20 CFR 404.1004(c)
The facts at hand indicate that the Missouri Division of Vocational Rehabilitation and the Missouri Division of Mental Health have established a program to provide rehabilitation services of a social and vocational nature to patients at State mental hospitals whose illnesses have responded sufficiently to psychiatric treatment to warrant planning toward the person's return to the community. The Division of Vocational Rehabilitation (hereinafter referred to as the Division) evaluates the needs of the patient and develops a concise plan to enable the patient to become a contributing and independent individual when he leaves the hospital. The Division is also responsible for the overall administration of the rehabilitation program at the State mental hospitals, determines the eligibility of a patient and his potential for vocational rehabilitation, and the nature and scope of the rehabilitative services to be provided. The State hospitals furnish the physical facilities and provide all the necessary equipment and supplies that are required for the care of the patient while in the rehabilitation unit.
A workshop manager is responsible for planning and directing the production and procurement phases of the workshop. He also obtains work contracts with business firms. Examples of the work contracts would be: tinting and labeling of whiskey bottles, assembling and mailing of advertising books, cutting of aluminum foil and plastic parts for use as packaging materials for various products, manufacturing of fishing lures, assembling of black powder, concrete nails, etc. The contracts are bid by the workshop manager using a complicated formula which considers twice the minimum wage divided by the anticipated piecework production. Supervisory employees in the workshop are employees of the Division of Mental Health or the Division of Vocational Rehabilitation. The individuals referred to as "lineworkers" are mostly inpatients at the hospital. In some instances patients live in boarding homes or community care placement centers and return to the hospital to participate in the program. The "lineworkers" normally work 6 hours a day and a 30-hour week. Wages range from 10 cents an hour to $2.56 an hour in a few cases.
The Division of Vocational Rehabilitation, acting for the State, controls the hours, wages, supervises the work and determines product quality. The quality of the end product is of considerable concern to the State as the State recently lost a contract to manufacture fishing lures and had approximately $10,000 invested in materials for which they now have little or no use. The State agency believes the sheltered workshops are State institutions and will be covered under the Section 218 agreement with the Secretary. Working with guidelines set down by the Department of Labor, the Division decides which patients will perform which jobs, the hours of work, and the rate of pay. The Division has the authority to accept, reject, or terminate patients from the program although we have been advised that few are ever terminated. The materials furnished this office reveal that there are some patients who will never progress to outside levels of employment. The workshop employment will be the only employment these individuals will ever experience.
The question to be resolved is whether the services performed by individuals in the rehabilitation program (sheltered workshop) were performed as an "employee" within the meaning of section 210(j) of the Social Security Act. Section 210(j)(2) defines an employee as an individual who, under the usual common-law rules applicable in determining the employer-employee relationship, has the status of an employee. Section 404.1004(c) of the Social Security Administration Regulations No. 4 (20 CFR 404.1004(c)) provides that any individual is an employee if under the usual common-law rules the relationship between him and the person for whom he performs services is a legal relationship of an employer and employee. Generally such relationships exist when the person for whom 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 details and means by which that result is accomplished.
Where, however, services are performed by individuals who are in a rehabilitation program in a sheltered workshop, Social Security Ruling 69-60 states that where the services are performed primarily for rehabilitation or therapeutic purposes, the individuals performing such services are not employees. This is usually the case where individuals are being trained for placement outside a workshop. On the other hand, in those situations where the individual is provided permanent employment in the workshop after it has been determined that he would not be able to hold an outside job and the services no longer have rehabilitation as their primary objective, he might then be an employee.
In this case, it appears that some individuals in the program in the Missouri mental health hospital are receiving the training for rehabilitation (to assist them to become independent when they have the institution); therefore, their services would not constitute employment for social security purposes.
The file indicates also that some individuals live in boarding homes or community care placement centers and return to the hospital to participate in the program. In the event these individuals are still undergoing treatment at the hospital as "patients" and, as part of their treatment, are in the rehabilitation program, as discussed above, their services in the sheltered workshop would probably not constitute employment under the Social Security Act.
For those individuals, including individuals living in boarding homes or community care placement centers, who do not have the status of "patients" in the hospital and who will never progress to outside levels of employment but are given permanent employment in the workshop, the criteria set forth in section 404.1004(c) of the Regulations hereinbefore discussed would have to be considered. Applying those criteria to this case, it appears the Division of Vocational Rehabilitation contracts for the work to be performed, supplies the materials to be used in performance of the work, furnishes the place of employment, establishes the wages paid, hours worked, and supervises the worker as to the manner and means in which the work is to be performed, and accepts or rejects the finished product. Thus, it would appear that all the requirements of section 210(j) and section 404.1004(c) of the Regulations exist for finding that individuals who are not patients in the hospital but who are participating in the rehabilitation program working on a permanent basis are employees of the State.
It is also indicated that the State believes that the services of patients are mandatorily excluded from coverage under section 218(c)(6)(B) of the Act which excludes "service performed in a hospital, home or other institution by a patient or inmate thereof." We concur that the services of those individuals who are in the hospital or out of the hospital and are still classified as patients but who are given permanent employment in the workshop because they could never progress to working outside the institution, would be mandatorily excluded from coverage under section 218(c)(6)(B) of the Social Security Act.
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