Faust v. West — VA may reduce a total PTSD rating when clear and convincing evidence shows substantially gainful employment

Faust v. West involved a veteran whose 100% disability evaluation for PTSD based on unemployability was later reduced after evidence showed that he was operating a business and earning substantial income. The record reflected that the veteran had previously been granted a total rating based on inability to engage in substantially gainful employment under the TDIU framework. However, later financial evidence demonstrated earnings of approximately $48,000 in a single year through self-employment activities.

The Court addressed whether this employment constituted substantially gainful employment for purposes of TDIU and whether the Board properly upheld the rating reduction. In doing so, the Court discussed the meaning of substantially gainful employment under 38 C.F.R. § 4.16. The Court explained that substantially gainful employment generally means employment that provides annual income exceeding the poverty threshold for one person, regardless of the number of hours or days worked. The Court emphasized that actual income level, rather than merely the structure or flexibility of employment, is a major factor in determining whether employment is substantially gainful rather than marginal.

The Court ultimately affirmed the Board’s decision, finding that the veteran’s demonstrated earnings established actual employability and substantially gainful employment. The case became one of the foundational precedents defining substantially gainful employment in the TDIU context.

Faust also reinforced broader rating reduction principles. The Court reiterated that VA rating reductions must comply with general regulatory protections governing reductions, including consideration of the veteran’s ability to function under the ordinary conditions of life and work. Later cases frequently cite Faust for the principle that actual improvement in functional capacity must be demonstrated before a rating reduction is proper.

Employment producing income above the poverty threshold generally constitutes substantially gainful employment for TDIU purposes regardless of the number of hours worked. VA rating reductions also require evidence demonstrating improvement in the veteran’s ability to function under the ordinary conditions of life and work.

A veteran may still be considered substantially gainfully employed even when working limited hours if actual earnings exceed the poverty threshold. Faust is one of the central cases defining the economic component of TDIU analysis

Faust remains one of the most cited TDIU cases because it established a workable benchmark for substantially gainful employment tied to poverty-threshold income. It is also frequently cited in rating reduction litigation involving functional improvement standards.

VA sometimes:
• focuses only on whether employment exists rather than whether earnings exceed marginal levels,
• improperly characterizes self-employment or accommodated work as substantially gainful without factual analysis,
• or reduces ratings without adequately addressing improvement under ordinary life and work conditions.

A veteran receiving TDIU later begins operating a small business with annual income significantly exceeding the poverty threshold. VA may rely on Faust to argue that the veteran has regained substantially gainful employment.

Faust is commonly used:

by VA when arguing that actual earnings establish employability,
by veterans when distinguishing marginal or protected employment from substantially gainful work,
and in rating reduction cases requiring proof of actual functional improvement.

The case is particularly important when analyzing:

• self-employment,
• flexible work arrangements,
• family businesses,
• or fluctuating earned income.

38 C.F.R. § 4.16, 38 C.F.R. §§ 4.1, 4.2, 4.10, Brown v. Brown, Moore v. Derwinski, Ferraro v. Derwinski