The opinion of the court was delivered by: Marc L. Goldman United States Magistrate Judge
MEMORANDUM OPINION AND ORDER
Plaintiff Robert Canady seeks judicial review of the Social Security Commissioner's denial of his application for Supplemental Security Income Benefits ("SSI") pursuant to Title XVI of the Social Security Act. For the reasons stated below, the matter is remanded for further proceedings consistent with this opinion.
I. Facts and Procedural Background
Plaintiff was born on October 20, 1967. He completed the eleventh grade and has no past relevant work. (Administrative Record ("AR") at 15, 83, 137.) Plaintiff filed an application for SSI on February 23, 2006,*fn1 alleging disability as of April 14, 2005, due to a psychological impairment and an injury to his right hand. Plaintiff's application was denied initially and upon reconsideration. (AR at 19, 57, 64.) Plaintiff appeared at a hearing before Administrative Law Judge ("ALJ") F. Keith Varni on July 18, 2007. However, his attorney was not present and the hearing was postponed. (AR at 301-05.) Plaintiff appeared at two subsequent hearings before ALJ Varni on September 24, 2007, and February 13, 2008. (AR at 281-300.) Plaintiff was represented by counsel at both hearings and testified on his own behalf. In addition, vocational expert ("VE") Joseph Mooney, and Plaintiff's girlfriend, Sherry McKinley, testified at the February 2008 hearing. (Id.)
ALJ Varni issued an unfavorable decision on March 10, 2008. (AR at 7-17.) The ALJ found that Plaintiff had not engaged in substantial gainful activity since the application date of February 23, 2006, and suffered from the following severe impairment: "a muskuloskeletal impairment involving the right hand." (AR at 12.) As discussed in detail below, the ALJ found that Plaintiff did not have a severe mental impairment within the meaning of the Social Security Act. Plaintiff's severe hand impairment did not meet the requirements of a listed impairment found in 20 C.F.R. Part 404, Subpart P, Appendix 1. The ALJ concluded that Plaintiff had no past relevant work, but retained the residual functional capacity ("RFC") to perform light work*fn2 with the following modifications:
[He can engage in] only occasional handling, fingering, and pushing/pulling with the right upper extremity. He can frequently (1/3 to 2/3 of the work day) feel with the right upper extremity. He can frequently crawl and climb stairs/ramps but can only occasionally climb ladders, ropes, and scaffolds. He can frequently: work at unprotected heights; work around moving, mechanical parts; and operate a motor vehicle. There are no non-exertional limitations with the left upper extremity. (AR at 13.) Finally, the ALJ determined that Plaintiff was not disabled because there were a significant number of jobs Plaintiff could perform in the national and local economy based on the testimony of the VE. (AR at 14-16.)
The Appeals Council denied review on February 17, 2010, (AR at 2-4), and Plaintiff commenced this action on March 15, 2010. Plaintiff argues the ALJ erred by (1) finding that his mental impairment was not severe at step two of the disability determination; (2) improperly disregarding the lay testimony of Plaintiff's girlfriend; and (3) concluding that Plaintiff retains the residual functional capacity to perform work in the national economy.*fn3 (Joint Stip. at 2-3.) Plaintiff asks the Court to reverse the ALJ's decision and order an award of benefits, or, in the alternative, remand for further proceedings. The Commissioner requests that the ALJ's decision be affirmed.
Under 42 U.S.C. § 405(g), a district court may review the Commissioner's decision to deny benefits. The Commissioner's decision must be upheld unless "the ALJ's findings are based on legal error or are not supported by substantial evidence in the record as a whole." Tackett v. Apfel, 180 F.3d 1094 (9th Cir. 1999); Parra v. Astrue, 481 F.3d 742, 746 (9th Cir. 2007). Substantial evidence means more than a scintilla, but less than a preponderance; it is evidence that a reasonable person might accept as adequate to support a conclusion. Valentine v. Comm'r Soc. Sec. Admin., 574 F.3d 685, 690 (9th Cir. 2009); Lingenfelter v. Astrue, 504 F.3d 1028, 1035 (9th Cir. 2007); Robbins v. Soc. Sec. Admin., 466 F.3d 880, 882 (9th Cir. 2006). To determine whether substantial evidence supports a finding, the reviewing court "must review the administrative record as a whole, weighing both the evidence that supports and the evidence that detracts from the Commissioner's conclusion." Reddick v. Chater, 157 F.3d 715, 720 (9th Cir. 1996). "If the evidence can support either affirming or reversing the ALJ's conclusion," the reviewing court "may not substitute its judgment for that of the ALJ." Robbins, 466 F.3d at 882.
A. The ALJ's Conclusion That Plaintiff Does Not Suffer From A Mental Impairment Is Supported By Substantial Evidence
At step two of the sequential analysis, the ALJ found that Plaintiff's mental impairment was not severe within the meaning of the Social Security Act. (AR at 12-13.) The ALJ reviewed the mental health records submitted by Plaintiff and concluded that they do not demonstrate "any mental limitations that would preclude the performance of simple, unskilled work activities." (AR at 12.) Plaintiff argues that these conclusions are not supported by substantial evidence.
A claimant for disability benefits has the burden of producing evidence to demonstrate that he or she was disabled within the relevant time period. Johnson v. Shalala, 60 F.3d 1428, 1432 (9th Cir. 1995). The existence of a severe impairment is demonstrated when the evidence establishes that an impairment has more than a minimal effect on an individual's ability to perform basic work activities. Smolen v. Chater, 80 F.3d 1273, 1290 (9th Cir. 1996); 20 C.F.R. §§ 404.1521(a), 416.921(a). The regulations define "basic work activities" as "the abilities and aptitudes necessary to do most jobs," which include physical functions such as walking, standing, sitting, pushing, carrying; capacities for seeing, hearing and speaking; understanding and remembering simple instructions; responding appropriately in a work setting; and dealing with changes in a work setting. 20 C.F.R. § 404.1521(b). The inquiry at this stage is "a de minimis screening device to dispose of groundless claims." Smolen, 80 F.3d at 1290 (citing Bowen v. Yuckert, 482 U.S. 137, 153-54 (1987)). An impairment is not severe only if it is a slight abnormality with "no more than a minimal effect on an individual's ability to work." See SSR 85-28; Yuckert v. Bowen, 841 F.2d 303, 306 (9th Cir. 1988).
Here the ALJ relied on the opinion of consultative examining psychiatrist Linda M. Smith, M.D., to conclude that Plaintiff does not have a severe mental impairment. A consultative examining physician's opinion amounts to substantial evidence supporting a finding if it is based on independent clinical findings. Orn v. Astrue, 495 F.3d 625, 632-33 (9th Cir. 2007); Andrews v. Shalala, 53 F.3d 1035, 1041 (9th Cir. 1995) (holding that where treating physician's opinion is contradicted by examining physician's opinion based on independent findings, "it is then solely the province of the ALJ to resolve the conflict."). "Independent clinical findings can be either (1) diagnoses that differ from those offered by another physician and are ...