Peterson v. Mathews, Civ. No. K-75-159.

• Decision Date: 03 May 1976
• Docket Number: Civ. No. K-75-159.
• Citation: 414 F. Supp. 1306
• Parties: Floyd D. PETERSON v. David MATHEWS, Secretary, Department of Health, Education and Welfare.
• Court: U.S. District Court — District of Maryland

414 F. Supp. 1306

Floyd D. PETERSON v. David MATHEWS, Secretary, Department of Health, Education and Welfare.

Civ. No. K-75-159.

United States District Court, D. Maryland.

May 3, 1976.

Norman L. Blumenfeld, Washington, D. C., John B. Kenkel, Hyattsville, Md., for plaintiff.

Jervis S. Finney, U. S. Atty., District of Maryland, and Virginia S. Draper, Asst. U. S. Atty., Baltimore, Md., for defendant.

FRANK A. KAUFMAN, District Judge.

Peterson, a sixty-eight year old Commissioner for the Washington Suburban Sanitary Commission (WSSC), seeks review in this Court, pursuant to 42 U.S.C. § 405(g), of a decision by the Secretary of Health, Education and Welfare (HEW) denying Peterson retirement benefits under the Federal Old-Age, Survivors and Disability Insurance Act, 42 U.S.C. §§ 401 et seq. (the Act). Peterson has exhausted all available administrative remedies.

Plaintiff, who held a number of federal governmental positions prior to 1961, and who in May of 1970 retired from the position of consultant to the "Electric Power Industries", thereafter applied for disability benefits pursuant to 42 U.S.C. § 423. That application was approved on December 12, 1970 after a disability examiner had on November 17, 1970 concluded that Peterson suffered from "poliomyelitis with motor deficits, bilateral, of the lower extremities" (Ad.Rec. at 50A). Subsequently, on September 10, 1971, Peterson was appointed a Commissioner of the WSSC and informed the Social Security Administration (SSA)¹ of that fact on October 19, 1971 in a document in which he stated:

Effective 9/10/71 I was appointed by the Montgomery Co. Executive to the Washington Suburban Sanitary Commission.

Once a week, for four hours the Commission meets to decide policy. I will be paid $6200 per year.

I will have no other duties, besides the above mentioned.

(Ad.Rec. at 50D-51). In response, the Director of the Bureau of Disability Insurance of SSA (BDI) wrote Peterson as follows on November 8, 1971:

Thank you for telling us that you returned to work. We have reviewed your case and have determined that you will continue to receive your disability payments.

(Ad.Rec. at 52).² On February 29, 1972, the BDI determined that in accordance with the provisions of 42 U.S.C. § 423(a), Peterson, who had attained age sixty-five on February 21, 1972, should thereafter, having reached that age, receive retirement benefits pursuant to 42 U.S.C. §§ 402-03 rather than further disability benefits under section 423. Subsequently, on May 22, 1972, Peterson's retirement benefits were terminated by the BDI on the basis of Peterson's "work and earnings" with the WSSC.

Plaintiff contends that, as a matter of law, his salary as a Commissioner of the WSSC does not constitute either "self-employment income" or "wages" within the meaning of 42 U.S.C. § 403(b). Peterson, in one or more documents, has described his position of WSSC Commissioner as "self-employment", and maintains that the services he renders as Commissioner are not "substantial" within the meaning of the Act.³ Peterson further reasons that he does not receive "wages" within the meaning of the Act since section 409 defines "wages" as "remuneration paid * * * for employment,"⁴ and section 410 defines "employment" as services performed "by an employee for the person employing him" (emphasis added).⁵ Peterson argues that he is not an "employee" of the WSSC as the term "employee" has been defined by the Act and regulations promulgated pursuant thereto.⁶ Peterson additionally argues that his services have not been brought within the statutory definition of "employment" by certain provisions of 42 U.S.C. § 418(a) relating to agreements entered into between HEW and the State of Maryland.⁷

The Government does not contend that Peterson can be termed an "employee" of the WSSC under the common law definition of the term "employee"⁸ or that Peterson's income from his WSSC position constitutes "self-employment income"⁹ within the meaning of 42 U.S.C. § 403(b). Rather, in determining that Peterson is not entitled to receive retirement benefits, Administrative Law Judge Thomas E. Bennett assigned the following reasons (Ad.Rec. at 15-16):

The issues in this case are whether the claimant's services as Commissioner of the Washington Suburban Sanitary Commission are performed in an employment relationship and whether such activity is subject to the annual retirement test.

The essential facts are that at times here material the claimant was a member of the Washington Suburban Sanitary Commission and derived significant income by reason of his performing services in that capacity, the performance of which services does not take a great deal of the claimant's time.

The claimant's case is based on his contention that he is not an "employee" either of the Washington Suburban Sanitary Commission or of Montgomery County. This contention is significantly supported by letter opinion of the General Counsel of said Commission (Exhibit 18, dated October 6, 1972) and of the Assistant County Attorney, Montgomery County (Exhibit 31, dated April 23, 1974). Insofar as these letter opinions interpret the laws of Maryland, they are accepted here without qualification. The difficulty from the claimant's point of view is that the underlying statutory interpretation and application involves Sections 210(a)(7) and 218(h)(3) of the Social Security Act and related provisions as supplemented by regulations.

The Administrative Law Judge has carefully reviewed said Sections 210(a)(7) and 218(h)(3) in light of the entire record in this case. Based thereon, it is found that the law and its application to the facts of this case are correctly stated on pages 2 and 3 of the Reconsideration Determination (Exhibit 28) in this case.

It is the decision of the Administrative Law Judge that the services of the claimant as a Commissioner of the Washington Suburban Sanitary Commission are performed in an employment relationship within the meaning of the Social Security Act, as amended, and, therefore, the work activity involved is subject to the annual retirement test. The said Reconsideration Determination is hereby adopted affirmed as written.

In the Reconsideration Determination referred to by Judge Bennett, Bernard Levine, Chief of the Reconsideration Branch of the SSA, had written (Ad.Rec. at 81-82):

The issues to be decided are whether Mr. Peterson's services as Commissioner of the Washington Suburban Sanitary Commission are performed in an employment relationship and whether such activity is subject to the annual retirement test.

Section 210(a)(7) of the Social Security Act excepts from social security coverage services performed in the employ of a State or any political subdivision thereof, unless such services have been included in an agreement with the State under the provisions of Section 218 of the Social Security Act. Section 211(c)(1) of the Act excepts the performance of the functions of a public office from the term "trade or business" when used with reference to self-employment or net earnings from self-employment.

The State of Maryland has entered into an agreement in accordance with the provisions of Section 218 of the Social Security Act and has extended coverage to employees of many political subdivisions, including the services of employees of the Washington Suburban Sanitary Commission. Services of employees of the Commission in positions not under a retirement system as well as the services of those employees in positions under the Employees Retirement System of the State of Maryland were included.

Section 218(b)(3) of the Act clearly states that the term "employee" includes an officer of a State or political subdivision. The determination as to who is a public officer of a State or political subdivision is based on State law. The file contains information received by the Administration from Mr. John B. Kenkel, General Counsel for the Commission which indicate that Mr. Peterson is a public officer since he advises that the Commission members serve in a statutory office to which they are appointed by the county governing body. As an officer of a political subdivision Mr. Peterson is an employee within the meaning of Section 218(b)(3) and the payments made to him are wages reportable by the State under its coverage agreement.

Since Mr. Peterson's disability insurance benefits ended on January 31, 1972, the disability provisions of the law no longer applied. He became subject to Section 203(b)(F) of the Act in determining his entitlement to benefit payments beginning with February 1972 when he attained age 65. The law in effect before 1973 provided that an employee may earn up to $1680 a year without losing benefits. If he earns more than $1680 a year $1 is deducted for each $2 of earnings between $1680 and $2880 and $1 for each $1 of earnings over $2880. No deduction is made for any month in which the individual is age 72 or over or for any month in which he did not earn more than $140. Beginning 1973 the law was amended so that an individual may earn up to $2100 in 1973 without a loss of benefits. If he earns more than $2100, $1 is deducted for each $2 of earnings over $2100. No deduction is made for any month in which the individual is age 72 or over for any month in which he did not earn more than $175.

On the basis of the evidence of record the initial determination is affirmed on reconsideration. The Social Security Administration has no discretion in the matter and must administer the law as it was enacted.

Additionally, in a letter to Peterson dated October 17, 1974, Irwin A. Friedenberg, Member, Appeals Council, explained the basis for Judge Bennett's said determination as follows (Ad.Rec. at 5-6):

In your letter you also expressed some confusion as to why your work for the Washington Suburban Sanitary Commission was considered that of an employee rather than a self-employed person.

Effective January 1, 1957, under Modification Number 58, the

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