State should have fewer rights than a person who has never worked in that State at all. Whether the word entered in Article [14](4)(b) must be read as is in or whether it is necessary to recognise the right of residence as existing under Article 18 of the EC Treaty outside the Directive does not matter. What, however, is clear is that the right of residence is held by virtue of the person s current status as a person seeking employment as a worker, rather than his or her former status as a self-employed person : Secretary of State for Work and Pensions v RK [2009] UKUT 209 (AAC) at 12. Judge Rowland erroneously referred to the relevant provision as article 15(4)(b). This would seem unlikely to apply to Mr. Solovastru who, as we have seen, was unable to seek employment as a worker due to the restrictions in the Act of Accession. However, it might be asked whether self-employed workers have a similar right to remain arising from the right of establishment in Article 49 EU.

11 could not rely on that residence for the purposes of habitual residence, it would be necessary to establish Mr. Solovastru s exact legal status in Ireland at the relevant time. As noted above, Dunne J s ruling following Tilianu - that a self-employed person does not retain that status after becoming voluntarily unemployed is a plausible interpretation. However, almost all other aspects of the ruling should be considered as per incuriam. It is understood that the case may be appealed to the Supreme Court though what anybody can do to untangle the issues at this stage remains to be seen.