The VA has long acknowledged that a veteran may be entitled to TDIU while still working if that job is considered marginal employment including, on a facts found basis, employment in a protected environment. However, the VA consistently declined to define or interpret the term “employment in a protected environment.” In 2024, the CAVC addressed the term in the consolidated cases LaBruzza v. McDonough and McBride v. McDonough. After reviewing the cases, both involving veterans making wages above the poverty level and claiming entitlement to TDIU due to a protected work environment, the Court found the term unambiguously means “a lower-income position that, due to the veterans service-connected disability or disabilities, is shielded in some respect from competition in the employment market.”

What is TDIU?

A veteran may get paid for a 100% disability rating when service-connected disabilities prevent gainful employment, even though they do not meet the schedular requirements for a 100% rating.

38 C.F.R. § 4.16 provides requirements for qualifying for this, under Total disability ratings for compensation based on unemployability (TDIU) of the individual. Under 38 C.F.R. § 4.16 total disability ratings for compensation may be assigned, where the schedular rating is less than total, when the disabled person is, in the judgment of the rating agency, unable to secure or follow a substantially gainful occupation as a result of service-connected disabilities. The statute further requires:

  • The veteran have one disability ratable at 60 percent or more, or
  • The veteran has two or more disabilities ratable at 40 percent or more, with a combined rating of 70 percent or more, or
  • The veteran fails to meet above percentage standards, and the rating board submits the case to the Director, Compensation Service, for extra-schedular consideration, where the rating board will include a full statement as to the veteran’s service-connected disabilities, employment history, educational and vocational attainment and all other factors having a bearing on the issue

What is Marginal employment?

38 C.F.R. § 4.16 provides that marginal employment is not substantially gainful employment if:

  • the veteran’s earned annual income does not exceed the poverty threshold (established by the U.S. Department of Commerce, Bureau of the Census) or,
    on a facts found basis, the veteran’s earned annual income exceeds the poverty threshold, including but not limited to employment in a protected environment such as a family business or sheltered workshop.
  • The VA must consider the nature of the employment and the reason for termination.

How does this change “protected work environment” for TDIU?

While 38 C.F.R. § 4.16 (a) provides a total disability rating for veterans unable to maintain gainful employment due to service-connected disabilities, it also provides that gainful employment does not include marginal employment, and “marginal employment may also be held to exist, on a facts found basis (includes but is not limited to employment in a protected environment such as a family business or sheltered workshop), when earned annual income exceeds the poverty threshold.” And in accordance with this, the VA has granted TDIU in cases where the veteran is working and earning above the poverty the threshold, if the VA finds the veteran is working in a protected environment.

The holding in LaBruzza v. McDonough, addresses the requirements of protected work environment for TDIU: Protected work environment means a “lower-income position that, due to the veterans service-connected disabilities or disabilities, is shielded in some respect from competition in the employment market.” Labruzza/McBride, No. 21-4467 (Vet. App. 2024). Self-employment doesn’t automatically mean a veteran works in a protected work environment. While it can be above the poverty level, it still has to be relatively low income and shielded. Reasonable accommodations under ADA does not count as shielding from the competitive labor market. A veteran should submit evidence of accommodations beyond what is required by the ADA to prove marginal employment.