                                                                       FILED
                                                            United States Court of Appeals
                                                                    Tenth Circuit

                     UNITED STATES COURT OF APPEALS May 20, 2011
                                                                Elisabeth A. Shumaker
                            FOR THE TENTH CIRCUIT                   Clerk of Court


    CARL D. SHEPPARD,

                Plaintiff-Appellant,

    v.                                                   No. 10-6172
                                                  (D.C. No. 5:09-CV-00390-C)
    MICHAEL J. ASTRUE,                                   (W.D. Okla.)
    Commissioner,
    Social Security Administration,

                Defendant-Appellee.


                             ORDER AND JUDGMENT *


Before MURPHY, McKAY, and HOLMES, Circuit Judges.



         Carl D. Sheppard appeals from the district court’s order affirming the

Social Security Commissioner’s denial of his applications for disability insurance

benefits and supplemental security income benefits under the Social Security Act.

The Administrative Law Judge (ALJ) denied Mr. Sheppard’s applications for


*
       After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and
collateral estoppel. It may be cited, however, for its persuasive value consistent
with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
benefits in a decision issued in January 2008 1 because he found at step one of the

five-step sequential evaluation process for determining disability that

Mr. Sheppard’s part-time job as a Recovery Support Specialist at the Edwin Fair

Community Mental Health Center was substantial gainful activity (SGA).

See 20 C.F.R. §§ 404.1520(a)(4)(i) and 416.920(a)(4)(i) (“At the first step, we

consider your work activity, if any. If you are doing substantial gainful activity,

we will find that you are not disabled.”); id. §§ 404.1520(b) and 416.920(b)

(“If you are working and the work you are doing is substantial gainful activity,

we will find that you are not disabled regardless of your medical condition or

your age, education, and work experience.”). Exercising jurisdiction under

28 U.S.C. § 1291 and 42 U.S.C. § 405(g), and having determined, based on our

de novo review, that the ALJ failed to apply the correct legal standards, we

reverse and remand for a redetermination at step one of whether Mr. Sheppard

was engaged in SGA. See Washington v. Shalala, 37 F.3d 1437, 1439 (10th Cir.

1994) (“We review the [ALJ’s] decision to determine . . . whether the [ALJ]

applied the correct legal standards[, and] [f]ailure to apply the correct legal

standard[s] . . . is grounds for reversal.”) (internal quotation marks omitted).



1
       Although the ALJ’s decision is dated January 3, 2007, see Aplt. App.,
Vol. II at 38, this is a typographical error as the decision was actually issued on
January 3, 2008, id. at 6 (Notice of Appeals Council Action denying
Mr. Sheppard’s “request for review of the [ALJ’s] decision dated January 3,
2008”).

                                         -2-
       Recognizing that our remand of this matter may not ultimately change the

Commissioner’s final disposition of the SGA issue, we nonetheless conclude that

the ALJ committed reversible legal error by failing to conduct his step-one

analysis within the proper analytical framework. Specifically, the ALJ failed to

give Mr. Sheppard the benefit of a rebuttable presumption, as required by

20 C.F.R. §§ 404.1574(b)(3)(i) and 416.974(b)(3)(i), that he had not performed

work at the SGA level from May 2005, when he started his part-time job, 2 through

the date of the hearing before the ALJ in April 2007. As the magistrate judge

correctly recognized in his report and recommendation to the district court,

Mr. Sheppard was entitled to such a presumption because his average monthly

earnings in 2005 and 2006 fell below the threshold monthly levels for those years

as calculated under §§ 404.1574(b)(2)(ii) and 416.974(b)(2)(ii). See Aplt. App.,

Vol. I at 76-78. 3

2
       The ALJ found that Mr. Sheppard began his part-time job in September
2003, see Aplt. App., Vol. II at 27, but this finding is not supported by the
administrative record. Instead, the colloquy between Mr. Sheppard and the ALJ
during the hearing before the ALJ indicates that Mr. Sheppard started working at
his part-time job in 2005, id. at 41-42, and the earnings information that his
employer produced indicates that he began working in May 2005, id., Vol. III at
683.
3
       Although the magistrate judge applied the correct legal standards in his
report and recommendation when he analyzed the SGA issue at step one, the
magistrate judge was prohibited by the well-established rules governing judicial
review of administrative decisions from substituting his own analysis for that of
the ALJ. See SEC v. Chenery Corp., 318 U.S. 80, 94-95 (1943) and SEC v.
Chenery Corp., 332 U.S. 194, 196 (1947). Accordingly, we confine our review to
                                                                      (continued...)

                                        -3-
      Although the controlling regulations explicitly require that Mr. Sheppard’s

earnings from his part-time job should have been the ALJ’s “primary

consideration” in resolving the SGA issue, see 20 C.F.R. §§ 404.1574(a)(1) and

416.974(a)(1), the ALJ essentially ignored Mr. Sheppard’s earnings. In fact, the

ALJ gave the mistaken impression that the controlling regulations only raise a

presumption in favor of a finding of SGA if the claimant’s average monthly

earnings exceed the threshold level calculated under the regulations, see Aplt.

App., Vol. II at 24, 35, when actually the regulations also raise a presumption

against a finding of SGA if the claimant’s average monthly earnings are

below the threshold level calculated under the regulations, see 20 C.F.R.

§§ 404.1574(b)(3)(i) and 416.974(b)(3)(i), which is the case for Mr. Sheppard.

As a result, it was simply not enough for the ALJ to proceed under the assumption

that “Mr. Sheppard’s actual activity is not per se ‘substantial gainful activity.’”

Aplt. App., Vol. II at 35. Instead, Mr. Sheppard was entitled to an affirmative

presumption in his favor on the SGA issue, and we conclude that the SGA issue in

this case is close enough that this legal error requires a reversal and remand.

      We also note that the ALJ failed to acknowledge the important evidentiary

provisions that are set forth in the controlling regulations. Those provisions

provide that the Commissioner “will generally consider other information in


3
 (...continued)
the ALJ’s decision.

                                          -4-
addition to [a claimant’s] earnings if there is evidence indicating that [the

claimant] may be engaging in substantial gainful activity.” 20 C.F.R.

§§ 404.1574(b)(3)(ii) and 416.974(b)(3)(ii). The regulations set forth two

specific examples of such “other information”:

      Examples of other information we may consider include, whether--

      (A) Your work is comparable to that of unimpaired people in your
      community who are doing the same or similar occupations as their
      means of livelihood, taking into account the time, energy, skill, and
      responsibility involved in the work; and

      (B) Your work, although significantly less than that done by
      unimpaired people, is clearly worth the amounts shown in paragraphs
      (b)(2) of this section, according to pay scales in your community.

Id.

      Although we agree with the Commissioner that these provisions did not

affirmatively require the ALJ to develop the specified earnings evidence,

pertaining to the pay scales of unimpaired individuals working in full-time

Recovery Support Specialist positions, to resolve the SGA issue in this case, see

Aplee. Br. at 15, the ALJ should consider whether it is feasible to develop such

earnings evidence on remand. Of course, the ALJ may also consider the general

information about Mr. Sheppard’s work activity that is described in 20 C.F.R.

§§ 404.1573(a)-(c), (e) and 416.973(a)-(c), (e) (i.e., the nature of his work, how

well he performs his work, if he performs his work under special conditions, and

the time spent in work). In considering such evidence, however, “the ALJ


                                          -5-
must . . . discuss the uncontroverted evidence he chooses not to rely upon, as well

as significantly probative evidence he rejects.” Clifton v. Chater, 79 F.3d 1007,

1010 (10th Cir. 1996).

      With regard to this last point, there appears to be uncontroverted and

significantly probative evidence in the record that the ALJ failed to discuss in his

prior decision relating to the mental health treatment that Mr. Sheppard was

receiving at the Edwin Fair Community Mental Health Center while he was

working there on a part-time basis. Specifically, the records from the health

center appear to show that: (1) Mr. Sheppard was suffering from persistent and

worsening severe depression and anxiety, as evidenced by repeated extensions of

his discharge date; (2) Mr. Sheppard’s overall health was deteriorating; and

(3) Mr. Sheppard was having difficulties with his job in terms of personal

relationships with coworkers and productivity. See Aplt. App., Vol. III at 441-49,

594-603, 593, 511-20, 571-80, 559-569, 548-57, 776-84, 767-75, 758-66. 4 On



4
       These record citations are cited out of sequence in order to put them in
chronological order. Although the last set of records from the health center are
dated February 27, 2008, see Aplt. App., Vol. III at 758-66, and thus were created
after the ALJ issued his decision on January 3, 2008, they should be considered
on remand since our remand of this case to the Commissioner for further
proceedings extends the potential period of disability through the next date of
decision. See Krauser v. Astrue, __ F.3d __, 2011 WL 1718892, at *3 (10th Cir.
May 6, 2011). We also note that the records from the health center dated
February 27, 2008, were considered and made part of the administrative record by
the Appeals Council in connection with its denial of Mr. Sheppard’s request for
review of the ALJ’s decision. See Aplt. App., Vol. II at 6, 10 and Exhibit AC-5.

                                         -6-
remand, the ALJ should examine this evidence as part of the determination of

how well Mr. Sheppard was performing his job and whether he was working

under special conditions.

       Finally, because we have concluded that the ALJ committed reversible

legal error at step one in finding that Mr. Sheppard’s part-time job as a Recovery

Support Specialist constituted SGA, we are precluded from considering whether

that same job could qualify as “past relevant work” at step four of the sequential

evaluation process. See James v. Chater, 96 F.3d 1341, 1343 (10th Cir. 1996)

(stating that work must be SGA to be considered past relevant work at step four);

20 C.F.R. §§ 404.1565(a) and 416.965(a) and §§ 404.1560(b)(1) and

416.960(b)(1) (same). Accordingly, we will not address the ALJ’s alternative

findings at step four. See Aplt. App., Vol. II at 37 (“[E]ven if the foregoing

conclusions [regarding step one] are rejected . . . , I still find at Step 4, that

Mr. Sheppard’s residual functional capacity . . . permits him to ‘return to’

(continue with) his work as a ‘recovery support specialist.’”).

       The judgment of the district court is REVERSED and this case is

REMANDED to the district court with instructions to REMAND the case to the

Commissioner for further proceedings consistent with this order and judgment.

                                                        Entered for the Court


                                                        Jerome A. Holmes
                                                        Circuit Judge

                                            -7-
