Mr. Egeler retired and began receiving social security old age retirement benefits. During his retirement, Mr. Egeler performed services for the Department of Defense as a consulting engineer. He earned more than $1,200’for the year, which at the time was the threshold amount for imposing work deductions against his social security benefits.

The Department of Defense certified that Me. Egeler was an employee, rather than an independent contractor, and accordingly, Social Security imposed work deductions against his retirement benefits.

Mr. Egeler appealed, asserting that he was an independent contractor and was thus entitled to take business expense deductions against his earnings for the Defense Department.

If Mr. Egeler was an independent contractor, then his net earnings from self employment after deducting business expenses were less than $1,200 for the year and, therefore, his social security benefits were not subject to work deductions.

If, in the other hand, his earnings were wages as an employee, then he was not allowed to deduct his business expenses and his social security benefits were subject to work deductions.

The hearing Referee (whose title was later changed to Hearing Examiner— and now we call them Administrative Law Judges, or ALJs) determined that he was bound by the Department of Defense determination that Mr. Egeler’s earnings were properly characterized as wages of an employee from which business expenses could not be deducted. Mr. Egeler appealed to the federal district court for the northern district of Ohio.

The district court judge held that the Referee’s decision was correct. Though he noted that the court was prone to liberally construe the Social Security Act in the light most favorable to the person seeking benefits, in this case the statute was clear that the Department of Defense determination as to Mr. Egeler’s status as an employee was conclusive and binding.

The court affirmed the decision that Mr. Egeler was an employee and remanded the case for a determination of whether the social security agency’s recovery of an overpayment would either “defeat the purpose” of the Social Security Act, or “be against equity and good conscience”, as required by the terms of the Act.

See Egeler v. Fleming, 184 F. Supp. 321 (N.D. Ohio 1960). See also Social Security Ruling (SSR) 64-24c.

This material should not be construed as legal advice for any particular fact situation, but is intended for general informational purposes only. For advice specific to any individual situation, an experienced attorney should be contacted