[2006] UKSSCSC CG_4016_2005 (19 June 2006)
CG/4016/2005
CG/4018/2005
DECISION OF THE SOCIAL SECURITY COMMISSIONER
- This decision is given in respect of two linked appeals brought with the leave of a commissioner. For the reasons given below, both appeals are dismissed. I held an oral hearing of this appeal on 14 June 2006, at which Mr. Nigel Wheatley appeared for both claimants and Mr. Jeremy Heath appeared for the Secretary of State. I am grateful to both for their helpful submissions.
CG/4016/2005
- In CG/4016/2005, the claimant claimed carer's allowance on 5 November 2004 from 1 November 2004. She had been employed until 31 October 2004 at a rate in excess of the statutory limit for carer's allowance, but from 1 November 2004 her hours were reduced, and her earnings then became less than the statutory limit. She was paid on 15 October 2004 for the whole of that month. The decision maker decided that she was only entitled to carer's allowance from 22 November 2004 because until then her earnings as determined by the relevant regulations were in excess of the statutory limit.
- The decision maker came to this conclusion because it was said that the earnings paid on 15 October had to be treated as received on the first day of the benefit week in which they were actually paid, in this case 11 October 2004. As monthly earnings, they were then recalculated on a weekly basis, and allowable deductions were made to produce a net weekly figure. The net weekly amount so calculated were treated as the claimant's earnings until the first day of the benefit week when she was next paid. As the next pay day was 15 November, when she was paid for the whole of November, the October earnings were attributed to the period from 11 October to 14 November 2004. As entitlement to carer's allowance depended on earnings in the immediately preceding week, the decision maker concluded that the claimant was not entitled to carer's allowance until 22 November 2004, although the amount that she was actually earning each week had reduced from 1 November 2004.
CG/4018/2005
- In CG/4018/2005, the claimant had claimed carer's allowance on 8 November 2004 from 1 October 2004. Her hours, and hence her earnings, had been reduced from 1 October 2004. Payments of wages had been made at the end of each calendar month. The weekly net earnings paid at the end of September, averaged out as described above, exceeded the earnings limit for carer's allowance. In addition, until the end of September the claimant had been working overtime on terms under which overtime for any month was calculated and paid with the following month's basic pay. The result was that the claimant in this case received her September overtime at the end of October. The decision maker calculated her net weekly earnings from that benefit week taking account not only of her reduced earnings for October, but also her overtime for September. The combination of the two meant that she again exceeded the earnings limit for carer's allowance and, applying the same calculations as before, was found not to be entitled to carer's allowance from 1 October to 5 December 2004.
- There is one further respect in which the claimant in CG/4018/2005 was in a different position from the other claimant. Apart from the drop in earnings suffered by the other claimant due to the reduced hours worked, there was no evidence of any fluctuation in the net amounts received by her. By contrast, presumably because of varying hours of overtime worked, the net amount received each month by the claimant in CG/4018/2005 was different in each of the months from August to November inclusive.
- The tribunal heard both appeals together and concluded that the decision maker's calculations were correct. On appeal from the tribunal, the claimants' representative has challenged both the way in which the calculations were made on the basis of the regulations and the validity of the relevant regulations themselves.
The carer's allowance legislation
- Section 70(1)(b) of the Social Security Contributions and Benefits Act 1992 ("the 1992 Act") provides that a person shall be entitled to a carer's allowance for any day on which he is engaged in caring for a severely disabled person if "(b) he is not gainfully employed". Section 70(8) provides that regulations may prescribe the circumstances in which a person is or is not to be treated for the purposes of this section as, inter alia, gainfully employed.
- Regulation 8(1) of the Social Services (Invalid Care Allowance) Regulations 1976 ("the ICA Regulations"), as in force and amended at the time to which this appeal relates, provides that for the purposes of section 70(1)(b) of the 1992 Act,
"a person shall not be treated as gainfully employed on any day in a week unless his earnings in the immediately preceding week have exceeded an amount equal to the lower earnings limit in force by reason of regulations under section 5 of the Contributions and Benefits Act on the last day of that week and, subject to paragraph (2) of this regulation, shall be treated as gainfully employed on every day in a week if his earnings in the immediately preceding week have exceeded an amount equal to the lower earnings limit in force by virtue of regulations under section 5 of the Contributions and Benefits Act on the last day of that week."
- Section 3(2) of the 1992 Act provides that for the purposes of Parts I to V of that Act (which includes section 70)
"(a) the amount of a person's earnings for any period; or
(b) the amount of his earnings to be treated as comprised in any payment made to him or for his benefit,
shall be calculated or estimated in such manner and on such basis as may be prescribed by regulations".
- It can thus be seen that section 70(1)(b) of the 1992 Act makes entitlement to carer's allowance dependent on the carer not being gainfully employed. "Gainfully employed" is not defined by the 1992 Act. Instead, the definition is left by section 70(8) to be prescribed by regulations. Regulation 8(1) of the ICA Regulations then make the question whether a person is gainfully employed in any week turn on his or her earnings in the previous week. Section 3(2) of the 1992 Act provides that regulations are to set out how earnings in any period are to be calculated or estimated.
The Computation of Earnings Regulations
- The Social Security Benefit (Computation of Earnings) Regulations 1996 "the Computation of Earnings Regulations") are stated to have been made by the Secretary of State for Social Security in exercise of the powers conferred, inter alia, by section 3(2) of the 1992 Act. In CG/6329/1997, Deputy Commissioner Warren expressed some doubt as to whether these regulations were originally intended to affect Regulation 8(1) of the ICA Regulations, and that doubt continues to be referred to at paragraph 4.103 of volume 1 of Social Security Legislation 2005 (Bonner, Hooker and White). The Deputy Commissioner did not need to address the issues he raised, because he was able to find in favour of the claimant on other grounds.
- Bearing in mind that regulation 10(3) of the Computation of Earnings Regulations is specifically directed to disregards and deductions from a claimant's net earnings in the case of entitlement to carer's allowance under section 70 of the 1992 Act, it appears to me clear beyond argument that the regulations were intended to affect Regulation 8(1) of the ICA Regulations. In CG/734/2003, Commissioner Mesher considered and rejected the Deputy Commissioner's doubts as to the power to make the Computation of Earnings Regulations apply to the operation of the ICA Regulations, stating:
"11. I find that the doubts expressed about the power to make the 1996 Computation of Earnings Regulations in a way which had an effect on the operation of the ICA Regulations are unfounded. The Regulations were properly made by the Secretary of State. At the time that they were made, the main empowering provision (section 3(2) of the Contributions and Benefits Act) had not yet been amended to require any regulations to be made by the Treasury, and neither had any other relevant provisions. At the time regulations were to be made by the Secretary of State. Nor is it relevant that the empowering provisions listed excluded section 70 of the Contributions and Benefits Act. The predecessor of section 70 empowered the making of the ICA Regulations, including regulation 8(1) deeming a person to be gainfully employed or not on any day in a week according as the person's earnings in the previous week did or did not exceed a prescribed limit. The width of the power allowed the regulations to treat a person as gainfully employed in a week in which he was not actually gainfully employed. It is the point of powers to make deeming regulations not just to provide simple tests of whether conditions are met but also to allow what is not in fact the case to be treated as if it is. Then the question is the identification of earnings in particular weeks. The power to make regulations, for the purposes of benefits including ICA, on the calculation and estimation of earnings is contained in section 3(2). That section allows such regulations to be made although they will have important consequences on the effect of other regulations. And it allows regulations to provide that a payment of earnings is to be treated as for a forward period beginning on the date of payment (Commissioners' decisions CG/1768/2000 and CIB/1650/2002).
12. There remains the point made in paragraph 9 of CG/6329/1997 about the allocation of payments to benefit weeks and how that affects regulation 8(1) of the ICA Regulations. I think that that point must rest on the precise words of regulation 8(1), which make the test the amount of a person's earnings "in the immediately preceding week". That is a slightly peculiar phrase. It could perhaps be argued that to have earnings "in" any particular week a person must either receive a payment of earnings in that week or be entitled to receive a payment of earnings for work done in that week. Then what Mr Deputy Commissioner Warren was getting at could have been that the Computation of Earnings Regulations, defining a person's earnings "for any period", simply did not bite on the test for ICA purposes.
13. I have considered that argument carefully, but conclude that it does not work. The ICA test of having earnings in a week cannot possibly be met only in weeks in which payment is actually received. That would mean that monthly-paid employees, say, would have earnings in the 12 weeks throughout the year in which they were paid, but not in the other weeks. That could not possibly be right. Once one expands the test to include weeks for which a person is entitled to receive a payment of earnings, or something similar, then it seems to me that in substance one is asking what earnings a person has "for" a week. Although looking at such a test in the abstract would point one to the weeks in relation to which the earnings were paid, regulations made under section 3(2) of the Contributions and Benefits Act may properly prescribe that actual earnings are to be treated as paid for a forward period. I conclude that the Computation of Earnings Regulations do apply to the question of whether a person is to be treated as gainfully employed in accordance with regulation 8(1) of the ICA Regulations."
- If further support for this conclusion is needed, it is provided by the recent Court of Appeal decision in Secretary of State for Work and Pensions v. Doyle, [2006]EWCA Civ 466, where it was held that the Computation of Earnings Regulations apply in deciding entitlement to incapacity benefit because it is section 30A, in Part II of the Contributions and Benefits Act which gives the basic entitlement to incapacity benefit, even though the regulations permitting a limited amount of work were made under powers conferred by section 171A, in Part XIIA of that Act.
- Regulation 6 of the Computation of Earnings Regulations 1996 provides as follows, so far as material to the issues in this appeal:
"(1) Earnings derived from employment as an employed earner shall be calculated or estimated over a period determined in accordance with the following paragraphs and at a weekly amount determined in accordance with regulation 8 (calculation of weekly amount of earnings).
(2) Subject to paragraphs (3) and (5) to (8), the period over which a payment is to be taken
into account-
(a) in a case where it is payable in respect of a period, shall be a period equal to a benefit week or such number of benefit weeks as comprise the period commencing on the date on which earnings are treated as paid under regulation 7 (date on which earnings are treated as paid) and ending on the day before the date on which earnings of the same kind (excluding earnings of the kind mentioned at regulation 9(1)(a) to (j)) and from the same source would, or would if the employment was continuing, next be treated as paid under that regulation;
.
(3) Where earnings not of the same kind are derived from the same source and the periods in respect of which those earnings would, but for this paragraph, fall to be taken into account overlap, wholly or partly, those earnings shall be taken into account over a period-
(a) equal to the aggregate length of those periods, and
(b) beginning with the earliest date on which any part of those earnings would otherwise be treated as paid under regulation 7 (date on which earnings are treated as paid)."
- Regulation 7 provides, subject to certain exceptions which do not apply to this case, that earnings to which regulation 6 applies are to be treated as paid on the first day of the benefit week following the benefit week in which the payment is due to be made.
- Regulation 8 provides that
"(1) For the purposes of paragraph 6 (calculation of earnings of employed earners), subject to paragraphs (2) to (4), where the period in respect of which a payment is made
(a) does not exceed a week, the weekly amount shall be the amount of that payment;
(b) exceeds a week, the weekly amount shall be determined
(i) in a case where that period is a month, by multiplying the amount of that payment by 12 and dividing the product by 52;
(ii) in a case where that period is three months, by multiplying the amount of the payment by 4 and dividing the product by 52;
(iii) in a case where that period is a year, by dividing the amount of the payment by 52;
(iv) in any other case, by multiplying the amount of the payment by 7 and dividing the product by the number equal to the number of days in the period in respect of which it is made.
(2) Where a payment of earnings from a particular source is or has been paid regularly and that payment falls to be taken into account in the same benefit week as a payment of the same kind and from the same source, the amount of those earnings to be taken into account in any one benefit week shall not exceed the weekly amount determined under paragraph 1(a) or (b), as the case may be, of the payment which under regulation 7 (date on which earnings are treated as paid) is treated as paid first.
(3) Where the amount of the claimant's net earnings fluctuates and has changed more than once, or a claimant's regular pattern of work is such that he does not work every week, the application of the foregoing paragraphs may be modified so that the weekly amount of his earnings is determined by reference to his average weekly earnings-
(a) if there is a recognisable cycle of work, over the period of one complete cycle (including where the cycle involves periods in which the claimant does not work, those periods but disregarding any other absences;
(b) if any other case, over a period of five weeks or such other period as may, in the particular case, enable the claimant's average weekly earnings to be determined more accurately."
- Regulation 9 defines "earnings" in the case of employment as an employed earner as any remuneration or profit derived from that employment and as including a lengthy list of different payments including bonuses and various forms of compensation, but not payments in respect of expenses wholly, exclusively and necessarily incurred in the performance of the duties of the employment. Regulation 10 provides for deductions to be made to arrive at net earnings.
The overall position
- The overall position reached, therefore, is that for the purposes of regulation 8(1) of the ICA Regulations it is necessary to look each week at the claimant's earnings in the immediately preceding week. Regulation 6(1) of the Computation of Earnings Regulations then provides that the weekly amount of a person's earnings shall be determined in accordance with regulation 8, and sets out the period during which the earnings so calculated are to be taken as continuing, starting from the date on which the earnings are treated as being paid. Regulation 7 provides for earnings to be treated as paid, with exceptions which are immaterial in the present case, on the first day of the benefit week in which the payment is due to be paid. In the case of monthly payments, therefore, a weekly amount has to be calculated in accordance with the following regulations, and that weekly amount is then treated as the claimant's earnings from the first day of the benefit week in which the monthly amount is due to be paid until the day before the first day of the benefit week in which the next monthly earnings are due to be paid.
- Regulation 8(1) then provides for monthly payments to be turned into notional weekly payments, but regulation 8(3) allows a discretion to substitute a more appropriate figure where net earnings fluctuate and have changed more than once.
- In my judgment the position is as set out in CG/4941/2003, where Mr. Commissioner Howell QC stated at paragraph 18:
"For a person paid on a regular monthly basis on the last working day of each calendar month, as this claimant was from 1 July 2001 onwards, the monthly earnings are treated as paid on the Monday of the benefit week that contains the actual monthly pay day, and that payment is treated as giving the claimant "earnings" for each of the (four or five) benefit weeks starting with that one and ending with the one before the week that will contain the next regular monthly pay day; the weekly amount of the earnings in each of those weeks being taken as the most recent monthly payment multiplied by 12 and divided by 52."
- The first two contentions on this appeal are that (1) the tribunal decision fails to consider whether the Computation of Earnings Regulations should have authority and precedence over the clear meaning and intention of the Invalid Care Allowance Regulations, in particular regulation 8(1), and (2) there was an error of law on the part of the tribunal in applying the two sets of regulations simultaneously to the same earnings and defining period. I reject these contentions. Regulation 8(1) sets a test as to whether a person's earnings in a particular week have exceeded the lower earnings limit. The question as to what those earnings are in the week in question is not addressed at all by the Invalid Care Allowance Regulations, but is addressed by the Computation of Earnings Regulations. The two sets of regulations work together. Each has its own function and neither has authority or precedence over the other.
The calculations in the cases under appeal
- In written submissions, the representative of the secretary of state contended that the tribunal and the decision maker erred in one clear respect in relation to the claimant's November receipts. Applying regulations 6(2)(a) and 7 of the Computation of Earnings Regulations, he contended that it was clear that the payment of 30 September 2004 in CG/4018/2005 was to be treated as paid in respect of the period from 27 September to 24 October 2004, a period of 4 weeks, but the payment of 31 October 2004 was to be treated as paid in respect of the period from 25 October to 28 November 2004, a period of 5 weeks. On this basis, an apportionment of the October payment over 5 weeks produces weekly earnings which are below the earnings threshold for the care allowance.
- I am unable to accept this argument, which was not pursued in oral argument by Mr. Heath. Regulation 6(2) is concerned with the period for which particular earnings are taken into account in assessing entitlement. Regulation 8(1)(b) is concerned with ascertaining the weekly amount of the earnings when they are not paid in respect of a week. If the contentions of the representative of the secretary of state were correct, then there would never be a payment in respect of a month, as each month would be turned into 4 or 5 weeks secretary of state were correct, then there would never be a payment in respect of a month, as each month would be turned into 4 or 5 weeks.
Earnings "of the same kind" and "not of the same kind"
- A further problem is presented in this case by regulations 6(2)-(4) and 8(2). Regulation 6(2) refers to the next entitlement to "earnings of the same kind" in determining the period over which a payment is to be taken into account. Regulation 6(3) gives special treatment to earnings "not of the same kind
derived from the same source". They are made to be taken into account for a longer period of time than if they had been of the same kind or had been from two different sources. There is no definition of "not of the same kind". However, the examples given in regulation 6(4) are of cases where a claimant receives holiday pay or pay in lieu of notice or compensation in respect of employment. Even in the case of holiday pay, it was held in CG/4172/2001, paragraph 15, that for the purposes of regulation 6(2), although not for the purposes of regulation 6(3)-(4) holiday pay was of the same kind as ordinary salary.
- I conclude that overtime is not pay of a different kind from basic pay for the purpose of regulation 6(2), even if it relates to work done in an earlier month. If it were "not of the same kind", then there would be an aggregation of periods which would work to the disadvantage of the claimant, as it would extend the period during which the higher earnings resulting from the overtime would be taken into account. Further, as Commissioner Turnbull pointed out in CG/4172/2001, if it were not "of the same kind" as ordinary salary, one would have to ask when the period to which it related could end, if there was no prospect of further overtime.
- Regulation 8(2) makes special provision for payments "of the same kind and from the same source". In that case, the regulation provides for the weekly amount not to exceed the weekly amount of the payment which under regulation 7 is treated as paid first. There is no definition of "of the same kind", under regulation 7, and almost all earnings are treated as paid on the first day of the benefit week in which they are due to be paid. However, this provision appears to me to be aimed at a case where a payment is treated as made on a particular date by regulation 7 and the weekly amount calculated accordingly, and applied to a fixed period of say 4 weeks by regulation 6, and then during that period, but in a subsequent benefit week, a further payment of the same kind is, or becomes, due to be paid. That further payment would be ignored until the end of the period for which the previous payment was to be taken into account. Where two payments of the same kind are treated as made on the same day, they are both to be taken into account in the same way as if they were a single payment.
- The claimant in CG/4018/2005 was paid monthly, according to her employers on the 28th day of each month (p.12), although the payment details they supplied showed that between August and November 2004 she was paid on the last day of each month (p.13). The gross monthly amounts she was shown as being paid fluctuated both before and after 1 October 2004.
The discretion under regulation 8(3) of the Computation of Earnings Regulations
- There appears to have been some further enquiries by the DWP because the letter explaining the decision that the claimant was not entitled to carer's allowance until 5 December 2004 used lower net monthly figures for her earnings than the gross ones given at p.13. The figures used are for August, £579.70, for September, £389.35, for October, £385.96, and for November, £294.94. These figures were converted by the DWP from monthly to weekly and in each month except November they were above the statutory limit of £342.37 per month.
- It is plain that this is a case where the claimant's net earnings has fluctuated and has changed more than once, due both to payments for overtime and to changes in her basic hours worked. In these circumstances, regulation 8(3) of the Computation of Earnings Regulations applies and the application of the previous paragraphs of regulation 8 may be modified so that the weekly amount of the claimant's earnings may be determined either over a period of one complete cycle of work, or over 5 weeks or such other period as may, in the particular case, enable the claimant's average weekly earnings to be determined more accurately.
- However, regulation 8(3) only applies if the amount of net earnings has not only fluctuated, but changed more than once. Where hours are reduced, but the net earnings change only once, there is no room for the operation of regulation 8(3).
- Under regulation 8(3), the weekly amount of the claimant's earnings can be determined by reference to the average weekly earnings over the period of one complete cycle or over a period of 5 weeks, or over some other period that may enable the weekly earnings to be determined more accurately. Nevertheless, regulation 8(3) makes it clear that it is the application of the foregoing paragraphs of the regulation that must be modified, not that the provisions of those paragraphs are to be abandoned in favour of some unfettered approach to averaging.
- The whole approach of the Computation of Earnings Regulations is that account should be taken of the amounts due to the claimant from time to time, with no distinction being drawn as to whether the amounts were due in respect of a period during which the claimant was working longer hours, or earning additional bonuses. The power to average earnings in regulation 8(3) is designed to avoid anomalies where there are variations in the claimant's earnings from week to week, and to deal with circumstances where the claimant's regular pattern of work is such that he does not work every week. It does not seem to me to be an appropriate exercise of the discretion granted by that regulation to use it to exclude from account payments due on a particular date because they are in respect of an earlier period when longer hours were worked, where the claimant's regular pattern of work does involve his working every week.
The ultra vires and unreasonableness arguments
- It is then said that the Computation of Earnings Regulations are ultra vires and unreasonable.
- The essential point is that although the regulations refer repeatedly to the claimant's earnings over a period, that is referring not to the amount of money they have earned by the work they have done in that period, but to the amount of money they have become entitled to be paid in that period because of the work they have done or promised to do, and averages must be calculated on that basis, even where the discretion conferred by regulation 8(3) is exercised. That is said to be unreasonable because it means that claimants such as those in the present cases, who have to give up their jobs, or reduced their hours of work, to care for a sick relative, are left without the allowance during a period when they are no longer earning (or earning at the same rate as before).
- Section 70 of the 1992 Act provides for claimants to receive benefit in any week in which they are not gainfully employed. A claimant who stops work to care for a relative will not regard him or herself as gainfully employed once they have ceased to be employed at all. If one were limited to the ordinary use of the English language, I would agree that that is the case. However, statutes do not always use the English language in the ordinary way. In this case, section 70 has specifically left it to regulations to set out when gainful employment begins and ends. The regulations lay down rules for that by reference not to when work ceases or begins, but by reference to when payment is received for work which has been, or is to be, done. I cannot see that there is anything unreasonable or ultra vires in that approach. Nor does it appear to me to make it unreasonable or ultra vires that the rules also provide that in determining entitlement one looks at the earnings in the immediately preceding benefit week, or that when payment has been received to cover a period longer than a week, that payment is apportioned to produce a weekly amount for an appropriate extended period.
- Mr. Wheatley has drawn my attention to anomalies which follow from the regulations, and to the fact that a significant period of time can sometimes elapse before a carer becomes entitled to carer's allowance. Anomalies, however, are almost inevitable is complicated regulations of this kind. It may be argued that there is a need for amendment to the regulations to remove or modify the anomalies, but they do not invalidate the entire regulations (see the decision of the Court of Appeal in O'Connor v. Chief Adjudication Officer, reported as R(IS)7/99).
The human rights argument
- It was suggested by Mr. Wheatley at one point that the regulations might be discriminatory because they kept more women that men out of benefit. However, if the provisions for calculation of earnings do have than effect, on the basis of the very limited evidence before me,. it is only because more women than men receive the benefit. Any regulation which excludes a carer from benefit until a period of time has elapsed since their last payday will have that effect. I can see no basis for any human rights argument and none was pursued at the oral hearing.``
- I agree with the representative of the secretary of state that the tribunal erred in law in failing to give adequate reasons for its decision and in failing to address regulation 8(3). I do not find it remotely surprising that, faced with a busy schedule, the tribunal was unable in the time available to it, fully to decipher and interpret the convoluted, and at times almost unintelligible, language of regulations 6 and 8. Nevertheless, it does not appear to me, having struggled through those regulations, that the tribunal could have come to any other conclusion in either case before me than to dismiss both appeals.
(signed on the original) Michael Mark
Deputy Commissioner
19 June 2006
