To acquire EU rights of residence and ultimately permanent residence, a person usually has to engage in certain activities: employment, self employment, study or being self sufficient. There are other criteria as well, but these are the four key ways that a person qualifies. The activities have to be “genuine and effective”, words that come from case law we consider in more detail below.

As is often the case with EU law concepts, it is not clear what the words mean in practice. Is part time work “genuine and effective” work in EU law? What about working 20 hours per week, or 12 hours per week, or 5 hours per week? What about a person who earns so little he or she also qualifies for and claims welfare benefits? How about a self employed person who earns very little, or who has gaps in his or her earnings due to work being scarce or being ill? And what tests does the Home Office apply in these kinds of cases?

Some of these questions are relatively easy to answer, others are more complex and depend on the precise circumstances of each person.

Part time working

EU law is clear on part time working: it potentially counts as employment. So part time work does qualify a person for EU rights of residence and time spent as a part time employed person counts towards acquiring permanent residence. However, the work still has to be “genuine and effective”.

In the case of D.M. Levin v Staatssecretaris van Justitie (C-53/81) a British woman had moved to the Netherlands and taken part-time employment in which she earned less than the minimum considered necessary to support oneself. The woman had other sources of income and support, though. The Court held that the woman was a worker as long as the work was “genuine and effective” and that this was irrespective of the fact the woman needed to rely on other forms of support. The Court went on specifically to say that part time working could qualify as work:

It should however be stated that whilst part-time employment is not excluded from the field of application of the rules on freedom of movement for workers, those rules cover only the pursuit of effective and genuine activities, to the exclusion of activities on such a small scale as to be regarded as purely marginal and ancillary.

Applying this approach, it was once held by the Court that a part-time music teacher giving 12 lessons a week topped up with Dutch social security payments was a worker for EU law purposes and entitled to a residence permit even if he was also receiving public funds: Kempf v Staatsecretaris van Justitie (Case 139/85). 10 hours per week was held to be sufficient for a person to be considered a worker in Megner and Scheffel v Innungskrankenkasse Vorderpfalz (Case C-444/93). In another case the Court stated that a person working only 5 hours per week for a very low hourly wage might potentially be a worker, although all the circumstances needed to be considered including the person’s entitlement to holiday pay, sick leave and the length of the employment contract: Genc v Land Berlin (Case 14/09).

So, we know that 10 or 12 hours a week is probably genuine part time employment. It may be that even fewer hours might qualify, but at some point we also know that the “work” will become marginal and ancillary.

Low earnings, zero hours contracts and payment in kind

There is no clear guide in EU law to what level of earnings will amount to “genuine and effective” economic activity. All be know is “activities on such a small scale as to be regarded as purely marginal and ancillary” do not count (from Levin). In practice, judges tend to follow an “I know it if I see it” style approach. Government officials have a threshold which they apply in practice, the Minimum Earnings Threshold, as discussed further below.

The Levin and Kempf cases both concerned very low earnings, and both succeeded. In Levin the issue had been whether earnings below the level considered necessary to support a person would count and they did. On the facts of Levin, the claimant had alternative resources available. In Kempf, the claimant did not have alternative income and claimed benefits at the same time as working because his income was so low.

The Court nevertheless held that these activities amounted to genuine part-time employment and were not so marginal and ancillary as not to be genuine and effective. The source of supplementary income did not affect the question of whether the activity was genuine and effective.

In EU law, earnings need not even be monetary in nature. The word “remuneration” has often been used in case judgments instead of “pay” or “wages”. In the case of Steymann (Case 196/87) it was held that the remuneration needs to be economic in nature but need not be monetary; provision of basic needs such as accommodation, food and pocket money in return for participation in a religious community was sufficient. On the other hand, in Bettray (Case 344/87) an applicant who was paid a wage but whose work was rehabilitative and was selected for him (rather than him for it) failed to establish that he was a worker.
A fixed length and short term employment contract may potentially qualify a person as a worker (Ninni-Orasche (C-413/01) and also see Barry, discussed below) and a “zero hours” contact may still potentially qualify as work if the work is genuine and effective, although if the work has been irregular and limited in duration that is a consideration which is to be taken into account (Raulin (C-379/89)).

In the UK, as is discussed below, the Government has introduced a threshold below which cases will (supposedly) be carefully considered on their facts. This is referred to as the Minimum Earnings Threshold and acts as a guide to Home Office and Department for Work and Pensions officials as to when work or self employment might cease being genuine and effective. The approach is not necessarily consistent with EU law, though, and on appeal a judge is more likely to take a nuanced and case-sensitive approach.

It is important not to lose sight of the end objective. While these cases may be fascinating for lawyers and students, if at all possible it is far better to avoid nuanced legal arguments and put the matter beyond doubt by undertaking work that is unequivocally work: a clear and defined job for a specific employer with a job description and contract which is undertaken in return for wages that are above the UK’s national minimum wage. For those unable to find such work they may still have an arguable case but may need to fight a protracted, stressful and expensive legal battle to establish their rights

Claiming benefits

Claiming benefits does not necessarily disqualify a person from acquiring EU rights of residence. Benefiting from tax credits is certainly not a problem, nor claims for universal benefits such as child benefit. If a worker earns so little that he or she qualifies for income based welfare benefits, that does not necessarily disqualify the person either.

In the case of Levin, as we have seen, the Court held that a person could be a worker even if the person had to supplement their income from another source. In the follow up case of Kempf the Court held that the fact the source might be welfare benefits did not mean that the work was not “genuine and effective”:

It follows that the rules on this topic must be interpreted as meaning that a person in effective and genuine part-time employment cannot be excluded from their sphere of application merely because the remuneration he derives from it is below the level of the minimum means of subsistence and he seeks to supplement it by other lawful means of subsistence. In that regard it is irrelevant whether those supplementary means of subsistence are derived from property or from the employment of a member of his family, as was the case in Levin, or whether, as in this instance, they are obtained from financial assistance drawn from the public funds of the member state in which he resides, provided that the effective and genuine nature of his work is established.

The test is not whether the person is claiming benefits but whether the work is “genuine and effective”. Whether benefits are claimed or not is of only very limited relevance to the real question.

The Minimum Earnings Threshold

EU law rarely changes; the UK Government interpretation of EU law changes regularly. On 1 January 2014, the new concept of the “Minimum Earnings Threshold” was introduced into the UK’s interpretation of EU law on the definition of who is and is not a worker. Essentially, if a person earns more than the threshold then he or she will automatically be regarded as a worker; if a person earns less than the threshold then his or her case will be more closely considered.

As explained by my Colleague Desmond Rutledge in this excellent blog post:

The MET is a tool which exposes EEA nationals on low earnings to greater scrutiny by introducing a two-tier process in decision making:

• Tier 1: In cases where the EEA claimant’s average earnings over the last three months satisfy the MET, they will automatically retain worker status when they claim JSA(IB) as a jobseeker.
• Tier 2: In the remaining cases, where the EEA claimant’s average earnings do not meet the MET, the decision maker will subject each case to a thorough examination to determine whether the EEA national’s work or self employment is genuine and effective.

Under Tier 2, the decision maker is required to have regard to the factors contained in EU case law…

The level of the Minimum Earnings Threshold, or “MET” is set at the earnings necessary to begin paying Class 1 National Insurance payments. Currently, for 2016/17, this is £155 per week or £8,112 per year.

There are legal arguments about whether the MET represents a breach of EU law by discriminating against part time workers and defining the concept of “worker” by reference to national law, which is impermissible. The guidance on how the MET should be applied indicates that where a person earns less it will be assumed as a starting point that the work is not genuine and effective. Realistically, though, unless a test case is brought the rules will continue to be applied by Home Office and Department for Work and Pension officials.

It is important to understand that earning less than the MET does not mean a person is not a worker; it just means that the person’s situation will be more carefully considered by the relevant official. It is still possible to rely on EU case law and succeed, although an appeal to a judge may become necessary.

Famine and feast in self employment

So far this blog post has focussed principally on work rather than self employment. Many of the points made are applicable equally to both forms of activity, though. A self employed person can be part time, can have low earnings, can potentially claim benefits and can earn less than the Minimum Income Threshold and still acquire EU rights of residence, as long as the self employment is genuine and effective.

There are additional problems faced by a person who is self employed.

First, the documentary proof of self employment is less straightforward than for a worker. A signed statement from the employer is all that is needed for a worker in EU law although in the UK it is prudent to include P60s or wage slips as well covering the relevant period. A self employed person will need to include registration as self employed, proof of payment of National Insurance if relevant and proof of the self employed activity, such as receipts, invoices or similar. Some forms of self employment are relatively informal, such as cleaners, and there may be little in the way of documentary records to use as proof.

Second, a self employed person is more likely to experience gaps in earnings and periods of “famine and feast”. It may take some time between establishing a business and generating any significant income and there may be gaps in income during periods of holiday or sickness or while seeking new business.

The way the Minimum Earnings Threshold is applied by officials is to take the last three months and see if the person earned more or less than the MET during that time. This may well cause problems for a self employed person.

Memo DMG 1/14 states as follows as guidance to DWP officials on applying the MET to the self employed:

Account must be taken of the different nature of self-employment: it may include periods of relative inactivity (see DMG 071186) and there will be period particularly as a business is starting up when the person may be working long hours but not yet receiving much profit.

The reference to DMG is to the official Decision Makers’ Guide. The paragraphs have been renumbered. The relevant paragraph is now 072842, at which the guidance sets out a paragraph from the case of SSWP v JS [2010] UKUT 240 (AAC):

I do not accept that a claimant who is for the moment doing no work is necessarily no longer self-employed. There will commonly be periods in a person’s self-employment when no work is done. Weekends and holiday periods are obvious examples. There may also be periods when there is no work to do. The concept of self-employment encompasses periods of both feast and famine. During the latter, the person may be engaged in a variety of tasks that are properly seen as part of continuing self-employment: administrative work, such as maintaining the accounts; in marketing to generate more work; or developing the business in new directions. Self- employment is not confined to periods of actual work. It includes natural periods of rest and the vicissitudes of business life. This does not mean that self-employment survives regardless of how little work arrives. It does mean that the issue can only be decided in the context of the facts at any particular time. The amount of work is one factor. Whether the claimant is taking any other steps in the course of self-employment is also relevant. The claimant’s motives and intentions must also be taken into account, although they will not necessarily be decisive.”

Similar references can also be found in HB Circular A3/2014: Minimum Earnings Threshold. All of the documents also include worked examples. These are correct in the opinion of the Government but have not all been tested in court.

Genuine and effective

Ultimately, the answer to these questions around the definition of “work” is basically whether the economic activity is genuine and effective, a test laid down in the case of Levin. In the same case it was stated that work which was “marginal and ancillary” would not be “genuine and effective”. This is not terribly helpful, though, because the meaning of the second test is as unclear as the meaning of the first.

One potentially helpful way to examine the question of whether work is “genuine and effective” is to consider the question from the point of view of the employer. Is the work of genuine economic value? Would another employee need to have been found to do the work instead, for example? This question was posed by the Court of Justice of the European Union in Genc and by the Court of Appeal of England and Wales in the case of Barry v London Borough of Southwark [2008] EWCA Civ 1440. It is by no means the only consideration nor necessarily decisive (many firms employ workers who might potentially be surplus to requirements; many family firms may genuinely employ family members even though the firm might potentially manage without) but this does seem to be a relevant consideration.

In Barry, the Court of Appeal reviewed some of the EU case law and held as follows on the meaning of “subsidiary or ancillary”:

[20] In my judgment, it follows from the above that work will be subsidiary or ancillary if it is done pursuant to some other relationship between the parties which is not an employment relationship, as where a lodger performs some small task for his landlord as part of the terms of his tenancy. The duration of the employment is, however, a factor to be taken into account. The duration of the work in the relevant period is not, however, a conclusive factor in deciding whether a person is a “worker” for Community law purposes (see Ninni-Orasche at [25]).

The Court of Appeal went on to hold that the whole employment history of the person was a relevant consideration to be taken into account in assessing whether the person remained a worker at a given time.

Internal Government guidance to its caseworkers sets out what are considered to be relevant factors when assessing whether work or self employment is genuine and effective. See, for example DMG 073050:

1. whether work was regular or intermittent

2. the period of employment

3. whether the work was intended to be short-term or long-term at the outset

4. the number of hours worked

5. the level of earnings.

DMG 073043 helpfully sets out for chase workers the principles to be derived from various Court of Justice cases, so may also be a useful reference point.

The Court of Justice of the European Union tends to establish tests in principle and relevant considerations rather than detailed thresholds or sharp edged lines, so all we can do to understand what “genuine and effective” means is look at the facts of previous cases, how they have been interpreted in our national courts and how the Government interprets these principles in practice.

Principles and practice

The first priority when making an application for recognition of residence or for benefits is to convince the Government official dealing with the application that it should succeed and that the applicant qualifies. This is generally no time to stand on principle and start quoting EU case law. At this stage, the official guidance documents are the best tool of persuasion, including the examples deployed in the guidance.

If a case is a marginal one with potential problems, it may also be helpful to include representations setting out the circumstances of the application. For example, if a self employed person went for several months without earning anything, it would be a good idea to explain what was happening at that time, such as serious illness or a lull in business and what was done to address it.

If the earnings are below the Minimum Income Threshold, it will probably be necessary to address why the work or self employment was genuine and effective, addressing the criteria that Government officials are directed by their guidance to consider.

If an application fails, an application for reconsideration may be viable in some circumstances, for example if there is further evidence available. Otherwise, an appeal or an application for judicial review may be required. It is at this point that the case law becomes more likely to be seriously considered.