Gubeladze — Extension of workers registration scheme unlawful

A long-form article

Habitual residence

The habitual residence test was introduced as a condition of entitlement to means-tested benefits back in August 1994. It continues to apply to all claims for means-tested benefits, i.e. Income Support (IS), income-based JobSeekers Allowance (ibJSA), income-related Employment and Support Allowance (irESA), Pension Credit (PC), Housing Benefit (HB), and latterly Universal Credit (UC) as well. It must be satisfied before any award is made, as otherwise a person will be classified as a ‘person from abroad’ and therefore not be entitled (1).

Proving habitual residence has always been a tricky thing — there was no specific definition of the term when first introduced, so it has been left to caselaw to determine under what circumstances a person could be said to be ‘habitually’ resident (2). As a result, the test became fairly complicated and not straightforward to determine (3). However, things were made notably more complex in 2004 when regulations brought in the requirement that a claimant must also have a ‘right to reside’ in order to be treated as habitually resident.

Right to reside

The 2004 regulations amended the habitual residence test already applicable to IS, ibJSA, PC and HB, stating that habitual residence could not be established without a person also having a ‘right to reside’ in the Common Travel Area (4). The right to reside test was also introduced for Child Benefit and Child Tax Credit as an amendment to the presence test. The same regulations were introduced into irESA from October 2008 and to UC from April 2013, but the term ‘right to reside’ remains undefined by legislation so is open to interpretation and has continued to be the subject of much case law.

This ‘right to reside’ element of the habitual residence test was introduced in response to the joining of 8 new countries to the EEA (known as the ‘A8’ states) on 1st May 2004. The new regulations were designed to prevent nationals of the new states from having unrestricted access to the UK labour market and benefits. The changes were introduced at very short notice, despite many concerns that the right to reside test would not only affect members of the new A8 states but also existing EEA nationals who would otherwise satisfy the habitual residence test. (Most people from countries outside the EEA will normally either have an immigration status which gives them a right to reside, e.g. indefinite leave to remain, or prevents them from claiming benefits anyway on the basis that they are subject to immigration control (5)).

EEA rights of residence

EEA nationals can rely on rights of residence acquired through Directive 2004/38/EC (6) where workers have a right to reside — indeed whilst they are workers they are exempt from the habitual residence test as a whole. EEA nationals who have been resident in the UK for a continuous period of at least five years have a permanent right of residence (7), but only if the 5 years residence was residence as an EEA ‘qualified person’ (e.g. a worker) and not just factual residence under UK law (8). So even if a person is no longer working, they can still acquire a permanent right to reside by virtue of work done in the past.

However, the A8 states were not granted full EEA rights immediately on accession. The government was concerned at the potential impact on the UK labour market of these new states joining the EEA and so took advantage of certain provisions within the accession treaty to restrict certain rights normally granted upon admission to the EEA. These are often referred to as ‘derogations’ and prevented those nationals from relying on some of the rights of EEA workers, as discussed above (9). The regulations stated that A8 nationals could not enjoy the full rights granted under Article 39 EC Treaty (now Article 45 TFEU) (which gives rights to ‘workers’ and work-seekers) or Articles 1–6 of EC Regulation 1612/68. Residence rights under Directive 2004/38/EC and the UK Imm (EEA) Regs were consequently also restricted. Whilst these derogations were in force, A8 nationals would only have been able to rely on EEA rights as workers if they met one of the following 4 criteria:

1. They were self-employed. The derogations did not apply to self-employed who continued to have the same rights as non-A8 self employed EEA nationals.
2. They were working in ‘registered employment’. Under the derogations, A8 nationals must have registered their work under the Workers Registration Scheme within one month of commencing employment. Applications were made to the Workers Registration Scheme at the Home Office with evidence of identity and payment of a fee. If an A8 worker changed jobs, then they needed to re-register (unless they had already completed 12 months of registered work — see below), but no further fee would be payable. There was no set number of hours which had to be worked in order to register, so part-time work should have been sufficient. An A8 national who worked whilst unregistered was not committing any offence, but an employer who employed an unregistered A8 national was guilty of an offence and could be fined.
3. They had been in registered work for at least 12 months. Once an A8 national had worked in registered employment for at least 12 months, then they had full access to all ‘normal’ EEA worker rights. A person was treated as having worked for a period of 12 months if they were legally working at the beginning and end of that period and allowed for 30 days of non-working within that period. It is important to remember that completing 12 months of registered work did not automatically give a person a right to reside — it merely gave them access to the ‘normal’ rights of workers enjoyed by all EEA members.
4. They were exempt from the worker registration requirements. Certain groups of A8 nationals (e.g. those who were in the UK legally and working prior to 1st May 2004) were not required to register their work, i.e. they were ‘exempt’ from the requirements of the scheme. These people were not subject to the ‘derogations’ and would therefore have full access to all ‘normal’ EEA worker rights straight away.

These derogations lasted for 5 years so initially applied to A8 nationals until 30 April 2009. The restrictions were then extended for a further 2 years until 30 April 2011 (10). So from 1 May 2011, A8 nationals were no longer subject to the derogations and could then use worker rights to satisfy the right to reside test in the exact same circumstances as any other non-A8 EEA national.

Hence, A8 nationals who are seeking to use a previous period of residence as a ‘worker’ in order to show that they have a permanent right to reside would need to show that any work done before 1 May 2011 was done under the requirements of the Workers Registration Scheme (i.e. that they fell within one of the 4 bullet points above), otherwise they would not count as ‘workers’ and could therefore not use those periods of work to count towards the 5 years needed for a permanent right to reside.

However, in a case heard by the Upper Tribunal in Jan 2015, it was decided that the extension of the scheme from May 2009 — May 2011 had a disproportionate effect on A8 nationals and was therefore not compatible with EU law (the ‘proportionality’ argument) and so the extension was therefore invalid. This meant that any work done by A8 nationals between 2009–2011 (even if unregistered) would count as legal residence as a ‘worker’ for right to reside purposes. The government appealed that decision to the Court of Appeal in November 2017, who upheld the Upper Tribunal decision. The DWP then sought permission to appeal that decision to the Supreme Court.

The Supreme Court’s decision

The Act of Accession (implemented in the UK by the Accession (Immigration and Worker Registration) Regulations 2004) allows a member state to extend the initial 5 year period of derogations “in case of serious disturbances of its labour market”. The question therefore, was whether, in May 2009, that criterion applied to allow extension of the UK Worker Registration Scheme for A8 nationals.

The Supreme Court firstly rejected an argument by the DWP that the extension of the Workers Registration Scheme was not subject to any requirement of proportionality and therefore could not be challenged on that basis. The claimant argued that the extension of the scheme was a national decision to limit EU rights of free movement and was therefore subject to a proportionality review under EU law, as per statements made to that effect in the case of Zalewska v DSD. The DWP tried to argue that Zalewska was wrong in this respect, as A8 nationals could not take advantage of EU rights in the first place until they had complied with the Workers Registration Scheme itself. The Supreme Court rejected that argument, finding that nationals of the A8 states had become citizens of the EU on 1st May 2004 and as a result of that status itself they were covered by the protections of proportionality on that date. Nationals of the A8 states enjoyed rights as EU citizens from accession, subject to the derogations.The derogations therefore were subject to the principle of proportionality in EU law.

The Court then considered whether the extension of the scheme had been unlawful. In 2009, the government had sought advice from the Migration Advisory Committee and as a result of that advice had decided to extend the period of derogation to 30 April 2011. The Migration Advisory Committee had concluded that there was a serious disturbance to the UK labour market at that time as the UK economy was in recession and there had been a rise in unemployment and redundancies. They were also asked what the likely labour market impact would be for relaxing the derogations and concluded that this would have a small, negative impact but still advised that it would be sensible to extend the derogations for a further two years. However, they were not asked for an opinion on whether such an extension would be proportionate with EU law. As the extension of the scheme was a national measure restricting EU rights, the absence of any explanation by the DWP of why the limited benefits associated with extending the scheme outweighed the ‘considerable detriments’ of doing so on both A8 workers and their employers, meant that the extension was a disproportionate measure which was unlawful under EU law.

What it means

This confirmation from the Supreme Court now means that any A8 national who worked between 1st May 2009 and 30 April 2011 did not need to have worked under the requirements of the Workers Registration Scheme in order to be treated as an EEA ‘worker’ during those periods. Such periods of work can now count towards any right of permanent residence (assuming the work is accepted as being ‘genuine and effective’).

People who appealed decisions where benefit was refused on the basis that work was unregistered may have had their appeals ‘stayed’ pending the outcome of the Supreme Court decision. Such cases can now be heard and full arrears of any benefit due will be payable.

If an unfavourable HB decision was made less than 13 months ago, a late appeal against that decision can now be submitted and, if accepted, full arrears of any benefit due will be payable. However, for other benefits there is no right of appeal unless the decision has been firstly revised, and in cases of revision the ‘anti-test case’ rule may apply to limit the amount of any arrears of benefit which would otherwise be due. The ‘anti-test case’ rule applies when a decision of the Upper Tribunal or courts has found that the law has been wrongly interpreted. The rule states that any claim, revision or supersession request which is made after that date must be treated as though the Upper Tribunal/court had not found the law to be wrong for any period prior to the date of that test case (11). However, the Upper Tribunal first held that the extension of the Worker Registration Scheme was unlawful on 30.1.15, so it is arguable that arrears are only prevented for periods prior to that date anyway.

For unfavourable decisions which were made after 30.1.15 it may be possible to request a revision on the grounds of official error (12). For decisions made before that date, a supersession would be required instead — this cannot be done on the grounds of a change in circumstances (as the test case is merely deciding what the law should always have been and so there is no ‘change’), but the decision could still be superseded on the basis that it contained an error of law, and where this is as the result of a test case decision, then arrears are payable back to the date of the test case itself (13). However, the ‘anti-test case’ rule still applies in cases of supersession, so no arrears would be payable for any period prior to 30.1.15.

Other implications

In reality, most people affected by the Supreme Court judgment may now be eligible to apply for settled status under the EU settlement scheme instead (which only requires 5 years actual residence and not 5 years residence with an EEA right to reside). Settled status counts as a right to reside for benefit purposes.

But acquiring permanent residence may still be useful for clients who are intending to naturalise as British citizens (and who are not the spouse of a British citizen), as they may be able to apply earlier with a permanent residence document than with settled status. An applicant for naturalisation needs twelve months free of any time limit on their stay in the UK. This time period will be taken from the date that settled status under the EU settlement scheme is granted. However, for permanent residence, it is taken from the date this was achieved. An application for permanent residency results in the applicant receiving a covering letter with the ‘backdated’ date they achieved permanent residence from. In cases where this was more than 12 months ago, they are able to apply for citizenship immediately without waiting for a further 12 months. Additionally, if permanent residency is granted, then any children born in the UK after the date this was attained will be British citizens.

In addition…

However, even for periods prior to 2009, the Upper Tribunal has also found in a separate case that proportionality arguments can be used to argue against the requirement that work must be registered. In CPC/1179/2015, the Upper Tribunal held that it was disproportionate to disregard periods of unregistered work (for the purposes of determining a 5 year permanent right to reside), where the client had worked in excess of 10 years. The Judge held that ‘Zalewska’ (which had determined that the derogations for A8 nationals were reasonable and proportionate) had not decided that the derogations had to be applied in all cases, but merely that they should not be applied in the Zalewska case (as the claimant had only worked for a short period of time). In cases such as CPC/1179/2015, where the claimant had worked for a significant period of time, it would be disproportionate to apply the 2004 derogations.

Another issue

Normally, to qualify for a permanent right of residence, a person has to have resided legally in the UK for at least 5 years — and caselaw has held that does not just mean factual residence here under UK law, but requires residence as a qualified person under EU law (14). The Gubeladze case itself, however, was concerned with an A8 national who was trying to argue that she had acquired a permanent right to reside on other grounds, i.e. that of being a worker who had ceased activity, as she had worked in the UK for at least 12 months before retirement and had resided in the UK continually for more than 3 years prior to the termination (15). In addition to the argument regarding whether work needed to be registered for the period 2009–2011, the Supreme Court decided (overturning the previous Court of Appeal’s decision on this point), that residence for this purpose did not need to be residence as a qualified person under EU law, and mere factual residence under UK law was sufficient. The language used to acquire a permanent right of residence under the 5 year rule (Article 16 Directive 2004/38/EC) stipulates that a person must have ‘resided legally’ for 5 years, whilst a permanent right of residence under the retirement route (Article 17) does not. Note that whilst the Court did not hear argument on this point, it is likely that it’s reasoning on the meaning of residence for retired workers must also apply in the same way to the residence required for workers with permanent incapacity (16).

Fiona Seymour works for Citizens Advice in the Expert Advice team.

The information in this article is correct as of the date of publication.

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Further reading

See other implications of the decision here

See also rightsnet’s summary of the decision

Footnotes

(1) IS Reg 21AA(4), JSA Reg 85A(4), ESA Reg 70(4), SPC Reg 2(4), HB Reg 10(3B), UC Reg 9(4)

(2) See the lead case in Nessa v CAO [1999] HoL

(3) See for example, R(IS)6/96, CIS/4474/2003, CIS/2559/2005, CJSA/1223/2006

(4) The UK, the Republic of Ireland, the Channel Islands and the Isle of Man

(5) Section 115 Immigration & Asylum Act 1999

(6) Incorporated into UK law under the Imm (EEA) Regs 2016 SI №1052

(7) Reg 15(1)(a) Imm (EEA) Regs 2016

(8) Ziolkowski C-424/10

(9) The Accession (Immigration & Worker Registration) Regs 2004 SI №1219

(10) The Accession (Immigration & Worker Registration) (Amd) Regs 2009 SI №892

(11) Section 27 SSA 1998

(12) Reg 1(3) SS (D&A) Regs 1999; Reg 2 UC (D&A) Regs 2013

(13) Reg 7(6) SS (D&A) Regs 1999; Reg 35(5) UC (D&A) Regs 2013

(14) See (7) above

(15) Art 17(1)(a) Dir 2004/38/EC and Reg 15(1)© Imm (EEA) Regs 2016

(16) Art 17(1)(b) Dir 2004/38/EC and Reg 15(1)© Imm (EEA) Regs 2016