If a veteran’s service-connected disability prevents gainful employment, then the veteran may be entitled to a total disability rating based on individual unemployability (TDIU) under certain circumstances. Specifically, the U.S. Department of Veterans Affairs will look to see if the veteran cannot secure substantially gainful employment, which is defined under VA regulation as “employment at which non-disabled individuals earn their livelihood with earnings comparable to the particular occupation in the community where the veteran resides.”
Under 38 C.F.R. § 4.16(a), marginal employment is not considered substantially gainful employment, and it exists when either (1) earned annual income does not exceed the poverty threshold or (2) where the veteran engages in “employment in a protected work environment,” such as family business or sheltered workshop.
What is a Sheltered Job? What is a Protected Work Environment?
It’s important to stress that a sheltered workshop is one example of a protected work environment. In general, where a veteran earned more than the federal poverty threshold, which can change from year to year, a TDIU claim would require a fact-intensive analysis of the nature of the veteran’s job and careful development of evidence to increase the odds of prevailing on such a claim.
Sheltered employment is not well defined by VA regulations. In a 2017 case, Cantrell v. Shulkin, the U.S. Court of Appeals for Veterans Claims criticized the VA for the ambiguous language in § 4.16(a). In a 2021 case, Arline v. McDonough, the Court encountered this ambiguity again. In Arline, the VA argued that a protected work environment is “a non-competitive workplace separated from workplaces in the open labor market and in which hiring and compensation decisions are motivated by a benevolent attitude toward the employee.”
Although this case did not revolve around what constituted a sheltered workshop, it demonstrates the ambiguity of § 4.16(a),. The Court avoided defining what “employment in a protected work environment” means.
Here’s an example from one of our case files: Our client had severe PTSD and could not get along with people. His family owned a business. They employed him to basically sit in a back room and not interact with any co-workers. He spent most time each day isolated in a back room with little to no interaction with others. Although they paid him a salary, it was only because he was a family member, and no competitive work environment would have tolerated the veteran. In that case, the actual wages earned did not reflect the veteran’s true level of impairment.
An overarching consideration is that a sheltered job allows someone with a disability to earn income and develop work-related skills, notwithstanding the effects of a disability on his or her ability to meet certain performance-related expectations typically applied to other workers without disabilities.
In many states, a sheltered workshop may require licensing by a state agency to pay disabled workers at a subminimum wage and typically have been operated by not-for-profit organizations. This part of the labor market is historically related to the introduction of New Deal programs. In 1938, Congress passed the Fair Labor Standards Act, which carved out an exemption for applying the minimum wage to disabled workers.
As early as 1940, the U.S. Department of Labor defined sheltered workshops as “charitable organizations and institutions conducted not for profit but for the purpose of carrying out a recognized program of rehabilitation for handicapped individuals and of providing such individuals with remunerative employment or other occupational rehabilitating activities of an educative or therapeutic nature.” By the 1960s, the Social Security Administration held that work in a sheltered workshop did not constitute employment.
Today, the Social Security Administration defines a sheltered workshop this way:
A sheltered workshop is a private non-profit, state, or local government institution that provides employment opportunities for developmentally, physically, or mentally impaired individuals to prepare for gainful work in the general economy. These services may include physical rehabilitation, training in basic work and life skills (e.g., how to apply for a job, attendance, personal grooming, and handling money), training on specific job skills, and providing work experience in the workshop.
Although the VA is not bound by other agencies’ rules, these other policies are informative of the way federal agencies have treated sheltered workplaces.
However, much has changed in efforts to employ disabled workers. For example, public-private partnerships have led to private-sector employer participation in vocational rehabilitation programs. There may be certain financial incentives for private-sector employers related to employment of disabled workers that could be relevant. Employers often accommodate the needs of such workers, considering certain factors, such as limitations imposed by a worker’s physical or mental condition and the necessity for a worker to take time off from work to go to appointments.
In addition, a supported employment model has emerged, whereby customized job skills and coaching services are provided, particularly for those with serious cognitive or psychiatric conditions.
Although the history of sheltered jobs involved not-for-profit organizations, TDIU analysis should not be limited by the nonprofit status of an employer, particularly since VA regulations make clear that a sheltered job is only one type of protected work environment to be considered in what is a fact-intensive analysis.
Certain factors are relevant to the issue of marginal employment and whether a veteran worked in a protected work environment, including:
- How often income exceeded the federal poverty threshold, and by what proportion
- The established wage for a particular type of occupation in the veteran’s community
- The nature of the veteran’s experience, education, and training
- The veteran’s work experience and earnings history
- Whether a veteran worked for a family member or friend
- Whether employment was based on participation in a program involving rehabilitation services, day treatment, or other training specific to people with disabilities
- Whether the employee maintained a different, more flexible schedule compared to non-disabled peers
- Whether the employee was subject to an alternative set of performance standards that accounted for reduced pace and productivity
- Whether the employee worked intermittently at the workplace
- Whether the employer continued to employ the veteran despite him being significantly off-task compared to peers
- Whether the employer participated in local, state, or federal financial incentive programs or vocational rehabilitation initiatives to facilitate training or reemployment of disabled workers
- Whether the employer-provided certain accommodations considered a fringe benefit under federal tax law, to the extent that such accommodations were reported as income
- Whether there was a marked reduction of earnings, particularly consistent with the veteran’s medical history
By no means is this an exhaustive list, and a claimant should not expect that one factor will be determinative of the outcome of a case. In at least one case, the Board of Veterans Appeals was not persuaded that accommodations by an employer relative to a veteran’s disabilities were sufficient to find that the veteran was engaged in marginal employment. In another case, the Board found it necessary to have the Regional Office obtain the veteran’s employment records to determine whether the veteran was afforded reasonable accommodations.
Board decisions are not binding in other cases. Rather, these decisions show that there should be a careful case-by-case analysis. An opinion by a vocational expert can help address these factors in support of a claim for TDIU, and additional employment records and lay statements from co-workers or supervisors may also help.
If you are a veteran who is unable to work a traditional job due to your service-connected disabilities and have been denied TDIU, then the lawyers at Gang & Associates may be able to help. We have successfully represented thousands of veterans over the years and have a strong track record of winning claims for TDIU.