The Hon. Joseph E. Stevens, Jr., United States District Judge for the Western *

District of Missouri, sitting by designation.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

_____________

No. 97-2109EA

_____________

James Gladden, *

*

Appellant, *

* On Appeal from the United

v. * States District Court

* for the Eastern District

* of Arkansas.

John J. Callahan, Acting Commissioner, *

Social Security Administration, *

*

Appellee. *

___________

Submitted: November 20, 1997

Filed: April 6, 1998

___________

Before RICHARD S. ARNOLD, Chief Judge, McMILLIAN, Circuit Judge, and

STEVENS, District Judge. *

___________

RICHARD S. ARNOLD, Chief Judge.

Between 1984 and 1991, James Gladden was paid $77,984.30 in social

security disability insurance benefits. It has now been determined that

Mr. Gladden was not entitled to these benefits, because he had been

engaging in substantial gainful activity 
The Secretary made the finding under review, but the action now proceeds

1

against the Commissioner of the Social Security Administration by virtue of the Social

Security Independence and Program Improvements Act of 1994, Pub. L. No. 103-296,

108 Stat. 1964.

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during all or most of that period of time. The issue of substantial

gainful activity is not now contested. Mr. Gladden did, however, ask the

Social Security Administration to waive its right to recover the

overpayment. The Secretary of Health and Human Services rejected this

request, finding that Mr. Gladden was not without fault in accepting the

money. Mr. Gladden filed suit in the District Court for a review of that

finding, but that Court, holding that the Secretary’s finding was supported

by substantial evidence, dismissed the complaint.

We hold that the Secretary’s finding is not supported by substantial 1

evidence. Because of erroneous advice received from an official of the

Social Security Administration, Mr. Gladden reasonably believed, at least

for part of the relevant time period, that he was not engaged in

substantial activity as that term is defined by the law, and that he

therefore had a right to the payments. He therefore was without fault, as

that term is defined by the applicable statute and regulations, and is

entitled to a waiver of recovery of the overpayment. We reverse and remand

to the District Court with directions to enter judgment in favor of Mr.

Gladden.

I.

James Gladden suffered a heart attack in June 1983 at age 49. The

heart attack left him unable to return to Reynolds Metals Company, where

he had worked as a computer programmer for 25 years. He applied to the

Department of Health and Human Services for social security disability

insurance benefits in September 1983. In May 1984, an Administrative Law

Judge (ALJ) conducted a hearing to determine Gladden’s eligibility to

receive benefits.
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After listening to Gladden’s description of his health problems and

resulting limitations, the ALJ explained that “[w]e don’t insist that you

work unless you’re capable of what they call substantial gainful activity

. . . in other words can you work eight hours a day 40 [hours] a week.” R.

104. The ALJ determined that Gladden’s “severe dyspnea, weakness and

inability to tolerate normal stress of a work environment, would preclude

him from performing any type of substantial gainful activity on a sustained

basis.” R. 83. Considering Gladden’s “maximum sustained work capability,

age, education and work experience,” the ALJ concluded that Gladden was

“disabled,” meriting an award of benefits.

At the hearing, Gladden disclosed that he owned a computer business,

which he would occasionally visit for an hour or two. R. 94. The ALJ asked

him two follow-up questions about the business and then departed from the

subject entirely. Gladden answered these questions truthfully. After the

ALJ’s decision, Gladden started spending more time at the computer business

to combat boredom and the isolation of being home alone. R. 46-52. The

business was in a downtown area, a more convenient location for him to visit

with friends or family, who would call or stop by to see him. He set up an

office with a couch, refrigerator, and television and received his mail and

newspaper there. Gladden ultimately came to spend the majority of his time

at the business location, including weekends, but was not actually working

there at first. As his time at the office grew, so apparently did the

business-related tasks he performed. 

For about seven years after the original decision of the ALJ in 1984,

Gladden reported income from the business on his tax returns. In 1990, the

Social Security Administration became interested in determining how that

income was generated and began conducting a “continuing disability

investigation.” A Social Security representative called Gladden to ask him

about the matter. Gladden explained that he did what he wanted to do during

the day, and in response to a question about how much
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time he spent at the office, stated that he spent about 40 hours there each

week, without differentiating between recreational and business hours. R.

51. Gladden completed a “Work Activity Report” in which he explained that

he did not work there, but rather was simply the owner of the business,

called Professional Systems, Inc. A. 64. He then filled out a “Statement

of Claimant or Other Person” form stating that he was present at the

business 40 hours a week and described his duties as talking to people,

handling public relations, hiring and firing, and helping to set fees. He

explained that he had started the business in 1977 and had invested

approximately $200,000 in it. R. 107-08. 

In April 1991, Social Security informed Gladden that it was reopening

the ALJ’s July 5, 1984, decision approving disability benefits and was

contemplating issuing a decision finding that Gladden had not been disabled

since June 10, 1983, because his business activities constituted substantial

gainful activity precluding the award of disability insurance benefits. In

June 1991, the Social Security Appeals Council held that Gladden was not,

and never had been, disabled as defined in the Social Security Act. R. 114-

16.

On April 1, 1992, Gladden received a notice stating that he no longer

qualified for benefits “beginning December 1983,” that he had been overpaid

$77,984.30 in benefits, and that he was liable to Social Security for

repayment. R. 125. Gladden retained counsel and requested waiver of

overpayment. Gladden asserted that he was not at fault in accepting the

disability benefits because Social Security was aware of his ownership

interest in the business at the time of the benefits award and because the

time he spent at the office since receiving disability benefits was for

social rather than business purposes. He pointed out that the ALJ who had

found him disabled had defined “substantial gainful activity” as working 40

hours a week.
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On May 5, 1993, Gladden requested a hearing by an ALJ. The request for

a hearing was granted. The ALJ concluded that Gladden was at fault in

accepting the overpayment of benefits. R. 20-21. Gladden unsuccessfully

sought review of the ALJ’s decision by the Appeals Council. 

Having exhausted his administrative avenues of relief, Gladden filed

a complaint in the District Court, seeking waiver of the assessed

overpayment. The District Court entered judgment against Gladden on March

11, 1997. This appeal followed. The ALJ’s findings will be affirmed if

supported by substantial evidence on the record as a whole. Smith v.

Schweiker, 728 F.2d 1158, 1161 (8th Cir. 1984). In determining whether

there is substantial evidence, we “must take into account whatever in the

record detracts from its weight.” Id. at 1162 (citation omitted). 

II.

Title 42 U.S.C. § 423 (d) (1) (A) (1994) defines “disability” as the

“inability to engage in any substantial gainful activity by reason of any

medically determinable physical or mental impairment which can be expected

to result in death or which has lasted or can be expected to last for a

continuous period of not less than 12 months.”

Title 20 C.F.R. § 404.1572 defines “substantial gainful activity.”

What we mean by substantial gainful activity.

Substantial gainful activity is work that is both substantial and

gainful:

(a) Substantial work activity.

Substantial work activity is work activity that involves doing

significant physical or mental activities. Your work may be

substantial even if it is
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done on a part-time basis or if you do less, get paid less, or have less

responsibility than when you worked before.

(b) Gainful work activity. 

Gainful work activity is work activity that you do for pay or

profit. Work activity is gainful if it is the kind of work that

is usually done for pay or profit whether or not a profit is

realized.

Moreover, the regulations provide that the activities of self-employed

individuals must be evaluated to determine whether they constitute

substantial gainful activity. Title 20 C.F.R. § 404.1575 provides that:

(a) If you are a self-employed person. We will consider your

activities and their value to your business to decide whether you

have engaged in substantial gainful activity if you are selfemployed. We will not consider your income alone since the

amount of income you actually receive may depend upon a number

of different factors like capital investment, profit sharing

agreements, etc. . . . We will evaluate your work activity on

the value to the business of your services regardless of whether

you receive an immediate income for your services. We consider

that you have engaged in substantial gainful activity if . . .

(3) You render services that are significant to the operation of

a business and receive a substantial income from the business.

(b) What we mean by significant services. (1) . . . [I]f your

business involves the services of more than one person, we will

consider you to be rendering significant services if you

contribute more than half the total time required for the

management of the business, or you render management services for

more than 45 hours a month regardless of the total management

time required by the business.

Gladden acknowledges that when Social Security began its investigation

in 1990, his activities constituted services significant to the operation

of a business. The crux
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of this case, however, is not the substantive issue of disability or

substantial gainful activity, but whether Gladden is entitled to have the

admitted overpayment waived because the ALJ told him he would be all right,

so to speak, as long as he did not work 40 hours a week. For this question

we must turn to the law defining fault. 

The statute provides that where an individual is determined to have

been overpaid disability benefits, but was not at fault in accepting the

overpayment, recovery of the overpayment can be waived. Title 42 U.S.C. §

404 provides:

(b) No recovery from persons without fault.

In any case in which more than the correct amount of payment has

been made, there shall be no adjustment or recovery by the United

States from any person who is without fault if such adjustment

or recovery would defeat the purpose of this subchapter or would

be against equity and good conscience. 

Fault is defined in the regulations as follows:

. . . In determining whether an individual is at fault, the

Social Security Administration will consider all pertinent

circumstances, including the individual’s age and intelligence,

and any physical, mental, educational, or linguistic limitations

. . . the individual has. What constitutes fault on the part of

the overpaid individual . . . depends upon whether the facts show

that the incorrect payment to the individual . . . resulted from:

(a) An incorrect statement made by the individual which he knew

or should have known to be incorrect; or

(b) Failure to furnish information which he knew or should have

known to be material; or
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(c) With respect to the overpaid individual only,

acceptance of a payment which he either knew or could

have been expected to know was incorrect. 

20 C.F.R. § 404.507.

The regulations also state:

A benefit payment . . . to . . . an individual who fails to meet

one or more requirements for entitlement to such payment . . .

constitutes an entitlement overpayment. Where an individual .

. . accepts such overpayment because of reliance on erroneous

information from an official source within the Social Security

Administration . . . with respect to the interpretation of a

pertinent provision of the Social Security Act or regulations

pertaining thereto . . . such individual, in accepting such

overpayment, will be deemed to be without fault.

20 C.F.R. § 404.510a. Furthermore, in such a situation, the regulations

direct that recovery will be waived. 20 C.F.R. § 404.512(a) states: “[i]n

the situations described in . . . § 404.510a, adjustment or recovery will

be waived since it will be deemed such adjustment or recovery is against

equity and good conscience. . . .” (Emphasis in original.) Thus, someone

who relies on erroneous information from an official source meets both

requirements for waiver set forth in 42 U.S.C. § 404(b): he or she is

without fault, and recovery would be against equity and good conscience.

At the 1984 hearing, the ALJ instructed, “[w]e don’t insist that you

work unless you’re capable of what they call substantial gainful activity

. . . in other words can you work eight hours a day 40 [hours] a week.”

R. 104. Gladden maintains that under the ALJ’s definition, he was not at

any time engaging in substantial gainful activity. The office was a social

outlet for him, as evidenced by the couch, refrigerator, and
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television, and by the fact that he received his mail there, and spent

weekends there to get out of the house and meet friends. 

The Appeals Council found that Gladden’s “fail[ure] to disclose [his]

full role in the computer store business” caused him to be at fault. R.

157. To the contrary, the record reflects that Gladden forthrightly

answered the questions put to him by the ALJ in 1984, and the ALJ did not

pursue further investigation into the matter. 

At most, the record would support a finding that at some point never

determined, Gladden’s situation became different from what it was when he

appeared before the ALJ in 1984. Gladden might be determined to be at fault

for accepting overpayment from such a date forward if the evidence shows he

should have recognized that his changed circumstances warranted notice to

Social Security, or at least an inquiry about any effect of that change on

his eligibility. 20 C.F.R. § 404.507(b) (“[F]ault on the part of the

overpaid individual . . . depends upon whether the facts show that the

incorrect payment to the individual . . . resulted from [f]ailure to furnish

information which he knew or should have known to be material. . . .”).

On this record, however, there is no evidence of when (if ever) Gladden

began working 40 hours a week, enough to qualify him as not disabled under

the definition he had been given, nor does either side ask us to remand the

case for further proceedings on that issue.

III.

Accordingly, we hold that the Secretary’s decision to deny a waiver of

recovery of overpayment is not supported by substantial evidence. The

judgment is reversed, and the cause remanded to the District Court with

directions to enter judgment in favor of Mr. Gladden.

It is so ordered.
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A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.