SSR 78-23: Sections 210(j)(2), 1611(b), 1612(a) and (b), and 1614(b)(4)(C) (42 U.SC. 410(j)(2), 1382(b), 1382a(a) and (b), and 1382c(b)(4)(C))—Supplemental Security Income—Earned Income—Wages from Employment in Sheltered Workshop
20 CFR 416.1101 and 416.1102
Where a disabled individual, who is a recipient of Supplemental Security Income, is unable to work in an environment other than a sheltered workshop and where the services he performed in the workshop are not considered part of a rehabilitation program, held, his services are rendered as an employee within the meaning of section 210(j)(2) of the Social Security Act thus, his remuneration constitutes earned income within the meaning of section 1612(a)(1)(A) of the Social Security Act subject to the earned income exclusions under section 1612(b)(4)(B) of the Social Security Act.
It has been previously determined that the claimant meets all factors of eligibility for supplemental security income, but that the amount of his supplemental security income benefits should be reduced because income received by the claimant for working in a sheltered workshop should be classified as "unearned," rather than "earned" income. Accordingly, the issue to be determined is whether the claimant's income received from working in a sheltered workshop should be treated as "earned" or "unearned" income.
The claimant began receiving Supplemental Security Income as a disabled individual on January 1, 1974, based upon an application filed on his behalf by his mother. At that time, the claimant was receiving income for work performed in a sheltered workshop at the rate of 40 cents per hour, amounting to about $13.50 per week. It was determined by the Social Security Administration that this income should be treated as "earned" income, with the proper exclusions for earned income being applicable. In August 1976 the claimant's mother advised that, although income received by the claimant from the sheltered workshop had been treated as wages in the past, such income would henceforth be treated as unearned income, thus reducing the amount of the claimant's SSI benefits beginning in October 1976. Upon reconsideration, the claimant was advised, in November 1976, that section 210(j)(2) of the Social Security Act defines remuneration received for services performed in a sheltered workshop rehabilitation program not to be wages, and therefore this remuneration must be considered unearned income. The claimant's mother disagreed with that determination and requested a hearing, stating that the claimant was not receiving any rehabilitation at the workshop and his income should therefore be considered as earned income, as he works for his pay.
The claimant is 26 years of age, suffers from brain damage, and attended school in a special education program from the age of 8 until 17. He was sent to a sheltered workshop under the sponsorship of the State Vocational Rehabilitation Department in July 1967 which sponsored him for three months. He has remained at the sheltered workshop since that time. The claimant's mother pays $65.00 per month tuition for him. Initially his pay at the workshop amounted to 5 cents per hour; he now earns 77 cents per hour and his mother considers him to be working, rather than being trained.
A recent psychometric evaluation of the claimant indicates that he suffers from moderate to severe mental retardation and that his full scale IQ, as extrapolated from a Wechsler Adult Intelligence Scale, is 37. The examining psychologist stated that the claimant does not have potential for functioning above the level of moderate retardation and it will always be necessary to provide him with a structured environment.
The manager of the sheltered workshop stated that all clients of the workshop are continually in some form of rehabilitation therapy and benefit from continuous behavior modification efforts whether or not they are enrolled in a specific skill training program. He also stated that the ultimate goal of the sheltered workshop is to enable clients to become more acceptable and productive in their community and, at best, to place them as competitive in the community labor market. He did not, however, specifically describe the program as it relates to the claimant.
The Assessment Evaluator of the workshop stated that the claimant's training in the sheltered workshop included assembly work, inserting plastic tableware into plastic bags, janitorial training, and operating a button machine. He now makes signs by a silk screen process, and he performs the entire process. According to the evaluator the claimant's wages are computed on the type of work performed, longevity, and production. His production capacity is 60 percent of normal. She said that the claimant last received formal classroom work in 1967, and that he receives no training at the present time and no close supervision. He has completely learned the silk screening job and will stay in that department. She said that he works better in a structured situation, and will continue in his present job indefinitely with no further training.
The significance of the determination of the Social Security Administration to treat the claimant's sheltered workshop income as "unearned" rather than "earned" income, as it had been treated in the past, lies in the fact that section 1611(b)(1) of the Social Security Act provides that the amount of SSI benefits for an individual such as the claimant shall be reduced by the amount of his income not excluded pursuant to section 1612(b). Section 1612(b), as applicable in this case, provides that the first $240 per year ($20 per month) of income, whether earned or unearned, may be excluded in determining the countable income to be deducted from the SSI benefit. In addition, the first $780 per year ($65 per month) of earned income, plus one half of the remainder of the earned income, may be excluded in determining the countable income to be deducted from the SSI benefit. Thus, in this case, at least $65 per month of earned income could be excluded in determining the countable income, in addition to the $20.
Section 1612(a) of the Social Security Act defines earned income as wages, as determined under section 203(f)(5)(C) and net earnings from self-employment, and defines unearned income as all other income. It must therefore be determined whether the remuneration received by the claimant for his services performed in the sheltered workshop constitutes "wages" or "other income."
The issue of whether services performed by a handicapped individual in a sheltered workshop were performed as an "employee" in employment was considered in Social Security Ruling 69-90. In that Ruing it was stated:
"As defined in section 210(j)(2) of the Act the term "employee" means, as pertinent here,
(2) 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 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, section 404.1004(c)(20 C.F.R. 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 as employer-employee relationship under these common law rules."
It was held in that case where a handicapped individual performs simple services and receives token remuneration during a sheltered workshop rehabilitation program, such services are not performed as an employee in employment as defined in section 210(j)(2) of the Social Security Act. It was further held that services performed in the workshop by an individual after he has completed the rehabilitation program of the workshop, constitutes services as an employee in employment as defined in section 210(j) of the Social Security Act, even though he is unable to obtain regular employment outside.
Since the claimant in this case no longer receives training and will continue indefinitely in his present job without further training, it must be found, under the rule enunciated in Social Security Ruling 69-60, that the claimant is, in fact, an "employee" of the workshop, even though he is not yet able to obtain regular employment outside the institution and probably never will be. As an "employee" his remuneration must be considered to be "wages" and thus, to be earned income.