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Neutral Citation Number:	2012 UKUT 122 AAC
Reported Number:
File Number:	CE 2190 2011
Appellant:	JA
Respondent:	Secretary of State for Work and Pensions
Judge/Commissioner:	Judge E. Jacobs
Date Of Decision:	16/04/2012
Date Added:	26/06/2012
Main Category:	Residence and presence conditions
Main Subcategory:	right to reside
Secondary Category:
Secondary Subcategory:
Notes:	Reported as [2013] AACR 15 European Union law – right to reside – whether an illegal contract of employment prevents an employee being a worker under Article 7 of Directive 2004/38/EC The claimant, a Dutch national, worked in a restaurant for just under 4 months. He was paid cash in hand (with no deductions for tax) and received no pay slips. He had no written contract of employment and was not given a P45 when the restaurant closed. Thereafter, he was awarded jobseeker’s allowance and, following an assault, he claimed employment and support allowance (ESA). The Secretary of State refused the claim for ESA on the ground that the claimant was a person from abroad with no right to reside in the United Kingdom. The claimant appealed to the First-tier Tribunal (F-tT) against the decision. It dismissed the appeal on the ground that the claimant’s contract of employment was illegal and so he could not be treated as a worker. The claimant appealed to the Upper Tribunal. The issue before the Upper Tribunal was whether or not the claimant had the status of a worker during the period he was working in the restaurant as, if he had, he retained that status while he was looking for work and while he was temporarily unable to work. Held, allowing the appeal, that: 1. the F-tT failed to make sufficient findings of fact to justify its conclusion that the claimant’s contract of employment was illegal and the written evidence was insufficient to allow it to make the necessary findings. It was not illegal for an employer to pay an employee free of income tax and national insurance: du Parcq LJ in Miller v Karlinski (1945) 62 TLR 85. It was only illegal if the employer failed to account for the appropriate amounts to Her Majesty’s Revenue and Customs. An employer who performed a contract in a way that defrauded the authorities cannot enforce the contract: Newland v Simons & Willer (Hairdressers) Ltd [1981] ICR 521. The effect on the employee depended on two factors: (i) the employee’s knowledge of how the contract would be performed; and (ii) the nature and extent of the employee’s participation. As to the employee’s knowledge, the test was subjective (not objective). As to participation, the test was whether “there has been sufficient degree of participation by the employee”: Hall v Woolston Hall Leisure Ltd [2001] 1 WLR 225 (paragraphs 8 to 14); 2. even if the claimant’s contract of employment was illegal the F-tT was wrong to decide that that prevented the claimant from being a worker. “Worker” is a European concept defined by European law through the decisions of the Court of Justice of the European Union. The Court has defined worker as an economic status, not a legal one. Work means the performance of services under the direction of another for remuneration: Case-66/85 Lawrie-Blum v Land Baden-Württemberg [1986] ECR 2121. The services must be in pursuit of an economic activity: Case-53/87 Levin v Staatssecretaris van Justitie [1982] ECR 1035. It does not matter that the job is short-term or temporary. It has been held that work for any given period is not essential: Case 39/86 Lair v Universität Hannover [1988] ECR 3161. The test is whether the activity represents the pursuit of an effective and genuine economic activity. The Court’s definition of work involves an essentially factual enquiry. The elements to be established are: (i) services performed (ii) under direction (iii) for payment. The Court has never said that these elements must be found within any legal relationship. Nor has it said that the elements present must be sufficient to constitute such a relationship(paragraphs 15 to 18). The judge set aside the decision of the F-tT and remitted the case to a differently constituted F-tT for reconsideration in accordance with his directions.
Decision(s) to Download:	CE 2190 2011-00.doc [2013] AACR 15ws.doc