When a self-employed EU citizen falls on hard times in another member state and stops working, do they retain their status as a worker?

Since 2010, English courts have said they do not. In a case with wide implications for residence and social security rights, the Court of Justice of the European Union in C-442/16 Florea Gusa v Minster for Social Protection (Ireland) has deemed that position to be wrong.

Self-employed people out of work had no right to reside

Mr Gusa, a Romanian national, worked as a self-employed plasterer in Ireland from 2008 to 2012. Work dried up in 2012, at the time of the economic downturn.

Being out of work, Mr Gusa applied for jobseeker’s allowance but was refused on the ground that he had not demonstrated that he had a right to reside in Ireland. He was considered to have lost the status of self-employed person upon ceasing to work.

Directive 2004/38/EC – the Free Movement Directive – provides that an EU citizen retains the status of worker or self-employed person in four cases. These include where:

he/she is in duly recorded involuntary unemployment after having been employed for more than one year and has registered as a jobseeker with the relevant employment office [Article 7(3)(b)].

Mr Gusa challenged the decision to refuse him in the Irish High Court, which dismissed the action. The Irish Court of Appeal made a reference to the CJEU under Article 267 TFEU, asking

whether Article 7(3)(b) covers only persons who are involuntarily unemployed after having worked as an employee for more than one year, or whether that provision applies also to persons who are in a comparable situation after having been self-employed for that period.

This judgment is relevant to practitioners in England and Wales because domestic law has long reflected the Irish position.

The relevant provision is Regulation 6(4) of the Immigration (EEA) Regulations 2016:

A person who is no longer in self-employment continues to be treated as a self-employed person if that person is temporarily unable to engage in activities as a self-employed person as the result of an illness or accident.

The point was litigated in Tilianu v Secretary of State for Work and Pensions [2010] EWCA Civ 1397. The Court of Appeal held that self-employed EU citizens did not retain worker status after falling out of work, unlike their employed counterparts.

The judgment in Gusa

The court noted that while the English- and French-language versions of the Free Movement Directive, which refer to a person “after having been employed”, suggest that self-employed persons fall outside the scope of Article 7, other-language versions use more generic expressions such as “occupational activity.” The Directive distinguishes between economically active citizens and inactive citizens and students, and not between the employed and self-employed.

The purpose of the Free Movement Directive was to change the approach of earlier directives which dealt separately with workers and self-employed people. In particular, recital 4 states:

With a view to remedying this sector-by-sector, piecemeal approach to the right of free movement and residence and facilitating the exercise of this right, there needs to be a single legislative act… on freedom of movement for workers within the Community

The interpretation offered by the Irish government in Gusa would clearly run counter to that purpose, according to the CJEU.

Finally, a distinction between the employed and self-employed would give rise to an unjustified difference in the treatment of those two categories of people. It would lead to a person who had been self-employed for more than one year being treated in the same way as a first-time jobseeker, contributions to the social security and tax system notwithstanding.

Implications for the UK

Following Gusa, self-employed EU citizens who become unemployed retain their worker status, and therefore right to reside, in the same way as people in direct employment who lose their jobs.

The EEA Regulations must therefore be amended. It also follows from Gusa that Tilianu is no longer good law, and EU citizens will be able to rely on Gusa for periods of unemployment.

This will have significant consequences for those seeking to demonstrate a right to reside during periods of economic inactivity. EU citizens seeking to build up five years permanent residence, particularly in preparation for an application for British citizenship after six years of lawful permanent residence, will also benefit.

This judgment will also affect entitlement to state assistance and benefits for self-employed EU citizens out of work. One example is in the context of homelessness assistance under the Housing Act 1996, as amended by the Homelessness Act 2002. Under Tilianu, the formerly self-employed were ineligible for homelessness assistance as they were deemed to have lost their worker status.

Significant practical hurdles, such as evidencing the often casual work undertaken by self-employed Europeans, will remain. But a significant number of EU citizens will no longer be excluded from the social security system because of a period out of work.

Simon Cox, who acted for the appellant in Tilianu, points out the perhaps surprising lack of infringement proceedings against the UK and Ireland given the unlawful positions in domestic law:

What's really problematic is – why didnt @EU_Commission bring infringement proceedings against UK and Ireland for denying right to reside to self-employed people whose businesses had failed?

— Simon Cox (@SimonFRCox) December 20, 2017

It is perhaps surprising that the Court of Appeal in 2010 did not make a reference to the CJEU, given the force of the reasoning in Gusa. It also demonstrates a difference in judicial approach between domestic courts and the CJEU when interpreting EU law. Whereas the Court of Appeal in its Tilianu judgment focused closely on the wording of Article 7 itself, the more schematic and purposive approach by the CJEU led quite naturally to a different result.