The opinion of the court was delivered by: Jean Rosenbluth U.S. Magistrate Judge
MEMORANDUM OPINION AND ORDER REVERSING COMMISSIONER AND REMANDING FOR FURTHER PROCEEDINGS
Plaintiff seeks review of the Commissioner's final decision denying her application for Social Security disability insurance benefits ("DIB") and Supplemental Security Income benefits ("SSI"). The parties consented to the jurisdiction of the undersigned U.S. Magistrate Judge pursuant to 28 U.S.C. § 636(c). This matter is before the Court on the parties' Joint Stipulation, filed September 17, 2012, which the Court has taken under submission without oral argument. For the reasons stated below, the Commissioner's decision is reversed and this matter is remanded for further proceedings.
Plaintiff was born on August 16, 1951. (Administrative Record ("AR") 219, 222.) She has an 11th-grade education. (AR 255.) Plaintiff worked for approximately 15 years as a microfilm technician. (AR 219, 251, 266.) She stopped working on August 30, 2003, because she was laid off. (AR 250.) Plaintiff filed applications for DIB and SSI on April 9, 2004; they were denied on July 28, 2006, and the Appeals Council affirmed the denials on December 18, 2006.*fn1 (AR 27.)
On January 24, 2007, Plaintiff again filed SSI and DIB applications, alleging that her circumstances had changed and she had acquired a new severe impairment since the July 2006 denial of benefits; she alleged she had been unable to work since August 1, 2006, because of lower back pain; pain in both arms, her right elbow, and her left shoulder; anxiety attacks; and depression. (AR 31, 219, 222, 250.) After Plaintiff's applications were denied, she requested a hearing before an Administrative Law Judge ("ALJ"). (AR 160.) A hearing was held on February 20, 2008, at which Plaintiff, who was represented by counsel, appeared and testified on her own behalf. (AR 65-89.) In a written decision issued on June 9, 2008, the ALJ determined that Plaintiff was not disabled. (AR 51-61.) Plaintiff then requested review of the ALJ's decision, and on October 8, 2008, the Appeals Council vacated the hearing decision and remanded the case for further proceedings. (AR 149-52.) On November 12, 2009, a hearing was held before the same ALJ, at which Plaintiff, who was represented by counsel, appeared and testified again on her own behalf. (AR 90-133.) Medical Expert Dr. David Peterson also testified. (AR 95-119.) On December 1, 2009, the ALJ issued a written decision again finding that Plaintiff was not disabled. (AR 23-45.) Plaintiff requested review of the ALJ's decision and submitted additional evidence to the Appeals Council; on June 8, 2011, the Appeals Council denied review. (AR 9-12.) On June 22, 2011, Plaintiff's counsel requested that her case be reopened because the Appeals Council had not referenced an additional legal brief he had submitted. (AR 8.) On November 17, 2011, the Appeals Council incorporated the additional evidence into the record but denied Plaintiff's request for review. (AR 1-7.) This action followed.
Pursuant to 42 U.S.C. § 405(g), a district court may review the Commissioner's decision to deny benefits. The ALJ's findings and decision should be upheld if they are free from legal error and are supported by substantial evidence based on the record as a whole. § 405(g); Richardson v. Perales, 402 U.S. 389, 401, 91 S. Ct. 1420, 1427, 28 L. Ed. 2d 842 (1971); Parra v. Astrue, 481 F.3d 742, 746 (9th Cir. 2007). Substantial evidence means such evidence as a reasonable person might accept as adequate to support a conclusion. Richardson, 402 U.S. at 401; Lingenfelter v. Astrue, 504 F.3d 1028, 1035 (9th Cir. 2007). It is more than a scintilla but less than a preponderance. Lingenfelter, 504 F.3d at 1035 (citing 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 reasonably support either affirming or reversing," the reviewing court "may not substitute its judgment" for that of the Commissioner. Id. at 720-21.
IV. THE EVALUATION OF DISABILITY
People are "disabled" for purposes of receiving Social Security benefits if they are unable to engage in any substantial gainful activity owing to a physical or mental impairment that is expected to result in death or which has lasted, or is expected to last, for a continuous period of at least 12 months. 42 U.S.C. § 423(d)(1)(A); Drouin v. Sullivan, 966 F.2d 1255, 1257 (9th Cir. 1992).
A. The Five-Step Evaluation Process
The ALJ follows a five-step sequential evaluation process in assessing whether a claimant is disabled. 20 C.F.R. §§ 404.1520(a)(4), 416.920(a)(4); Lester v. Chater, 81 F.3d 821, 828 n.5 (9th Cir. 1995) (as amended Apr. 9, 1996). In the first step, the Commissioner must determine whether the claimant is currently engaged in substantial gainful activity; if so, the claimant is not disabled and the claim must be denied. §§ 404.1520(a)(4)(i), 416.920(a)(4)(i). If the claimant is not engaged in substantial gainful activity, the second step requires the Commissioner to determine whether the claimant has a "severe" impairment or combination of impairments significantly limiting his ability to do basic work activities; if not, a finding of not disabled is made and the claim must be denied. §§ 404.1520(a)(4)(ii), 416.920(a)(4)(ii). If the claimant has a "severe" impairment or combination of impairments, the third step requires the Commissioner to determine whether the impairment or combination of impairments meets or equals an impairment in the Listing of Impairments ("Listing") set forth at 20 C.F.R., Part 404, Subpart P, Appendix 1; if so, disability is conclusively presumed and benefits are awarded. §§ 404.1520(a)(4)(iii), 416.920(a)(4)(iii). If the claimant's impairment or combination of impairments does not meet or equal an impairment in the Listing, the fourth step requires the Commissioner to determine whether the claimant has sufficient residual functional capacity ("RFC")*fn2 to perform her past work; if so, the claimant is not disabled and the claim must be denied. §§ 404.1520(a)(4)(iv), 416.920(a)(4)(iv). The claimant has the burden of proving that she is unable to perform past relevant work. Drouin, 966 F.2d at 1257. If the claimant meets that burden, a prima facie case of disability is established. Id. If that happens or if the claimant has no past relevant work, the Commissioner then bears the burden of establishing that the claimant is not disabled because she can perform other substantial gainful work available in the national economy. §§ 404.1520(a)(4)(v), 416.920(a)(4)(v). That determination comprises the fifth and final step in the sequential analysis. §§ 404.1520, 416.920; Lester, 81 F.3d at 828 n.5; Drouin, 966 F.2d at 1257.
B. The ALJ's Application of the Five-Step Process At step one, the ALJ
found that Plaintiff had not engaged in any substantial gainful
activity since August 1, 2006. (AR 31.) At step two, the ALJ concluded
that Plaintiff had the "medically determinable" impairments of "right
shoulder injury, osteoarthritis, history of hernia, history of
hysterectomy, gastrointestinal reflux disease (GERD), hypertension,
hepatitis C infection, diabetes mellitus, obesity, and mental
depression." (Id.) He found that Plaintiff's physical impairments in
combination were severe. (Id.) As to her depression, however, he found
that it "provides only mild limitations in her activities of daily
living, social functioning and ability to maintain concentration,
persistence and pace" and "has not caused any episodes of
decompensation of extended duration"; thus, it was "not a severe
impairment." (Id.) At step three, the ALJ determined that Plaintiff's
impairments did not meet or equal any of the impairments in the
Listing. (AR 36.) At step four, the ALJ found that Plaintiff retained
the RFC to perform "a reduced range of medium work,"*fn3
with the limitations that Plaintiff can lift and carry up to
50 pounds occasionally and 25 pounds frequently. She can stand and
walk up to 6 hours in an 8 hour day, and can sit up to 6 hours in an 8
hour day. She is precluded from overhead reaching with the
right arm. She has no other limitations. (Id.) Based on the VE's
testimony, the ALJ concluded that Plaintiff could ...