Substantial Work in Disability Cases; Self Employment

The first question addressed in the five-step sequential evaluation process used to evaluate disability claims is whether the claimant is engaged in substantial gainful activity.

Generally, substantial work is physical or mental work a person is paid to do. Work can be substantial even if it is part-time. To decide if your work is substantial, the Social Security Administration considers the nature of the job duties, the skills and experience needed to do the job, and how much the individual earns.

Generally, the Social Security Administration will find work is substantial if the gross earnings average over $1090 per month. If an individual is blind, the amount is substantially higher.

Even if an individual has to take a job that pays less, it may still be substantial under the Social Security rules.

If a person is self-employed, the Social Security Administration will consider the kind and value of the work, including the individual’s role in the management of the business, as well as your income, to decide if your work is substantial.

It is not always easy to calculate how much a self-employed person is actually making in profit, let along evaluating that work activity to determine whether it is “substantial” under Social Security rules. There are several rules for self employed persons in the Code of Federal Regulations. The applicable rules are as follows:

(2General rules for evaluating your work activity if you are self-employed. We will consider your activities and their value to your business to decide whether you have engaged in substantial gainful activity if you are self-employed. We will not consider your income alone because the amount of income you actually receive may depend on a number of different factors. . .  We will evaluate your work activity based on the value of your services to the business regardless of whether you receive an immediate income for your services. We determine whether you have engaged in substantial gainful activity by applying three tests. If you have not engaged in substantial gainful activity under test one, then we will consider tests two and three. The tests are as follows:

(i) Test one: You have engaged in substantial gainful activity if you render services that are significant to the operation of the business and receive a substantial income from the business.

(b) What we mean by significant services. (1) …we will consider you to be rendering significant services if you contribute more than half the total time required for the management of the business, or you render management services for more than 45 hours a month regardless of the total management time required by the business.

c)What we mean by substantial income—(1)Determining countable income. We deduct your normal business expenses from your gross income to determine net income. Once we determine your net income, we deduct the reasonable value of any significant amount of unpaid help furnished by your spouse, children, or others. Miscellaneous duties that ordinarily would not have commercial value would not be considered significant. … That part of your income remaining after we have made all applicable deductions represents the actual value of work performed. The resulting amount is the amount we use to determine if you have done substantial gainful activity. For purposes of this section, we refer to this amount as your countable income.

(ii) Test Two: You have engaged in substantial gainful activity if your work activity, in terms of factors such as hours, skills, energy output, efficiency, duties, and responsibilities, is comparable to that of unimpaired individuals in your community who are in the same or similar businesses as their means of livelihood.

(iii) Test Three: You have engaged in substantial gainful activity if your work activity, although not comparable to that of unimpaired individuals, is clearly worth the amount shown in § 404.1574(b)(2) when considered in terms of its value to the business, or when compared to the salary that an owner would pay to an employee to do the work you are doing.

The CFR regulations noted above can be found here.

If you have questions about a claim for Social Security disability benefits, or with you speak with a Tampa Social Security disability lawyer, contact our office for a free consultation.