Louis and Department of Education, Employment and Workplace Relations [2011] AATA 30 (27 January 2011)

Last Updated: 31 January 2011

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 30

ADMINISTRATIVE APPEALS TRIBUNAL )

) No 2010/2144

GENERAL ADMINISTRATIVEE DIVISION		)
	Re		Faye Louis

Applicant

And

Department of Education, Employment and Workplace Relations

Respondent

DECISION

Tribunal

Senior Member N Isenberg

Date 27 January 2011

Place Wollongong

Decision

The decision under review is set aside, and a decision substituted that Ms Louis should be treated as unemployed as at 31 December 2009.

....................[sgd]...................
Senior Member

CATCHWORDS

SOCIAL SECURITY – allowances – newstart allowance – requirement that a person be unemployed – discretion to treat person as unemployed for purpose of newstart receipt – where person self-employed without income – where person did not register participation failure with respect to job-seeking obligations.

Social Security Act 1991 — ss 593, 595

Guide to Social Security Law

REASONS FOR DECISION

27 January 2011	Senior Member N Isenberg
INTRODUCTION

1. The applicant, Ms Faye Louis, seeks review of a decision by the Secretary of the Department of Education, Employment and Workplace Relations (the Secretary) to cancel payment of newstart allowance effective from 31 December 2009. The basis of that decision was that Ms Louis was not “unemployed” at that time. That decision was made on 8 January 2010, and subsequently affirmed by the Social Security Appeals Tribunal on 18 March 2010.

BACKGROUND

2. Ms Louis began receiving newstart allowance on 2 December 2006. She had previously been in receipt of parenting payment single, which ceased when her daughter reached the age of 16 years. She had difficulty finding employment and worked in several positions for a brief period on each occasion.
3. Ms Louis subsequently established a small business, “Faye’s Sandwich Bar & More” (the sandwich shop), which commenced trading on 1 July 2007. She informed Centrelink of her plans on 12 June 2007, and was told that she would need to continue seeking alternative work while establishing the business.
4. According to Ms Louis, the sandwich shop was always run at a loss. She did not draw a wage at any stage despite working there in excess of 40 hours per week. Ms Louis continued to receive newstart throughout the time she was operating the sandwich shop, and was also subject to activity agreements requiring her to look for paid work. Both parties agree that she fulfilled the participation requirements agreed with her as part of the activity test for newstart recipients.
5. On 31 December 2009, Ms Louis’ newstart allowance was suspended, and subsequently cancelled on 8 January 2010. The cited reason was that her commitment to the sandwich shop meant that she was unable to undertake full time employment. This decision was affirmed by a Centrelink Authorised Review Officer on 2 February 2010, and subsequently by the SSAT.
6. At the time of hearing, Ms Louis continued to operate the business while seeking a buyer. She said that the business climate complicated a sale and that other local businesses were also “struggling”. She was also undergoing treatment for depression, having previously been subject to a reduced job search requirement on this account between 3 December 2007 and 3 March 2008, and was in a straitened financial situation.

RELEVANT LAW

7. Section 593(1)(a) of the Social Security Act 1991 (Cth) (the Act) provides that subject to other sections of the Act not presently relevant, a person is qualified for Newstart allowance in respect of a period if, relevantly, they were unemployed throughout that period.
8. The parties accept that Ms Louis’ work as the owner-operator of the sandwich shop during at the time of cancellation meant that she did not satisfy the definition of an “unemployed” person. However, it is argued on her behalf that her circumstances warrant the exercise of the discretion in s 595 to treat her as unemployed for the purposes of s 593. The Respondent opposes this course.
9. Section 595 provides:

595 Persons may be treated as unemployed
(1) The Secretary may treat a person as being unemployed throughout a period if:
(a) during the period, the person undertakes:
(i) paid work that, in the Secretary's opinion, is suitable for the person to undertake; or
(ii) any other activity;
as a result of which he or she would, but for this subsection, not be taken to be unemployed; and
(b) the Secretary is of the opinion that, taking into account:
(i) the nature of the work or other activity; and
(ii) the duration of the work or other activity; and
(iii) any remuneration received for the work or other activity; and
(iv) any other matters relating to the work or other activity, or to the person's circumstances, that the Secretary considers relevant;
the activity should be disregarded.
Note: The person may, under subsection 603(3), also be treated as satisfying the activity test.
(1A) However, the work or other activity must not be or include any work or other activity of a kind that the Secretary determines under subsection (1B).
(1B) The Secretary may determine, by legislative instrument, kinds of work or other activity that are not to be taken into account for the purposes of subsection (1).
(2) A person complying with a Newstart Employment Pathway Plan, or with a requirement under subsection 601(1A), may be treated by the Secretary as being unemployed.
(3) In deciding whether to treat a person as being unemployed, the Secretary is to take into account:
(a) the nature of the activity undertaken by the person so as to comply with a requirement under subsection 601(1A) (activity test) or a requirement in a Newstart Employment Pathway Plan; and
(b) the duration of the activity; and
(c) any other matters relating to the activity that the Secretary considers relevant.

10. The secretary has promulgated a policy document, the Guide to Social Security Law (the Guide), to assist decision makers in the administration of the Act. In exercising a discretion such as s 595, the Tribunal should take into account executive policies relevant to the matter unless there are cogent reasons for not doing so in a particular case: Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634.
11. The applicant draws attention to Part 1.1.U.30 of the Guide, which outlines the manner in which the discretion in s 595 would be exercised in order to determine whether someone is “unemployed”:

Section 595 gives the Secretary the discretion to treat a person as unemployed where the person would not be regarded as unemployed in the general sense. Use of the discretion supports the objective or increasing or maintaining a person's engagement in the labour market.
The most common use of the discretion is to enable a person who undertakes paid work to continue to be regarded as unemployed. A person on NSA is generally required to look for and undertake suitable work. The NSA income test is intended to support this be ensuring that people benefit financially by taking up paid work. This objective would be undermined if a person in paid employment could not be regarded as unemployed, since the person would not qualify for NSA even if they had an entitlement to part-rate NSA under the income test. The discretion to treat an employed person as unemployed for NSA purposes should therefore be exercised in such a way as to further the objective of increased workforce participation, rather than providing a disincentive for people to increase their hours of work.
Although employment is actively encouraged for NSA recipients, the section 595 discretion is not always exercised to disregard employment. For example, a person who is working less than the number of hours required to satisfy their activity test requirement, and who is not willing to look for or undertake alternative work, would fail the activity test and not be considered unemployed. As a general rule, however, where the person has employment and also satisfies the activity test, the employment will be disregarded.
Section 595 is also used to continue to treat as unemployed a person who is undertaking an activity the Secretary considers appropriate to disregard.

12. Both s 595(3) and the Guide make satisfaction of the activity test a relevant consideration in determining whether or not the discretion to treat a person as unemployed should be exercised. Where a person undertakes employment as part of their activity test requirements, a further “sufficient work test” is applied in determining whether, notwithstanding the fact that they would not be “unemployed” within the meaning of s 593 of the Act, the discretion in s 595 should be exercised. The test involves determining whether the combination of hours worked and remuneration paid is appropriate for the circumstances of the individual case: 1.1.S.403 of the Guide. The application of the test to self-employment is set out at 3.2.2.10 of the Guide:

Self-employed
The conditions for satisfying the sufficient work test apply equally to self-employment. Self-employment will fully satisfy the activity test if the person is working at least their required number of hours, and the taxable income of the business provides the equivalent of the National Minimum Wage rate for the minimum required hours.
Where the self-employment does not satisfy the sufficient work test, the person will generally be required to look for alternative work. If their commitment to their business activities interferes with required job search or other activities, the person will usually not be considered to be unemployed under section 595 and will not satisfy the activity test.

13. In determining whether to exercise the discretion, the Tribunal must make its decision on the basis of the facts as they stood at the date on which the cancellation became effective – that is, 31 December 2009.

ISSUES

14. In light of the legislation and relevant sections of the Guide, it is necessary to consider the following matters when exercising the discretion under s 595:
    • (i) the nature of the work undertaken by Ms Louis;
    • (ii) the duration of that work;
    • (iii) any remuneration she received;
    • (iv) whether she satisfied the sufficient work test at the relevant time;
    • (v) if not, whether she satisfied the activity test; and
    • (vi) any other factors which are relevant in light of the scope and purpose of the Act.
      

CONSIDERATION

15. The nature of the work undertaken by Ms Louis Ms Louis’ work at the sandwich shop was done with a view to remuneration – on her account, in order to “buy [herself] a job”.
16. Her pattern of work in the sandwich shop has consistently involved working between 8 am and 3 pm, six days per week, equivalent to 42 hours per week. Her commitment is thus full-time. She employed – and continues to employ – a casual worker for two-three hours per day to cover the lunchtime rush.
17. The duration of Ms Louis’ work The sandwich shop started operating on 1 July 2007. Ms Louis had therefore been running the business for approximately two and a half years at the time her newstart allowance was cancelled.
18. It should be noted that a Centrelink Complex Assessment officer reviewed the operation of the sandwich shop on 15 December 2008, some 12 months prior to cancellation. The report noted that the sandwich shop was loss-making and that a person in her situation would ordinarily be required to meet the normal activity test. Annual review of the situation was recommended but no further action was taken with respect to Ms Louis’ payments.
19. On her account, the sandwich shop had been “up for sale” for the past 12 months as at the date of the Tribunal hearing. Before the SSAT, she stated that the shop was first advertised for sale in local newspapers in January 2010. An Agency agreement provided to this Tribunal shows that she was advertising the shop through a real estate agency as of March 2010.
20. Any remuneration Ms Louis received Ms Louis ran the sandwich shop at a loss of $24,740 during the 2007-2008 financial year, and of $44,389 (included rolled-over losses) for 2008-2009. In submissions, it was stated that she had made a small profit of $5,000 during the 2009-2010 financial year.
21. According to Ms Louis, she did not pay herself a wage from the shop’s operations. She used money held by the business to pay for work clothing and subscriptions for local business organisations such as the Illawarra Business Chamber. On the advice of her accountant, she also used the business to pay for some personal expenses such as car insurance as a means of obtaining a tax deduction.
22. It is unclear how Ms Louis financed the ongoing losses sustained by the sandwich shop. Her own account is that she has limited assets and made no further investment beyond the initial capital contribution, which was drawn from an inheritance. It was suggested on her behalf that some of the financial losses may have been attributable to capital depreciation. However, this question does not presently bear on the issue of remuneration she received while operating the business.
23. Whether Ms Louis satisfied the sufficient work test at the relevant time For Ms Louis to satisfy the sufficient work test, two conditions must be satisfied:
    • (i) the total hours worked must be the minimum required under the participation requirement; and
    • (ii) the remuneration must be at least the applicable hourly rate, multiplied by the minimum number of hours required for that person.
      
24. Ms Louis was subject to a full-time job-seeking requirement during the period she was running the takeaway prior to cancellation. She also provided evidence that she never paid herself a wage during the time the business was in operation. In these circumstances, she could not have satisfied the requirement that she be earning at least the Federal Minimum Wage for a fully-engaged worker at the time of cancellation, which the respondent estimated would have amounted to $543.78 per week. Ms Louis does not therefore satisfy the sufficient work test.
25. Whether she satisfied the activity test A person who does not satisfy the sufficient work test must satisfy the activity test in order to be considered unemployed for the purposes of s 595: 3.2.2.10 of the Guide. A person will satisfy the activity test with respect to a period provided that they are (a) actively seeking and (b) willing to undertake paid work in Australia, other than paid work which is unsuitable: s 601(1).
26. The Secretary may place additional requirements on a person in order for them to satisfy the activity test, including an activity agreement. At the time of cancellation, Ms Louis was subject to an Employment Pathway Plan commencing on 7 July 2009 and running until 7 June 2010. This required her to:
    • look into and complete short courses for small business management;
    • look into short courses for improving small business;
    • complete monthly appointments as required as required [T11];

A further requirement stipulated that she should actively look for work, attend all job interviews arranged for her, and accept any suitable job offered to her. In their statement of facts, issues and contentions, the Secretary conceded that Ms Louis had complied with the terms of her activity agreements and employment pathway plans.

27. Somewhat inconsistently, the Secretary argues that Ms Louis was not actively seeking and willing to undertake paid full-time work as at 8 January 2010. It cites four examples in its submissions:
    • a business details form completed on 10 July 2007, in which she indicated she was not looking for full-time work due to the purchase of her business;
    • a record by the Salvation Army Employment Plus Service of 3 October 2007, to similar effect;
    • a conversation with the Jobfind Centre of 7 July 2009, during which she said she could not cope with the stress of additional employment while running her business; and
    • another conversation with the Jobfind Centre on 3 November 2009, saying that she felt that she would seek more employment once the fate of her business was known.
      
28. Both the SSAT and the ARO also noted that Ms Louis’ commitment of in excess 40 hours per week in her business during the period of its operation was inconsistent with her actively seeking alternative full time work. The ARO recorded that the business’ financial situation at the relevant time would not have allowed her to employ a substitute staff member while she sought alternative opportunities.
29. Against these issues, it must again be emphasised that the Secretary conceded that Ms Louis complied with the terms of the applicable activity agreements and Employment Pathway Plans throughout the period prior to cancellation of her newstart allowance. Potential participation failures were raised at stages – for example, a failure to attend a work for the dole interview on 26 March 2008 [ST 24]. However, in that instance, no failure was recorded as Ms Louis provided a medical certificate attesting to ongoing issues with depression. Ms Louis’ evidence also was to the effect that she had never been informed of any participation failure during that time.
30. The Tribunal further notes that participation in the business and in related activities was a condition of agreements covering Ms Louis at various times. For example, the Activity Agreement entered into on 25 September 2007 required Ms Louis to work eight and a half hours per day at the business. The 7 July 2009 agreement similarly required her to undertake activities intended to enhance her operation of the business. While sale of the business was canvassed with Ms Louis on several occasions, she was at no time told during the two and a half year period prior to cancellation of newstart that its continued operation was inconsistent with compliance with her activity requirements.
31. It therefore appears to the Tribunal that Ms Louis complied with the job-seeking requirements imposed by Centrelink prior to cancellation, and was led to believe that she had notwithstanding her operation of the business.
32. Any other factors which are relevant in light of the scope and purpose of the Act Section 595(1)(b)(iv) allows the Secretary (and the Tribunal on review) to take into account any other matters considered relevant.
33. The policy intent of the section was explained in this way in the Explanatory Memorandum to the Employment and Workplace Relations Legislation Amendment (Welfare to Work and Other Measures) Act 2005 (Cth):

“Section 595 is concerned with the Secretary’s power to treat people as unemployed in certain circumstances. As a result of the Welfare to Work measures, some people who might previously have sought to claim either Parenting Payment or Disability Support Pension will now need to establish entitlement to other payments such as newstart allowance. One qualification criterion for newstart allowance is that the person must be unemployed. However, it is recognised that some people in the affected group will already be working to capacity or undertaking other appropriate activities, with the effect that they might not be correctly described as ‘unemployed’. Accordingly, new subsection 595(1) creates a power for the Secretary to treat a person as unemployed in the circumstances specified in proposed new subsection 595(1).”

34. Conclusion I am satisfied that the discretion in s 595 should be exercised to treat Ms Louis as unemployed as at 8 January 2010. I do so taking into account the following factors:
35. First, it appears on available evidence that Ms Louis complied with the job search requirements placed on her while operating the small business – no participation failure was recorded. Moreover, she complied with the Pathway Plan applicable at the time of cancellation.
36. It may be, as the Secretary suggests, that Ms Louis’ full-time engagement with the business called into question her willingness to seek alternative work. If it did, however, the course of conduct adopted by Centrelink and job service providers over a two and a half year period did not effectively indicate that this was an issue. While there are notes suggesting that Ms Louis was referred to the work for the dole scheme in March 2008 due to concerns about her lack of engagement in paid work, she was not delivered an ultimatum that conducting the business was incompatible with her participation requirements.
37. This occurred despite Centrelink remaining aware of the extent of Ms Louis’ engagement with the business at all relevant times. As was previously discussed, a Complex Assessment Officer noted the lack of income drawn from the business in December 2008 without taking any further action. The Employment Pathway Plan made in July 2009 similarly encouraged her to re-skill in order to operate the business. Even if the Secretary’s submission that no decision under s 595 was ever made with respect to Ms Louis is accepted, the de facto exercise of the discretion in her favour over an extended period acted as a tacit endorsement of the arrangement.
38. I acknowledge that instances in which Ms Louis was reluctant to seek work due to her commitment to the takeaway draw into question her satisfaction of the activity test. However, this must be balanced against the failure of Centrelink and its allied job service providers to treat her conduct as a participation failure with respect to her job-seeking requirements. Taking these factors into account, it appears that Ms Louis satisfied the participation requirements applicable to her as at the date of cancellation. She satisfied the relevant Employment Pathway Plan, and otherwise engaged in a course of conduct which had not been deemed inappropriate by Centrelink and her job service providers over an extended period.
39. Second, although Ms Louis failed the substantial work test, the Tribunal finds for the above reasons that her substantial compliance with the activity requirements covering her strongly favours exercise of the discretion in her favour.
40. Thirdly, the fact that Ms Louis had operated the business for two and a half years at the time of cancellation without being able to draw a wage augurs against the exercise of the discretion. On the other hand, however, it must be remembered that the conduct of Centrelink and other service providers was ambiguous in terms of encouraging Ms Louis to continue operating the business. For example, the prospect of selling the business to allow her to undertake the work for the dole programme was canvassed during an interview with Centrelink on 18 March 2008 (ST17). A Complex Assessment Officer subsequently reviewed the business’ situation on 15 December 2008, noted its unprofitability, but did not recommend any further action with respect to Ms Louis’ newstart allowance.
41. The available evidence is that Ms Louis sought to sell the business once the January 2010 cancellation made it apparent that she could no longer continue operating the business and receiving newstart. While her decision to do so post-dates the period which I must consider, it adds weight to the proposition that Ms Louis being led to believe that she could receive newstart and operate the business without drawing an income, played a significant role in the length of time she chose to operate the business unprofitably. The length of time the business operated should therefore be given less weight in light of this consideration.
42. Fourthly, continued receipt of newstart allowance at the date of cancellation would not contradict the objective of encouraging Ms Louis’ participation in full-time paid employment. On her account, at that time it would not have been possible to immediately sell or wind-down the business without some advanced warning. Suddenly ceasing to treat Ms Louis as unemployed when she had customarily been previously would arguably not have had any effect on her broader workplace participation due to ongoing commitments to the business, but would nonetheless have imposed substantial hardship on her.
43. I place significant weight on the contradictory information given to Ms Louis as a contributing factor to the situation in which she found herself at the time newstart was cancelled. For the foregoing reasons, the Tribunal exercises its discretion under s 595 to treat Ms Louis as unemployed at the relevant date.

ORDER

44. The decision under review should be set aside, and a decision substituted that Ms Louis should be treated as unemployed as at of 31 December 2009.

I certify that the 44 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member N Isenberg.

Signed: ................................[sgd]........................................

Associate

Date of Hearing: 14 January 2011

Date of Decision: 27 January 2011

Solicitor for the Applicant: Illawarra Legal Centre

Solicitor for the Respondent: Centrelink Advocacy Branch