20 CFR 404.1004(c), 404.1026

SSR 69-59

Where services were performed 48 hours a week for a nursing home by a patient on convalescent leave from a mental hospital, for which the nursing home paid her $15 a week plus room and board the first year, and later the rate paid to regular employees, held, all of her services were performed as an employee in employment, notwithstanding she had performed such services for the home under the mental hospital's rehabilitation program.

D performed services for a privately-owned nursing home under the rehabilitation program of a State mental hospital of which she was a patient. Under this program, convalescent patients were placed in work situations on a trial basis in nursing homes throughout the State. There was no written agreement between the hospital and the nursing home, but there was an understanding that the patient would be instructed in and perform menial tasks under the direction of the nursing home operator. D received training as a nurse's aide and performed services for a trial period of 1 year beginning January 1967, ending January 1968. She worked 8 hours a day, 6 days a week and received $15 a week plus room and board from the nursing home. Beginning in February 1968, however, D's pay was raised to the going rate for regular employees, $1.40 an hour, and the nursing home reported her earnings as wages for social security purposes. However, the nursing home had failed to report earnings for D during the period prior to February 1968, as its operator contended that D was not an employee because she was performing sheltered work and the amounts paid to her were not wages but gratuities.

D was subject to direction and control by the nursing home operator in the day-to-day performance of her services. The nature of the services to be done, and how they were to be performed, was decided by the operator. A member of the rehabilitation staff of the hospital visited D and the operator of the nursing home twice a month, to ascertain whether problems connected with D's condition had developed and to discuss her progress toward recovery. His interest was in D's ability to do the work assigned without adverse effect on her condition. D would have been returned to the hospital had she not shown improvement and ability to do the work or if problems in her condition had developed. Demonstration of ability to adjust to the work situation and to do the work could result in D's release by the hospital.

The questions to be determined are therefore, whether D's services at the nursing home prior to February 1968 were performed as an "employee" in employment, and whether the remuneration paid to her, including the value of room and board, may be credited as wages for social security purposes.

The term "employee" as defined under section 210(j)(2) of the Social Security Act, includes an 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 such rules depends upon the facts in each case. The guides for determining whether an employment relationship exists are found in Regulations No. 4, section 404.1004(c) (20 CFR 404.1004(c)). Generally, such relationship exists when the person for whom the services are performed has the right to control and direct the individual who performs the service, not only as to the result to be accomplished by the work but also as to the manner and means by which that result is accomplished. An employer-employee relationship does not exist, however, where the organization for which the services are performed creates the working environment which permits the individual to perform services, and where this environment is created primarily for its rehabilitative and therapeutic value to the individual. See SSR 69-60, C.B. 1969, p. 58 (companion ruling), which involves a situation of this type.

While the hospital arranged for the services performed by D, and was interested in the rehabilitative and therapeutic effects such services would have on her, the services themselves were performed for a nursing home and not for the hospital. Accordingly, it cannot be said that the nursing home was primarily concerned with providing her with rehabilitative and therapeutic activities. D's services were of significant value in the business operations of the nursing home. The duties for which she was paid $15 a week, plus room and board, prior to February 1968 were the same as those she performed thereafter at the rate paid to regular employees of the nursing home. The operator of the nursing home exercised day-to-day control over the tasks to be performed by D, how they should be performed, and whether they were performed satisfactorily. On the basis of all the facts, it appears that the nursing home operator exercised or had the right to exercise the direction and control over D necessary to establish the relationship of employer-employee for social security purposes. It is accordingly held that an employer-employee relationship within the meaning of section 210(j)(2) existed between the nursing home and D during the "trial period" lasting from January 1967 to February 1968 and that the remuneration paid to her during that period in cash and in kind, which included the value of room and board, are wages creditable to D's earnings record for social security purposes.

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