In Her Majesty’s Revenue and Customs v HD (CHB) (Second interim decision)  UKUT 148 (AAC), the Upper Tribunal decided to make a reference to the Court of Justice of the European Union. The question is whether an EU national who was self-employed before pregnancy and childbirth can rely on C-507/12 Saint Prix to preserve her self-employed status and claim benefits which are subject to a right to reside requirement.
The court in Saint Prix had held that:
…a woman who gives up work, or seeking work, because of the physical constraints of the late stages of pregnancy and the aftermath of childbirth retains the status of ‘worker’, within the meaning of that article, provided she returns to work or finds another job within a reasonable period after the birth of her child.
For brief discussion of the Saint Prix decision, see this post by Colin Yeo. In this article, I trace the background to the litigation — the road to Luxembourg, if you like — and give some flavour of the legal arguments for the benefit of practitioners interested in the cross-over between immigration law and welfare benefits law.
How this became an issue
It had previously been assumed that EU women in self-employment who took time off for maternity leave, but intended to resume self-employment, did retain their right to reside as a “self-employed person” for the purposes of Article 7 of the Citizens’ Directive. The Secretary of State made a concession to that effect before the Social Security Commissioner a decade ago.
The official view, however, has changed. According to the current version of the Department for Work and Pensions staff guide at paragraph 073216:
Self-employed persons do not fall within the scope of the Saint Prix judgment. The CJEU only considered the retention of “worker” status under Article 45 TFEU.
The first interim decision (January 2017)
The Upper Tribunal initially heard the matter as a test case in Her Majesty’s Revenue and Customs v HD and GP (CHB)  UKUT 11 (AAC). GP was a Romanian national and self-employed as a cleaner. HD was a Lithuanian who had been self-employed as a beauty therapist. In both cases, HMRC refused to award Child Benefit.
The tribunal heard submissions on the Saint Prix issue. But its decision addressed the preliminary issue of whether GP or HD could be said to have retained their self-employed status, having regard to the principle that it is not necessary to be actively engaged in economic activity at every moment in order to maintain self-employment: Secretary of State for Work and Pensions v JS (IS)  UKUT 240 (AAC).
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Adopting this approach, Judge Ward made fresh findings of fact, and concluded that GP had retained her self-employed status. He gave particular weight to the fact that GP had carried on cleaning right up to the start of her maternity allowance period, and had then made arrangements to preserve her customer base. The Upper Tribunal issued a final decision in GP’s case allowing her appeal: CF/1375/2016 HMRC v GP (final decision).
The situation for HD, on the other hand, was very different. HD had found it increasingly hard to work as her pregnancy went on and some of her customers went elsewhere. In addition, when she moved house, which was about a 30-minute bus ride from her old one, this led to a further loss of custom.
Judge Ward concluded that by this point, HD’s self-employment was no longer genuine and effective. The Upper Tribunal issued an interim decision in respect of HD (CF/393/2016 HMRC v HD (interim decision)).
Given the gap in HD’s status and therefore her right to reside, the question thus arose whether, as a person formerly engaged in genuine and effective self-employment, she was in a position to take advantage of the decision in Saint-Prix.
The Upper Tribunal deferred making any decision on the issue pending a ruling by the Court of Justice on the reference from the Irish Court of Appeal in Florea Gusa v Minister for Social Protection  IECA 237.
Waiting for Gusa
The case of Gusa concerned a Romanian national who had worked as a self-employed plasterer in Ireland until the economic downturn. An application for jobseeker’s allowance had been refused on the basis that Article 7(3)(b) of Directive 2004/38 only applied to employed persons. The reference, in addition to asking whether Mr Gusa could retain his self-employed status by virtue of Article 7, went to ask whether he could retain the right to reside, even if he has not satisfied the criteria in Article 7.
Advocate General Watchelet addressed this wider issue in part two of his Opinion (see paragraphs 67-79). He suggested that an analogy can be drawn with Saint Prix:
In actual fact, the issue raised by the referring court is not entirely unprecedented. The Court has already held that it does not follow from either Article 7 of Directive 2004/38 or from the other provisions of that directive that a citizen of the Union who does not fulfil the conditions laid down in that article is, therefore, systematically deprived of the status of ‘worker’ within the meaning of Article 45 TFEU. The Court inferred from this that it could not be argued that Article 7(3) of Directive 2004/38 lists exhaustively the circumstances in which a migrant worker who was no longer in an employment relationship may nevertheless continue to benefit from that status. (Saint Prix (C-507/12) paras 31 and 38).
When the Court of Justice handed down its judgment, however, it ruled on the first issue but decided that there was no need to answer the other questions.
The second interim decision (April 2018)
When the matter came back before Judge Ward, HMRC submitted that the Court of Justice had decided Gusa only on the first question referred to it. Though the Advocate General had floated wider issues in relation to the other question, the court had chosen not to adopt his reasoning. Secondly, the argument that there was a general principle of equivalence between the employed and the self-employed in EU law had been considered and rejected by the Court of Appeal in Hrabkova v SSWP  EWCA Civ 794, which was decided before Gusa was available.
Against this background, HMRC argued:
The present issue was not one of those where workers and the self-employed should be equiparated [treated the same]. An employee who becomes pregnant is in a binary situation: absent the ruling in Saint-Prix, a person with a contract of employment is protected, a person without a contract of employment is not.
A self-employed person who becomes pregnant is not in a binary situation. Unlike an employee, she is not required personally to carry out the work. It is open to her to take steps to maintain her self-employment through the period of pregnancy and maternity (as Ms P, the claimant in the case previously linked to this one, did) and in due course to resume more fully. If she chooses not to continue the business, she is choosing not to exercise Art 49 rights. The need arose to safeguard a person in the position of Mr Gusa because the absence of work had been beyond his control: such is not the case for a self-employed woman, who can take steps to keep her business alive.
HD submitted that whilst the court in Gusa only took up one of the three bases considered by the Advocate General, leaving the other two, the court’s decision “contained dicta as to matters which fortified the Court in its interpretation of Article 7”. These dicta support the proposition that the self-employed should have Saint Prix rights.
For example, at paragraph 36 of Gusa, the court identified the key distinction as being whether, not how, a person is economically active. At paragraph 40, the court had relied on a teleological approach, which had also found favour in Saint-Prix itself.
The Upper Tribunal’s assessment
Judge Ward gave the following analysis of the issues:
- On the present state of the law, there is no general principle that the rights of the employed and the self-employed are to be equiparated.
- The Court of Justice in Gusa had an opportunity, through the Advocate General’s answer to the second question raised, to go down that route, but elected not to take it.
- However, the claimant does not need to assert this as a general principle in order to succeed.
As for the argument that the formerly employed need protection that the formerly self-employed do not (because the latter can take steps to shape their economic activity even during maternity), Judge Ward made the following observations:
There may be some merit in the distinction Ms Ward makes about the greater freedom of the self-employed woman to shape her economic activity, even at a time of pregnancy and maternity. However, there are all kinds of self-employed activity and it may be that some are more susceptible of being shaped as Ms Ward suggests than others. By virtue of the nature of this Chamber’s work, it tends to see many at the smaller-scale end, engaged in modest activities, over which a person may possibly not have a great deal of control. I have no evidence on which to make any kind of finding.
What distinguished Saint Prix, Judge Ward said, was that the court was not interpreting secondary legislation but ruling on what were the incidents of a particular status under the Treaty (in that case “worker” under Art 45). Accordingly, the fact that Jessy Saint Prix was not actually available on the employment market for a few months did not mean that she had ceased to be in the market during that period, provided she returned to work or found another job within a reasonable period after giving birth.
While the decision in Gusa is indeed tied to Article 7, there is some force in [counsel for HD’s] submission as to the sort of concerns of vulnerability and unfairness which appear to have at least fortified the Court in its interpretation of the language in question. It might well be open to the Court, were it so minded, to develop its view at Gusa,  so that what mattered was the fact of economic activity, rather than its form, so that  of Saint-Prix could be applied by analogy.
As Judge Ward could not say that the matter was acte clair either way, he therefore referred the following question to Luxembourg:
In circumstances where an EU citizen who is a national of one Member State (i) is present in another Member State (the host Member State), (ii) has been active as a self-employed person within the meaning of Article 49 TFEU in the host Member State, (iii) was paid a maternity allowance from May 2014 (a point at which she considered herself less able to work on account of pregnancy), (iv) has been found to have ceased to be in genuine and effective self-employed activity from July 2014, (v) gave birth in August 2014, and (vi) did not return to genuine and effective self-employed activity in the period following the birth and prior to claiming jobseekers’ allowance as a jobseeker in February 2015:
Must Article 49 TFEU be interpreted as meaning that such a person, who ceases self-employed activity in circumstances where there are physical constraints in the late stages of pregnancy and the aftermath of childbirth, retains the status of being self-employed, within the meaning of that Article, provided she returns to economic activity or seeking work within a reasonable period after the birth of her child?
As the matter concerns the scope of a Treaty article applicable across the EU, it was, perhaps, inevitable that this appeal would need to go to Luxembourg for a definitive ruling.
The downside for EU women in HD’s position is that in the meantime they will be denied state benefits at a time when they need them most. Under UK law, the only “remedy” is to dispute the benefit decision (i.e. request a mandatory reconsideration and lodge an appeal to the First-tier Tribunal) to ensure that they will receive full arrears of benefit when the court hands down its ruling. Otherwise no arrears will be paid prior to the date of the Court of Justice decision under the anti-test case rule (Social Security Act 1998, section 27).
Under EU law, HD look-a-likes could rely on the principle of effective judicial protection to argue that this requires a national court to grant interim relief in the form of payments equivalent to the state benefit that is being refused, in order to ensure their EU rights are respected (see e.g. C-432/05 Unibet at paragraphs 72 and 76; and Factortame at page 659C per Lord Bridge). Hickinbottom J (as he then was) in R (Sanneh) v Secretary of State for Work and Pensions & Anor  EWHC 793 (Admin) left open the question of whether such relief would be available in an appropriate benefit case — i.e. where the claimant’s EU rights were in jeopardy (see paragraph 113).