SSR 76-13a: SECTIONS 209 and 210(j)(2) (42 U.S.C. 409 and 410(j)(2)) -- EMPLOYER/EMPLOYEE RELATIONSHIP -- FAMILY EMPLOYMENT
20 CFR 404.1004(c)
- Where claimant, an applicant for old-age insurance benefits, performed domestic services for remuneration in the household of her sister but such remuneration was subsequently returned in toto to the sister, and where claimant was not supervised, controlled or directed by the sister in the performance of the household duties and no contract of employment existed between claimant and her sister, held, claimant is not entitled to old-age insurance benefits since the domestic services were not performed within a bona fide employer/employee relationship as defined in section 210(j)(2) of the Social Security Act, the household arrangements having been motivated by mutual benefits and family ties, and the remuneration paid to the claimant did not constitute wages within the meaning of section 209 of the Act.
The claimant, born on March 21, 1902, filed an application for old-age insurance benefits on January 16, 1973, indicating that she had been employed by her sister from January 1972 through June 1972 and since October 1972. She revealed in an accompanying statement dated January 16, 1973, that her sister paid her $100 per month for housekeeping services.
The claimant worked as a teacher for many years, but a record of her earnings maintained by the Social Security Administration dated February 2, 1973, reveals that her teaching earnings were covered under the Social Security Act only during the years 1956, 1957, 1958 and 1959 during which time she acquired 9 quarters of coverage. From August 1959 until her retirement in may 1971, the claimant worked for the United States Government in Japan, teaching dependents of United States servicemen. The claimant had intended to teach at a private school in the United States after the completion of her teaching duties in Japan in order to secure the four quarters of coverage she required for entitlement to old-age insurance benefits. When the claimant returned to the United States in July 1971, however, she was blind in her left eye because of an unsuccessful cataract operation performed in March 1971, and was also going blind in her right eye. As a result, she was unable to teach or drive to any place to do gainful work.
The claimant lived at her home in Pennsylvania during the summer of 1971, but in the fall of 1971 she went to live with her sister in New Jersey so that she could be near an eye specialist. The sister also was a school teacher and the claimant did housework while her sister was teaching.
The sister indicated on a statement dated January 16, 1973, that she employed the claimant on January 1, 1972, through necessity, because she worked full time and needed someone to care for the household. She stated that she paid all the household expenses, but did not claim the claimant as a dependent on her tax returns. During the 3 summer months, she and the claimant vacationed in Pennsylvania.
Contact made with the claimant on January 16, 1973, revealed that she and her sister were the only occupants of the household. She indicated that there was no contractual agreement, written or oral, between her and her sister and that her sister did not control or direct her because she knew what had to be done. A Report of Contact made with the claimant on February 12, 1973, indicates that she performed the same work for her sister from September 1971 through December 1971 without wages and that there was no specific reason why her sister suddenly required a housekeeper.
A Statement of Employer signed by the sister on January 17, 1973, indicates that wages of $300 were paid to the claimant during each of the calendar quarters ending March 1972, June 1972, December 1972 and March 1973. Cancelled checks in the amount of $300 made out to the claimant dated April 1, 1972, June 30, 1972, December 30, 1972, and April 3, 1973, and cancelled checks payable to Internal Revenue dated April 1, 1972, June 30, 1972, December 31, 1972, and April 2, 1973, signed by the sister, were submitted as evidence that the wages were paid and reported timely.
An Employment Relationship Questionnaire dated November 1, 1973, signed by the sister, indicates that the claimant cleaned, washed and ironed, cooked meals and did dishes. It was stated that she expected the work to be done when she came home from work and to be done the way she wanted it. The claimant was allegedly under her control, supervision, and direction and was not free to work for others.
A Domestic Service Questionnaire signed by the claimant on April 3, 1974, indicates that it was agreed by her and her sister that she would do all the light housework. She allegedly worked 7 days a week about 4 hours a day, but indicated that there were no specific hours in which she was required to do the work. She stated that her sister had the right to instruct her, but that it wasn't necessary since she knew how to do the work. The employment relationship was said to have ended on April 1, 1973, because she had an eye operation and was no longer able to work after that date. After April 1, 1973, the sister hired another person to do the housework on a part-time basis.
At the hearing before the Appeals Council, the claimant testified that she and her sister, who is six years younger, had an oral agreement. She stated that her hours were flexible, but that she always had dinner ready when her sister came home from work. She indicated that she sometimes had difficulty performing the work, but kept at it in order to acquire the quarters of coverage. The claimant admitted that she did similar work for her sister during the months prior to January 1972, when she was not paid. It was stated that for many years her sister had a woman come every two weeks to help with the housework, but that the woman died about 1970. After the woman's death, the sister was said to have had no regular lady, but once in a while had someone come in.
The claimant testified before the Appeals Council that she deposited the checks received from her sister into here checking account. She was asked whether she gave any money to her sister and replied, "I must be honest about this. I paid here what she paid me."
Section 209 of the Social Security Act provides, as pertinent here, that the term "wages" means remuneration paid for employment, except that such terms shall not include remuneration paid in any medium other than cash to an employee for domestic service in the private home of the employer.
Section 210(j)(2) of the Social Security Act provides as pertinent, that the term "employee" means any 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 provides, in pertinent part, that an employment relationship exists under the usual common-law rules 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 details and means by which the result is to be accomplished; that is, an employee is subject to the will and control of an employer not only as to what shall be done but how it shall be done. Whether the relationship of employer and employee exists under the usual common-law rules will, in doubtful cases, be determined upon an examination of particular facts of each case.
Whether a bona fide employment relationship exists in a given case is essentially a question of fact and, while the basic principles are the same in cases involving alleged employment between family members as in those where no family relationship exists, there is a difference between creating a bona fide employment relationship and merely giving to certain purported payments the color of wages for the purpose of qualifying for old-age insurance benefits. The latter is neither within the letter nor the spirit of the law. Gancher v. Hobby, 145 F.Supp. 461. Whether a claimant was an "employee" receiving "wages" for the requisite period is a question to be determined from all the evidence in this case. Domanski v. Celebrezze, 323 F.2d 882; Folsom v. O'Neal, 250 F.2d 946. In determining whether a bona fide employment relationship exists, the courts have held that the Social Security Administration has ". . . both right and the duty to scrutinize with care the actuality of the relationship. . . ." Hall v. Ribicoff, CCH, UIR, Fed. Para. 14,374; Thurston v. Hobby, 133 F.Supp. 205.
The Appeals Council carefully considered this case and, while it did not question the fact that the claimant performed domestic services in her sister's home and was a great help to her sister, it was of the opinion that the services performed by the claimant were not performed within an employment relationship. The Appeals Council held that a proper evaluation of the evidentiary facts and circumstances in this case required the conclusion that whatever services the claimant performed and whatever payments she received were the result of a family arrangement motivated by mutual benefits, as well as family ties.
The evidence did not establish, in the opinion of the Appeals Council, that there was a rendition of services and cash remuneration for such services pursuant to a contract of employment. The essence of an employment relationship is a contractual arrangement between parties whereby an employee agrees to perform services, subject to the control or reservation of a right to control by the party for whom the services are performed. In the absence of a contract, there is no employment relationship. Making due allowance for their family relationship and the informal nature of the arrangement, there was no indication that the claimant was required to do any minimum amount of work and work special hours, or that she was given any instructions as to the work to be done and the order of services or that such a relationship was contemplated. The record reveals that the services performed beginning January 1972 were the same services that she had performed prior to January 1972, when she received and expected to receive no remuneration. The fact that the sister had no need for a full-time housekeeper either before or after the period of alleged employment indicated that there was no real need for the claimant's services. It was the opinion of the Appeals Council that the claimant would have performed domestic duties for her sister within the course of daily living and that her purpose in going to live with her sister was to be near her eye doctor and not because of a contract of employment. If she had been "fired", nothing would have changed.
Of particular significance to the Appeals Council and an even stronger indication that a true employment relationship did not exist was the revelation made by the claimant during the course of her appearance before the Appeals Council that she paid back to her sister whatever her sister paid to her. In actuality, the claimant received no remuneration for the services performed for her sister. The checks drawn to her order were designed to simulate the payment of wages when in fact no actual payment of wages was intended.
The Appeals Council emphasized that nothing stated in its decision should be construed as implying any unethical conduct by the claimant. Instead, the Appeals Council commended the claimant for the honesty of her testimony before the Administrative Law Judge and the Appeals Council and her unwillingness to distort the facts for personal advantage.
The findings of the Appeals Council were as follows:
- 1. An employment relationship did not exist between the claimant and her sister during the periods January 1, 1972, through June 30, 1972, and October 1, 1972, through March 31, 1973.
- 2. The claimant was not paid "wages" by her sister, within the meaning of section 209 of the Social Security Act, in any quarter of the years 1972 and 1973.
- 3. The claimant has only 9 of the 13 quarters of coverage required for entitlement to old-age insurance benefits.
The Appeals Council, therefore, decided that the claimant is not entitled to old-age insurance benefits pursuant to her application filed on January 16, 1973.