The opinion of the court was delivered by: Andrew J. Wistrich United States Magistrate Judge
Plaintiff filed this action seeking reversal of the decision of the defendant, the Commissioner of the Social Security Administration (the "Commissioner"), denying plaintiff's application for disability insurance benefits. The parties have filed a Joint Stipulation ("JS") setting forth their contentions with respect to each disputed issue.
The procedural facts are not disputed and are recited in the Joint Stipulation. [See JS 2]. Plaintiff alleged that she became disabled as of October 1, 2004, due to scoliosis of the spine, minimal degenerative changes of the knees, and multiple musculoskeletal complaints. [JS 2]. After her application was denied initially and upon reconsideration, plaintiff requested that the evidence on the record be considered without a hearing. [JS 2]. See 20 C.F.R. §§ 404.939, 404.948(b). In a written decision dated October 12, 2006 that constitutes the Commissioner's final decision in this matter, an Administrative Law Judge (the "ALJ") found that plaintiff retained the residual functional capacity ("RFC") to perform medium work and that her RFC did not preclude performance of her past relevant work as a medical clerk in an office setting. [JS 2; Administrative Record ("AR) 15-18].
The Commissioner's denial of benefits should be disturbed only if it is not supported by substantial evidence or is based on legal error. Stout v. Comm'r Social Sec. Admin., 454 F.3d 1050, 1054 (9th Cir. 2006); Thomas v. Barnhart, 278 F.3d 947, 954 (9th Cir. 2002). "Substantial evidence" means "more than a mere scintilla, but less than a preponderance." Bayliss v. Barnhart, 427 F.3d 1211, 1214 n.1 (9th Cir. 2005). "It is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Burch v. Barnhart, 400 F.3d 676, 679 (9th Cir. 2005)(internal quotation marks omitted). The court is required to review the record as a whole and to consider evidence detracting from the decision as well as evidence supporting the decision. Robbins v. Soc. Sec. Admin, 466 F.3d 880, 882 (9th Cir. 2006); Verduzco v. Apfel, 188 F.3d 1087, 1089 (9th Cir. 1999). "Where the evidence is susceptible to more than one rational interpretation, one of which supports the ALJ's decision, the ALJ's conclusion must be upheld." Thomas, 278 F.3d at 954 (citing Morgan v. Comm'r of Soc. Sec. Admin., 169 F.3d 595, 599 (9th Cir.1999)).
Substantial gainful activity Plaintiff contends that the ALJ erred in determining that plaintiff engaged in substantial gainful activity ("SGA") after her alleged date of onset of disability. [See JS 3-5].
At step one of the sequential evaluation, the ALJ found that plaintiff engaged in SGA after October 1, 2004, her alleged onset date, on the grounds that plaintiff had earnings of $5,677 in 2005 and $4,140 in 2006 from part-time clerical work in an optometrist's office.*fn1 [AR 15, 41-42]. The ALJ noted that 2007 earnings figures were not yet available, so "I have no documentary evidence that the claimant has ever ceased to engage in work activity, probably in her usual employment as a medical office clerk." [AR 15]. Although the ALJ did not deny benefits at step one, he explicitly relied on his SGA finding in evaluating plaintiff's RFC and to support his step-four determination that plaintiff retained the RFC to perform her past relevant work. [AR 15-18].
Under the regulations, if a claimant has average monthly earnings above a prescribed amount, a presumption ordinarily arises that a claimant has engaged in substantial gainful activity, while average monthly earnings at or below the prescribed amount ordinarily establish a presumption that the claimant has not engaged in substantial gainful activity. 20 C.F.R. § 404.1574(a)& (b). Plaintiff had average monthly earnings of approximately $473 in 2005 and $345 in 2006. Those earnings were significantly below the level that presumptively establishes SGA; therefore, plaintiff's earnings established a presumption that she did not engage in SGA in 2005 or 2006. See 20 C.F.R. § 404.1574(b)(2)(ii), (b)(3).*fn2
In certain circumstances the ALJ may consider information in addition to earnings to rebut the presumption of SGA. See 20 C.F.R. § 404.1574(b)(3). In this case, however, the ALJ found that plaintiff had engaged in SGA without discussing the application of the presumption against a finding that plaintiff engaged in SGA or any evidence rebutting the presumption. Moreover, the ALJ speculated that plaintiff continued to work in 2007 without, apparently, making any attempt to verify her employment status. According to a letter in the record from plaintiff's non-attorney representative, plaintiff ceased working on account of her impairments in September 2006, and he notified the Social Security of that fact. [AR 353].
Accordingly, the ALJ erred in relying on plaintiff's earnings to show that she engaged in SGA. See Lewis v. Apfel, 236 F.3d 503, 515-516 (9th Cir. 2001)(noting that the ALJ must inquire whether the claimant can work "on a regular and continuing basis," and holding that where the ALJ failed to rebut the earnings presumption with respect to the claimant's part-time work, the ALJ erred in finding that the claimant's past work was substantial gainful activity).
Defendant contends that any error by the ALJ was not "material" because the ALJ did not deny plaintiff's claim at step one. The ALJ, however, explicitly relied on plaintiff's purported ability to engage in SGA to reject the alleged severity of plaintiff's subjective complaints and to disregard a disability opinion from plaintiff's treating physician, Dr. Bramson. [AR 17-18]. The ALJ's error was material and not harmless because it "impacted the validity of the ALJ's decision," and thus is not "inconsequential to the ultimate non-disability ...