AR 93-2(2): Conley v. Bowen, 859 F.2d 261 (2d Cir. 1988)--Determination of Whether an Individual With a Disabling Impairment Has Engaged in Substantial Gainful Activity Following a Reentitlement Period--Title II of the Social Security Act.

Issue

Whether, in making a determination following an individual's reentitlement period that an individual with a disabling impairment has engaged in substantial gainful activity (SGA), the Secretary may consider work and earnings by the individual in a single month rather than an average of work and earnings over a period of months.

Statute/Regulation/Ruling Citation

Sections 216(i)(2)(D), 223(a)(1) and 223(e) of the Social Security Act (42 U.S.C. 416(i)(2)(D), 423(a)(1) and 423(e)); 20 CFR 404.316(d), 404.321(c), 404.325, 404.337(d), 404.352(d), 404.401a, 404.1571-404.1576, 404.1579, 404.1592a and 404.1594; and SSR 83-33, 83-34 and 83-35.

Circuit

Second (Connecticut, New York, Vermont)

Conley v. Bowen, 859 F.2d 261 (2d Cir. 1988)

Applicability of Ruling

This Ruling applies to determinations or decisions at all administrative levels (i.e., initial, reconsideration, Administrative Law Judge hearing and Appeals Council).

Description of Case

In May 1977, the plaintiff, Edith Conley, filed an application for disability insurance benefits under Title II of the Social Security Act (the Act). In May 1978, she was awarded benefits effective February 1977.

In 1982 the plaintiff submitted a work activity report to the Social Security Administration (SSA), indicating that she had worked for several months in 1978 and on two occasions in 1979 and 1980. SSA investigated the plaintiff's work activity and determined that she was still disabled.

In June 1983, SSA investigated additional work activity by the plaintiff and in January 1984 notified her that, unless she presented evidence to the contrary, SSA intended to find that she had demonstrated her ability to engage in SGA and that her benefits should have ceased effective December 1982. The plaintiff submitted a work activity report reflecting various employment between November 1980 and September 1983.

Ultimately, SSA determined initially and on reconsideration that the plaintiff had demonstrated her ability to engage in SGA despite a disabling impairment and that her benefits should have ceased in December 1982. She requested and was granted a hearing before an Administrative Law Judge (ALJ). The ALJ determined that: 1) she had completed her 9-month trial work period in November 1980; 2) her reentitlement period had commenced in December 1980 and ended in March 1982; 3) during her reentitlement period, the plaintiff had engaged in SGA from December 1980 through May 1981, in August 1981, and from October through December 1981; 4) December 1982 was the first month following her reentitlement period in which she had performed SGA, because that was the first month in which she had earned more than $300^[1]; and 5) as a result of her earnings of $338.54 in December 1982, the plaintiff's entitlement to disability insurance benefits had terminated that month. The plaintiff requested that the Appeals Council review the ALJ's decision. The Appeals Council denied her request.

The plaintiff sought judicial review of the Secretary's decision, alleging that: 1) the Secretary was required by his own regulations defining SGA, which are set forth at 20 CFR 404.1571 through 404.1576, to average her earnings over a period of months, rather than look at a single month's earnings, in determining whether she had performed SGA; and 2) the Secretary erred in applying 20 CFR 404.1592a, which governs SGA during the reentitlement period.

The district court found that the Secretary properly applied section 404.1592a in determining whether the plaintiff had engaged in SGA in December 1982 and dismissed the complaint. The plaintiff then appealed to the United States Court of Appeals for the Second Circuit.

Holding

Because it found that 20 CFR 404.1592a did not govern the work period at issue, the court of appeals reversed the judgment of the district court with directions to remand for further proceedings before the ALJ.

The court of appeals concluded that a straightforward reading of 20 CFR 404.1592a reveals that this regulation applies only to eligibility for, and the method of calculation of, benefits during the reentitlement period. As explained by the court of appeals:

: Section 404.1592a is entitled, "The reentitlement period." Subparagraph (b) defines when the reentitlement period begins and ends. Subparagraph (a) sets forth when benefits will be paid during the reentitlement period, and subparagraph (c) defines when persons are not entitled to a reentitlement period.
: 859 F.2d at 265.

The court of appeals thus held that section 404.1592a is limited in scope to the duration of the reentitlement period, and it had no application to the period of work activity at issue (December 1982) which was after the plaintiff's reentitlement period had expired. The court stated that the only other regulations that define SGA are set forth at 20 CFR 404.1571 through 404.1576. It stated further that, while the Secretary contended that these regulations were applicable only to initial determinations of disability, there is nothing in the language of these regulations that limits the definition of, and criteria for, determining "substantial gainful activity" to initial determinations of disability.

Statement as to How Conley Differs From Social Security Policy

Beginning with the month following a completed trial work period, an individual is entitled to a reentitlement period, during which he or she may continue to test his or her ability to work despite a disabling impairment.^[2] At any time during or after this reentitlement period, the individual's work may be evaluated by the Agency to determine whether his or her work activity warrants a cessation of disability status and benefits. In determining whether disability has ceased due to the performance of SGA, SSA will, if necessary, average the individual's work and earnings over the actual period of time in which work was performed, which may include work performed during the trial work period or during or after the reentitlement period.^[3]

If it is determined that disability ceased on the basis that an individual is engaging or has engaged in SGA, then the individual's entitlement to disability payments will terminate as of the third month following the month that the individual engaged in SGA, but in no event earlier than the first month after the reentitlement period. All work activity during the reentitlement period which occurs in or after the third month following the month of the disability cessation determination is evaluated on a month-by-month basis. This means that an individual is not paid benefits for any month in which he or she engages in SGA, but benefits are paid for months during the reentitlement period in which he or she does not engage in SGA. Therefore, when determining whether to pay benefits for any month after the month disability ceased due to SGA, SSA does not average earnings. Likewise, after the reentitlement period has ended, SSA determines SGA based on work and earnings in each month individually, rather than by averaging work and earnings over a period of months. Benefits which were reinstated during the reentitlement period are terminated effective with the first month of SGA-level earnings after the reentitlement period. This policy is consistent with the language of section 223(a)(1) of the Act, inasmuch as Congress, by prescribing a set period of months for the reentitlement period and a set termination month, did not intend for an individual to be given an additional period of time, beyond the reentitlement period, to test his or her ability to perform SGA.

The Second Circuit's holding is inconsistent with the above- referenced policy, in that it would require SSA, in cases where a cessation determination based on SGA has been made, to average work and earnings after the reentitlement period has ended for the purposes of payment or nonpayment of benefits.

Explanation of How SSA Will Apply This Decision Within the Circuit

This Ruling applies only to cases involving the termination of Title II disability insurance benefits of recipients who (1) have completed a 9-month trial work period and performed SGA despite their disabling impairment(s), and (2) reside in Connecticut, New York or Vermont at the time of the determination or decision at any administrative level, i.e., initial, reconsideration, Administrative Law Judge hearing or Appeals Council.

In such cases, when making a determination of whether an individual has performed SGA following that individual's reentitlement period, SSA must consider the individual's average monthly earnings and amount of work (in accordance with procedures outlined in 20 CFR 404.1571 through 404.1576 and SSR 83-35), rather than his or her work in and earnings for a single month. SSA intends to clarify the regulation at issue in this case, 20 CFR 404.1592a, through the rulemaking process. SSA will continue to apply this Ruling until such clarification is made. At that time, pursuant to 20 CFR 404.985(e)(4), SSA may rescind this Ruling.

^[1] SSA regulations, at 20 CFR 404.1574(b), define what level of earnings ordinarily is considered SGA. At the time of the Conley decision, earnings in excess of $300.00 per month ordinarily would be considered SGA. The SGA monthly threshold is currently $500.00.

^[2] At the time of the ALJ's decision, the Act provided for a fifteen-month reentitlement period. As of January 1988, the Act provides for a thirty-six month reentitlement period, so long as the individual's condition continues to be disabling. During the reentitlement period, cash benefits will be reinstated for any month(s) that an individual's earnings drop below SGA after disability has been ceased due to demonstrated ability to perform SGA.

^[3] It is not always necessary or appropriate to average earnings in every case, e.g., where the earnings from month-to-month or job-to-job remain constant and uniform. Averaging would be required, however, in the case of a fluctuation of earnings from month-to-month, or where the individual performs two or more different types of work which are not representative of one another. See Social Security Ruling 83-35 for further explanation of the averaging concept.

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