Welfare law error: State may face action

WELLINGTON: Work and Income may face a costly class action lawsuit after it appears to have spent decades wrongly advising some benefit applicants that they cannot get support until their redundancy runs out.

Last week Work and Income admitted it had made an error after it rejected the benefit claim of Mary, an Auckland hotel worker, due to her Covid19 redundancy payout.

The reversal came after RNZ pointed out that the Social Security Act said redundancy should not be a factor when calculating someone's entitlement to a benefit.

Further legal advice suggests it has been unlawful since 1991 to include redundancy as part of the calculation for a benefit standdown.

RNZ has been contacted by many people who believe they are in a similar situation to Mary. Some cases are from the past few months, while others date back to the early 1990s. Some say they lost their savings and homes.

Grant Cameron, a senior partner at GCA Lawyers and a specialist in class action lawsuits, said ‘‘often bureaucratic mistakes are made and it's a question of how it is dealt with’’.

‘‘On the information presented to date, there is a high prospect of a class action being formed provided people are sufficiently interested.’’

Victoria University of Wellington law lecturer Mamari Stephens, who specialises in social security and welfare law, said there was little case law relating to the issue of redundancy and benefit payments but people were ‘‘vulnerable’’ in such circumstances.

Ms Stephens said there were two issues: the potentially narrow way in which the law relating to redundancy was applied (there could also be a difference between those who took voluntary redundancy and those considered ‘‘superfluous’’); and the nature of the training Work and Income staff received and how many of them understood the law.

‘‘It seems to me there is a real risk to the department [of further legal action].’’

The agency’s manual and procedures document appeared to correctly reflect the law but in practice this could be ‘‘lost in translation’’, she said.

‘‘There are some case workers who are not trained in the legislation and they are relying on the manual and procedures. How these are translated to the public can differ.

‘‘This may be a classic example of the law saying one thing clearly and practice over time has evolved quite differently.’’

Social Development Minister Carmel Sepuloni yesterday told the Ministry of Social Development (MSD) to investigate the situation, saying in a statement she wanted ``to ensure MSD practice reflects the legislation’’.

Ms Sepuloni also asked to be given further briefings on the matter and to stay updated on any issues that may arise in the investigation.

In a statement, MSD group general manager of client service delivery Kay Read said: ``We are investigating the extent to which guidance to staff may have resulted in incorrect decisionmaking.''

Ms Read said there had been some inquiries from clients yesterday about the situation.

``We encourage anyone concerned to get in touch with us.''

A number of other questions — including around the practices staff had been following and for how long; whether Work and Income had any idea of the number of people turned down based on redundancy payments; if there was a risk that back payments would be required; the potential cost, if any, being put in place to help claimants — remain unanswered. — RNZ

❛ On the information presented to date, there is a high prospect of a

class action being formed provided people are sufficiently

interested