SSR 72-37c: SECTION 224(a) (42 U.S.C. 424(a)). -- DISABILITY INSURANCE BENEFITS -- REDUCTION UPON RECEIPT OF STATE WORKMEN'S COMPENSATION PAYMENTS -- CONSTITUTIONALITY

20 CFR 404.408

SSR 72-37c

Richardson v. Belcher, 404 U.S. 78, 92 Sup. Ct. 254 (Supreme Court of the United States, November 22, 1971)

Claimant, entitled to social security disability insurance benefits, objected to a reduction in monthly amount of such benefits because of a monthly sum received from State of West Virginia as workmen's compensation benefits. On appeal, held, section 224 of Social Security Act (42 U.S.C. 424(a)), which requires a reduction of social security disability benefits in certain cases to reflect receipt of periodic payments only under a workmen's compensation law of the United States or of a State, does not violate the Due Process Clause of Fifth Amendment by not including other forms of public or private compensation since the statute establishes a classification which is "rationally based and free from invidious discrimination."

MR. JUSTICE STEWART delivered the opinion of the Court.

The appellee was granted social security disability benefits effective in October 1968, in the amount of $329.70 per month for himself and his family. In January 1969, the federal payment was reduced to $225.30 monthly after the "offset" provision of Section 224 of the Social Security Act. 79 Stat. 406, 42 U.S.C. § 424a (1970 ed.),[1] upon a finding that the appellee was receiving workmen's compensation benefits from the State of West Virginia in the amount of $203.60 per month. After exhausting his administrative remedies, the appellee brought this action challenging the reduction of payments required by § 224 on the grounds that the statutory provision deprived him of the due process of law guaranteed by the Fifth Amendment. The District Judge, disagreeing with other courts that have considered the question,[2] held the statute unconstitutional. 317 F.Supp. 1294. The Secretary appealed directly to this Court under 28 U.S.C. § 1252.[3] We noted probable jurisdiction, 401 U.S. 935, and the case was briefed and argued on the merits. We now reverse the judgment of the District Court.

In our last consideration of a challenge to the constitutionality of a classification created under the Social Security Act, we held that "a person covered by the Act has not such a right in benefit payments as would make every defeasance of 'accrued' interests violative of the Due Process Clause of the Fifth Amendment." Flemming v. Nestor, 363 U.S. 603, 611. The fact that social security benefits are financed in part by taxes on an employee's wages does not in itself limit the power of Congress to fix the levels of benefits under the Act or the conditions upon which they may be paid. Nor does an expectation interest in public benefits confer a contractual right to receive the expected amounts. Our decision in Goldberg v. Kelly, 397 U.S. 254, upon which the District Court relied, held that as a matter of procedural due process the interest of a welfare recipient in the continued payment of benefits is sufficiently fundamental to prohibit the termination of those benefits without a prior evidentiary hearing. But there is no controversy over procedure in the present case, and the analogy drawn in Goldberg between social welfare and "property," 397 U.S., at 262 f. 8, cannot be stretched to impose a constitutional limitation on the power of Congress to make substantive changes in the law of entitlement to public benefits.

To characterize an act of Congress as conferring a "public benefit" does not, of course, immunize it from scrutiny under the Fifth Amendment. We have held that "[t]he interest of a covered employee under the [Social Security] Act is of sufficient substance to fall within the protection from arbitrary governmental action afforded by the Due Process Clause." Flemming v. Nestor, 363 U.S., at 611. The appellee argues that the classification embodied in § 224 is arbitrary because it discriminates between those disabled employees who receive workmen's compensation and those who receive compensation from private insurance or from tort claim awards. We cannot say that this difference in treatment is constitutionally invalid.

A statutory classification in the area of social welfare is consistent with the Equal Protection Clause of the Fourteenth Amendment if it is "rationally based and free from invidious discrimination." Dandridge v. Williams, 397 U.S. 471, 487. While the present case, involving as it does a federal statute, does not directly implicate the Fourteenth Amendment's Equal Protection Clause, a classification which meets the test articulated in Dandridge is perforce consistent with the due process requirement of the Fifth Amendment. Cf. Bolling v. Sharpe, 347 U.S. 497, 499.

To find a rational basis for the classification created by § 224, we need go no further than the reasoning of Congress as reflected in the legislative history. The predecessor of § 224, enacted in 1956 along with the amendments first establishing the federal disability insurance program, required a full offset of state or federal[4] workmen's compensation payments against benefits payable under federal disability insurance. 70 Stat. 816. It is self-evident that the offset reflected a judgment by Congress that the workmen's compensation and disability insurance programs in certain instances served a common purpose, and that the workmen's compensation programs should take precedence in the area of overlap. The provision was repealed in 1958, 72 Stat. 1025, because Congress believed that "the danger that duplication of disability benefits might produce undesirable results [was] not of sufficient importance to justify reduction of the social security disability benefits." H.R. Rep. No. 2288, 85th Cong., 2d Sess., p. 13.

In response to renewed criticism of the overlap between the workmen's compensation and the social security disability insurance programs, Congress re-examined the problem in 1965. Data submitted to the legislative committees showed that in 35 of the 50 States, a typical worker injured in the course of his employment and eligible for both state and federal benefits received compensation for his disability in excess of his take-home pay prior to the disability. Hearings on H.R. 6675 before the Senate Committee on Finance, 89th Cong., 1st Sess., p. 904. It was strongly urged that this situation reduced the incentive of the worker to return to the job, and impeded the rehabilitative efforts of the state programs. Furthermore, it was anticipated that a perpetuation of the duplication in benefits might lead to the erosion of the workmen's compensation programs.[5] The legislative response was § 224, which, by limiting total state and federal benefits to 80% of the employee's average earnings prior to the disability, reduced the duplication inherent in the programs and at the same time allowed a supplement to workmen's compensation where the state payments were inadequate.

The District Court apparently assumed that the only basis for the classification established by § 224 lay in the characterization of workmen's compensation as a "public benefit." Because the state program was financed by employer contributions rather than by taxes, the Court held that the "public" characterization afforded no rational basis to distinguish workmen's compensation from private insurance. We agree that a statutory discrimination between two like classes cannot be rationalized by assigning them different labels, but neither can two unlike classes be made indistinguishable by attaching to them a common label. The original purpose of state workmen's compensation laws was to satisfy a need inadequately met by private insurance or tort claim awards, Congress could rationally conclude that this need should continue to be met primarily by the States, and that a federal program which began to duplicate the efforts of the States might lead to the gradual weakening or atrophy of the state programs.

We have no occasion, within our limited function under the Constitution, to consider whether the legitimate purposes of Congress might have been better served by applying the same offset to recipients of private insurance, or to judge for ourselves whether the apprehensions of Congress were justified by the facts. If the goals sought are legitimate, and the classification adopted is rationally related to the achievement of those goals, then the action of Congress is not so arbitrary as to violate the Due Process Clause of the Fifth Amendment.

The judgment is

Reversed.

[Mr. Justice Douglas filed a dissenting opinion. Mr. Justice Marshall filed a separate dissenting opinion, in which Mr. Justice Brennan joined.]

[1] Section 224 provides, in pertinent part:

"If for any month prior to the month in which an individual attains the age of 62 --
"(1) such individual is entitled to benefits under section 423 of this title, and
"(2) such individual is entitled for such month, under a workmen's compensation law or plan of the United States or a State, to periodic benefits for a total or partial disability (whether or not permanent), and the Secretary has, in a prior month, received notice of such entitlement for such month,
the total of his benefits under section 423 of this title for such month and of any benefits under section 402 of this title for such month based on his wages and self-employment income shall be reduced (but not below zero) by the amount by which the sum of --
"(3) such total of benefits under sections 423 and 402 of this title for such month, and
"(4) such periodic benefits payable (and actually paid) for such month to such individual under the workmen's compensation law or plan,
exceeds the higher of --
"(5) 80 percentum of his 'average current earnings' . . . .
"For purposes of clause (5), an individual's average current earnings means the larger of (A) the average monthly wage used for purposes of computing his benefits under section 423 of this title, or (B) one-sixtieth of the total of his wages and self-employment income (computed without regard to the limitations specified in sections 409(a) and 411(b)(1) of this title) for the five consecutive calendar years after 1950 for which such wages and self-employment income were highest.

[2] E.g., Gambill v. Finch, 309 F.Supp. 1 (ED Tenn. 1970); Lofty v. Cohen, 325 F.Supp. 285, aff'd sub nom. Lofty v. Richardson, 440 F.2d 1144 (CA6 1971); Bartley v. Finch, 311 F.Supp. 876 (ED Ky. 1970); Bailey v. Finch, 312 F.Supp. 918 (ND Miss. 1970); Benjamin v. Finch, Civ. No. 32816, ED Mich., May 26, 1970, aff'd sub nom. Benjamin v. Richardson, No. 20, 714 CA6, April 29, 1971; Gooch v. Finch, Civ. No. 6840, SD Ohio, July 13, 1970; Rodatz v. Finch, Civ. No. 69-170, ED Ill., Sept. 4, 1970, aff'd sub nom. Rodatz v. Richardson, _____ F.2d _____ (CA7 1971).

[3] "Any party may appeal to the Supreme Court from an interlocutory or final judgment, decree or order of any court of the United States . . ., holding an Act of Congress unconstitutional in any civil action, suit, or proceeding to which the United States or any of its agencies, or any officer or employee thereof, as such officer or employee, is a party."

[4] The primary federal workmen's compensation programs are the Longshoremen's and Harbor Workers' Compensation Act, 44 Stat. 1424, 33 U.S.C. § 901 et seq. (1970 ed), applicable to employees in the District of Columbia and in maritime-related occupations, and the Federal Employees' Compensation Act, 80 Stat. 532, 5 U.S.C. §§ 8101 et seq. (1970 ed), applicable to employees of the Federal Government. The overwhelming majority of workers in the United States are covered by state rather than federal programs, and thus we may refer generally to workmen's compensation as a program of the States.

[5] The Senate Committee on Finance, with whom the 1965 amendment originated, took note of "the concern that has been expressed by many witnesses in the hearings about the payment of disability benefits concurrently with benefits payable under State workmen's compensation programs." S. Rep. No. 404, 89th Cong., 1st Sess., p. 100. Testimony concerning the anticipated effects of duplication upon the future of the state programs appears in Hearings on H.R. 6675 before the Senate Committee on Finance, 89th Cong., 1st Sess., at 252, 259, 366, 540, 738-740, 892-897, 949-954, 990.

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