20 CFR 404.1004(c)

SSR 69-60

Where a handicapped individual performs simple services and receives token remuneration during a sheltered workshop rehabilitation program held, such services are not performed as an employee in employment as defined in section 210(j)(2) of the Social Security Act. Further held, services performed in the workshop by an individual after he has completed the rehabilitation program of the workshop constitute services as an employee in employment as defined in section 210(j)(2) of the Social Security Act, even though he is unable to obtain regular employment outside.

J performed services at a guidance center maintained by a State association under a rehabilitation program for retarded and other handicapped individuals. The center is supported by funds from Federal and State appropriations, from voluntary organizations, and from work done by participants in the program of the sheltered workshop. J's work included food preparation, housework, assembly work and envelope stuffing.

J completed the rehabilitation program of the center which lasted for 42 weeks, divided as follows: (1) an 8-week diagnostic and evaluation period, exploratory in nature, which enabled the supervisor to make a realistic appraisal of J's capacity and gave J an opportunity to try out various types of work within her abilities; (2) a 16-week personal adjustment training period, which helped J develop proper work habits, and interpersonal relationships, while improving her tolerance for work, attention span and ability to carry out orders; and (3) an 18-week vocational training period, which improved her ability to perform those tasks in which she showed the greatest proficiency. Regular class hours were followed and her work was done under close supervision of instructors. She was paid a stipend of 11 cents an hour.

After completion of the above regimen the individuals enter regular employment if they are able to perform a job available to them. Individuals unable to secure regular employment because of the severity of their impairments, or the unavailability of jobs, are known as "terminal cases" and are retained in the sheltered workshop at the center indefinitely or until placed in regular employment. Individuals performing services are paid at the rate of approximately 10 percent of the statutory minimum wage, based on a judgment that handicapped individuals work at about 10 percent of the capacity of a worker in regular employment at the minimum wage. The computation of payments on this basis is required by the State Department of Labor. J remained in the center as a terminal case and performed simple sewing tasks under close supervision. She continued to receive instructions in her duties and had to follow a daily routine to the extent her condition permitted. Her payments were based on her productive capacity.

The issue to be resolved in this case is whether J's services at the rehabilitation center were performed as an "employee" within the meaning of section 210(j)(2) of the Social Security Act.

As defined in section 210(j)(2) of the Act the term "employee" means, as pertinent here,

(2) Any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee; * * *

Whether an individual is an employee under these common law rules is largely a question of fact to be determined from the facts and circumstances in each individual case. The guides for determining when an employer-employee relationship exists are set out in Social Security Administration Regulations No. 4, ยง 404.1004(c) (20 CR 404.1004(c)). Generally such a relationship exists when the person for whom the services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work, but also as to the detail and means by which that result is accomplished. Where, however, the intent of supervision and control of the individual who performs services is to rehabilitate and protect him, and to accustom him gradually to industrial working conditions outside the sheltered workshop, there is not that degree or kind of direction and control necessary to establish an employer-employee relationship under these common law rules.

In the instant case the facts show that the services which J performed during the 42-week guidance center program were purely those of a patient or trainee, performed primarily for therapeutic and rehabilitative purposes and the supervision and control exercised by the center was of a protective nature as distinguished from the type of control envisioned in section 210 of the Act. Although J did receive certain monetary allowances in connection with her work, there was no agreement of any nature to form an employment relationship under the usual common law rules. Once, however, J had completed her rehabilitative training and was classified as "terminal employee" by the center, an employment relationship was intended. As a "terminal employee" J was expected to follow a daily routine, within the limits of her impairment, and was instructed as to how the work was to be done. In addition, the center exercised the right to change the methods followed by J in the performance of her services. The center set her hours of work and production schedules. She could quit just like any regular employee, and she could be discharged.

Accordingly, it is held, no employer-employee relationship within the meaning of section 210(j)(2) existed between J and the center during the 8-week diagnostic and evaluation period, the 16-week personal adjustment training period, or the 18-week vocational training period, all of which were designed only for therapeutic and rehabilitation purposes. Further, it is held, an employer-employee relationship did exist once the rehabilitation program was completed and J performed services as a "terminal employee."

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