The Court of T has said in Minter v Kingston Upon Hull City Council and Potter v Secretary of State for Work and Pensions that employees have to pay back overpayments of state benefits from equal pay settlements because they constitute income or earnings under the relevant Regulations.
Ms Minter, a part-time clerical assistant for Kingston upon Hull council, received a one-off lump sum payment of almost £5,000 from her employer in March 2008 to settle a claim for a breach of equal pay legislation.
As she received housing benefit and council tax benefits because she was on such a low wage, she disclosed the settlement to the council’s benefit office which then asked her to repay almost £550 in overpaid housing benefit.
Ms Potter, a part time employee for Wolverhampton council, accepted a part-payment of just over £700 to settle a similar claim in late 2007. As she had applied earlier in 2007 for Jobseeker’s Allowance (JA), the Department of Work and Pensions assessed the sum as income under the Regulations and asked for a repayment.
Decisions of first tier and upper Tribunals
The first tier Tribunal held that although the payment was income, Ms Minter did not have to repay it because it was not recoverable under the housing benefit Regulations.
However, the upper Tribunal disagreed, saying that it was recoverable because it fell within the definition of “earnings” under the Regulations. That is, “any remuneration or profit” including “any payment in lieu of remuneration” derived from her employment.
In Ms Potter’s case, the first tier Tribunal held that her award should not be treated as income under the JA Regulations as it was not a compensation payment. This decision, however, was overturned on appeal by the upper Tribunal which said that the first tier judge should have gone on to decide that it was income rather than capital as it qualified as “earnings” for the loss of past income.
Both women appealed, arguing that the payments they had received should not qualify as income.
Decision of Court of Appeal
The Court of Appeal said that to decide whether the payment was income or capital, it had to determine its “true characteristics in the hands of the recipient ... in the context of the two legislative schemes”.
The size of the payment was irrelevant, as was the label attached to it by the parties. Likewise, whether it was paid as a lump sum, a series of payments or by way of settlement of a claim.
The Court said that the payments received by the two women were clearly compensation for the lower wages they had been paid over a period of time.
As the underlying claims were “nothing more or less” than a claim for underpayment of wages, the “true characteristic” of the payments “was therefore clearly compensation for past lost income”.
But was it income or capital within the relevant Regulations? The Court said that it was clear that the payments either constituted “remuneration” derived from employment or “earnings”.
It therefore dismissed both appeals.
This decision clearly highlights the need for individuals to be aware when settling claims for equal pay that any compensation may impact on state benefits that they have received. They should therefore seek further advice in respect of same.