Editors --- "Newstart allowance: participation failures; meaning of 'to be negotiated' and 'reasonable excuse' within the context of negotiating an activities agreement" [2009] SocSecRpr 52; (2009) 11(4) Social Security Reporter, Article 15

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Newstart allowance: participation failures; meaning of 'to be negotiated' and 'reasonable excuse' within the context of negotiating an activities agreement

KRONEN v SECRETARY TO THE DEEWR

(Federal Court of Australia)

Decided: 9th November 2009 by Finn J.

Legislation

Under section 593 of the Social Security Act 1991 (the Act), a person is qualified to receive newstart allowance if they are unemployed throughout the period and satisfy the activity test [section 593(b) (i)]. A person who is eligible to receive newstart allowance may be required to satisfy the activity test by entering into an activity agreement. Furthermore, the Secretary has the power under section 601(4) of the Act to require a person who has entered into an activity agreement, to enter into a new agreement. Subsequent sections of the Act set out the consequences of a newstart recipient failing to comply with the terms of their activity agreement, and set out the procedures to be followed if the Secretary determines that a participation failure has occurred. Section 629(1) of the Act provides that the Secretary may impose an 8 week non payment period where a person commits three or more participation failures in a 12 month period. The Secretary also has the option to cancel the recipient’s newstart allowance, not merely suspend it.

The facts and background

In this matter the Kronen signed an activity agreement with Maxima Joblink (Maxima) on 10 May 2007. He subsequently objected to the signing of another activity agreement with Maxima unless certain clauses which ‘protected his rights’ were included in any future agreement. The Kronen subsequently failed to attend multiple interviews at Maxima. On each occasion Maxima provided the Kronen with relevant notice of his obligation to attend each interview and the consequences which could arise if he incurred a participation failure as a consequence of this. On 10 May 2008 the Kronen entered into an activity agreement with Centrelink. He did not enter into a subsequent agreement when requested by letter dated 22 April 2008.

As a consequence of the above, the Secretary determined that Kronen had incurred three participation failures in a 12 month period. The Secretary then cancelled his newstart allowance on the grounds that he did not satisfy the eligibility requirements for this allowance.

The decision to cancel his allowance was affirmed by an authorised review officer (ARO) on 9 April 2008. The applicant appealed this decision to the Social Security Appeals Tribunal (SSAT). On 24 July 2008 the SSAT found that the Kronen had incurred three participation failures without reasonable excuse in a 12 month period. The SSAT then affirmed the decision to impose an 8 week non payment period. On 19 May 2008 an ARO found that Kronen had incurred an additional participation failure within the same 12 month period. As a consequence a further 8 week non payment period was imposed. On 24 July 2008 the SSAT affirmed this same decision. On 7 November 2008 a third ARO decision was made within the same 12 month period. This decision found that the applicant had incurred an additional participation failure. As a result a third 8 week non payment period was imposed within the same 12 month period.

Kronen offered an identical explanation for each participation failure. He said that Maxima had not agreed to include certain specific clauses drafted by him within his activity agreement. In particular Kronen objected to being required to participate in ‘work for the dole’. The clause which Kronen wanted included required Maxima to ‘provide good well considered advice and guidance as required and ...refrain from attempting to cause Horst Kronen any unnecessary aggravation, frustration, monetary loss...’ Furthermore, Kronen also sought to impose a cost penalty of $1,697.20 on Maxima, should it ‘furnish incorrect, incomplete, false and or misleading information to any third party...(which) may result in a participation failure, serious participation failure or other similar breach...’. These clauses made Maxima retrospectively liable for any breaches of these clauses which may have occurred since 1 January 2007. Maxima refused to include these clauses in his activity agreement, and Kronen claimed that their non cooperation triggered his decision not to attend further meetings with Maxima.

On 10 April 2008 Kronen received a letter from DEEWR inviting him to contact DEEWR in order to arrange his transfer to another job network other than Maxima. He did not contact DEEWR in response to this letter. An ARO advised Kronen of this same option on 9 April 2008, at which time he said that he did not wish to change job network service providers. The Kronen claimed that it was reasonable for him to refuse to enter into further activity agreements with Maxima until his clauses were included in these same agreements. The Commonwealth Ombudsman separately investigated the applicant’s complaints against Maxima and found them to be groundless.

The SSAT found that Kronen’s ability to negotiate the terms of his Activity Agreement ‘must be viewed in the context of the statutory provisions of the Act’ and not in accordance with general provisions governing the negotiation of contracts. The Tribunal went on to find that the Act required a newstart recipient to enter into an activity agreement, providing for specific penalties should they fail to do so. The SSAT both affirmed the participation failures and the cancellation of Kronen’s newstart allowance.

The AAT affirmed both the reasoning and the decision of the SSAT.

The decision of the Court

Kronen appealed to the Federal Court on the grounds that the provisions of s.615 of the Act had not been correctly interpreted, and that the phrases ‘to be negotiated’ and ‘reasonable excuse’ had been misapplied. The Court found that:

If Mr Kronen is to qualify for a newstart allowance, he was required, in the circumstances, enter into an activity agreement: s 593(1) (e); he was required to undertake one or more activities that the Secretary regarded as suitable for the person: s 606(1); the terms of the agreement were to be approved by the Secretary. In this scheme, the “right to negotiate” could be illusory in quite some degree for some purposes and especially when the Secretary (or a delegate) takes decisions or actions in effectuation of the purposes of the Act itself. This is not to say that there was no room for discussion, accommodation and compromise. Rather, it is to recognise that the actual terms of the negotiation itself were something in relation to which the Secretary, acting reasonably and in good faith, could ultimately dictate, approve or disapprove, if there was to be an agreement. (Reasons, para. 39)

The Court found that there was no error of law in the Tribunal reaching the conclusion that the applicant had incurred three participation failures without reasonable excuse, and that his newstart allowance payments should be cancelled.

[I.T]