MEMORANDUM AND ORDER
ERIC F. MELGREN, District Judge.
Plaintiff Debra Kellum seeks review of a final decision by the Commissioner of Social Security ("Commissioner") denying her application for disability insurance benefits and supplemental security income benefits. Kellum claims that the Commissioner's decision should be reversed because the Administrative Law Judge ("ALJ") erred by assigning no weight to the treating physician's opinion and by failing to properly account for her limitations in the hypothetical given to the vocational expert. Having reviewed the record, and as described below, the Court reverses the order of the Commissioner.
I. Factual and Procedural Background
Debra Kellum was born on November 26, 1955. In Kellum's applications for disability insurance benefits and supplemental security income benefits, she alleged a disability beginning October 15, 2008. The agency denied Kellum's application initially and on reconsideration. Kellum then asked for a hearing before an administrative law judge.
An administrative hearing was held on November 1, 2010. At that hearing, Kellum testified about her medical conditions. A vocational expert testified that Kellum would be able to perform the requirements of representative medium occupations. An independent medical examiner also testified.
The ALJ issued his written opinion on December 27, 2010. He found that Kellum had not engaged in substantial gainful activity since October 15, 2008, and that she suffered from two impairments: chronic back pain and depression. The ALJ found that Kellum's mental impairment did not meet or medically equal the listed criteria. He found that Kellum did not have a marked restriction of activities of daily living; social functioning; and difficulties in maintaining concentration, persistence, or pace. Instead, the ALJ determined that she only had mild to moderate restrictions in these areas.
The ALJ's decision states that he considered reports from Kellum's treating physician but that he gave no weight to the treating physician's opinion. He also stated that he considered the consultative physician's report, and although the consultative physician opined that Kellum could not work, the ALJ did not interpret the opinion to mean that Kellum could not perform any work-merely the work she had previously performed. The ALJ also stated that his findings were based in "good part" on the independent medical examiner's testimony, who participated via telephone during the administrative hearing. After finding that Kellum did not have an impairment equivalent to a listed impairment, the ALJ found that Kellum had the residual functioning capacity ("RFC") to perform medium work. The ALJ denied Kellum's request for benefits.
The ALJ found that Kellum was unable to perform any of her past relevant work, but a finding of "not disabled" was directed by the medical-vocational rules. Based on Kellum's age, education, work experience, and RFC, the ALJ found that there were jobs that existed in significant numbers in the local and national economy that Kellum could perform.
The Social Security Administration's Appeals Council granted Kellum's request for review. On September 7, 2012, the Appeals Council modified the ALJ's decision with regard to Kellum's physical limitations. The Appeals Council affirmed the ALJ's RFC findings as to Kellum's mental limitations. The Appeals Council's decision stands as the final decision. Because Kellum has exhausted all administrative remedies available, the Commissioner's decision is now final, and this Court has jurisdiction to review the decision.
II. Legal Standard
Pursuant to 42 U.S.C. § 405(g), "[t]he findings of the Commissioner of Social Security as to any fact, if supported by substantial evidence, shall be conclusive." Upon review, the Court must determine whether substantial evidence supports the factual findings and whether the ALJ applied the correct legal standard. "Substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. It requires more than a scintilla, but less than a preponderance." The Court is not to reweigh the evidence or substitute its opinion for the ALJ. The Court must examine the record as a whole, including whatever in the record detracts from the ALJ's findings, to determine if the ALJ's decision is supported by substantial evidence. Evidence is not substantial if it is overwhelmed by other evidence or if it is a mere conclusion.
To establish a disability, a claimant must demonstrate a physical or mental impairment that has lasted, or can be expected to last, for a continuous period of twelve months and an inability to engage in any substantial gainful work existing in the national economy due to the impairment. The ALJ uses a five-step sequential process to evaluate whether a claimant is disabled. The claimant bears the burden during the first four steps.
In steps one and two, the claimant must demonstrate that she is not presently engaged in substantial gainful activity and that she has a medically severe impairment or combination of impairments. "At step three, if a claimant can show that the impairment is equivalent to a listed impairment, she is presumed to be disabled and entitled to benefits." If, however, the claimant does not establish an impairment at step three, the process continues. The ALJ assesses the claimant's RFC, and at step four, the claimant must demonstrate that her impairment prevents her from performing her past work. The Commissioner has the burden at the fifth step ...