The opinion of the court was delivered by: BRENNAN
This litigation raises the question as to the status of certain workers as employees, within the meaning of Section 1426(d) of the Internal Revenue Code as amended by the Act of June 14, 1948, 26 U.S.C.A. § 1426(d).
Maurice H. Silver, doing business as Morris Construction Co. (hereinafter referred to as Morris), brings this action to recover taxes paid by him under the provisions of the Federal Insurance Contributions Tax, 26 U.S.C.A. § 1400 etc., during the period from 1947 to 1950, inclusive. Such payments were computed and paid upon the basis of the earnings of certain workers termed 'applicators' herein. Plaintiff claims that such payments were erroneously paid, upon his mistaken understanding that such applicators were his employees as defined in the section of the law above cited, when in fact they were independent contractors. Application for refund was properly made, same was denied and this action followed. The trial was held before the Court, the testimony of the plaintiff and one applicator was received, and it was stipulated that if all the other applicators upon whose earnings the plaintiff has paid the tax had testified that they would have testified substantially the same as the applicator witness who actually presented oral evidence, and that the plaintiff himself would have testified the same as to each individual applicator. In effect the determination of the employment status of all workers upon whose earnings the tax was paid by the plaintiff will be determined collectively rather than individually.
It is obvious that the decision here will require that the plaintiff's business methods and the facts pertaining to the business relationship of plaintiff and the applicators be examined and appraised. The evidence offered raises no serious factual dispute, and the findings of the Court are set out below in narrative form.
Plaintiff has been engaged in business at Syracuse, New York, since 1938. As far as pertinent here, it may be termed generally as a roofing and siding business; that is the furnishing and the fixing of materials to the roofs and the side walls of frame structures in need of repair. Contracts are solicited by salesmen from the owners of property. These contracts are in writing and provide a unit price for the materials and labor necessary to perform the repair or improvement which is described in general terms. No time is set out in the contract within which its obligations are to be fulfilled by either party. Such contracts are financed by Morris through a banking institution, and he receives the consideration from the bank after the owner's credit has been approved and a completion slip signed by the owner is presented to the bank. After the contract has been accepted, the materials are furnished by Morris and shipped or conveyed by him to the situs of the contract. At about this point, the applicator enters the picture.
An applicator is the person who performs the labor of affixing the roofing or siding material to the roofs or walls of the structures described in the contract. He is a person generally experienced in the work involved. Morris had the names of several such applicators who upon the completion of one job would apply for another. Newspaper ads were used by Morris to obtain additional applicators should the occasion arise. When a job was ready, the applicator came to Morris' office or was sent for by him and he was handed a plain sheet of paper, called a work sheet, which contained the name and the address of the owner of the property to be improved and a general statement of the work to be done. No measurements were contained on the paper, but the applicator was advised as to the approximate number of squares (100 square feet) to be applied. No writing was executed as between Morris and the applicator. With the exception of the work sheet, the arrangement between them was entirely oral. No price was fixed but both parties understood that payment was to be made by Morris upon a unit price set by the industry for each square of material applied, and that same would be paid upon the presentation of the completion slip signed by the owner, which in effect certified that the contract had been performed satisfactorily. No time was agreed upon or discussed within which the applicator would start or complete the work. With this somewhat informal arrangement, which the applicator was free to accept or reject, he was ready to begin his work. The applicator furnished his own transportation to the place of performance. He furnished his own tools and equipment which generally consisted of ladders, scaffolding, jacks, hammers and saws. He determined his own hours of labor and was free to hire his own helpers who would be paid by him or by Morris on his instruction. The applicator received no instructions as to where or in what manner he should start his work, or the method to be used in the application of the material. The jobs were occasionally inspected during the progress of the applicator's work by Morris, his employees or the salesmen above mentioned. It is evident, however, that Morris depended upon the fact that the applicator was a man of experience and upon the requirement that he procure a completion slip before payment was made to him, to insure that the work was being properly performed. It is further evident that the work of the applicator was of such a nature that it could only, or at least most conveniently, be performed in a generally accepted manner.
As already indicated the applicator was free to accept or reject the job offered to him. Upon the completion of a job, he was free to apply for a new job from Morris, to take no work at all or seek a job from another company engaged in a like business. Each job was separate and separate work sheets were furnished the applicator at the time he undertook same. The witness applicator apparently continued his course of business with Morris for about four years during which time he occasionally performed a few odd jobs for third persons.
The statute and regulation in so far as they apply here are set out in the footnote below.
The application thereof is guided by judicial decisions which have interpreted and applied them.
This discussion need not include reference to the conflict of lower court decisions prior to United States v. Silk, 331 U.S. 704, 67 S. Ct. 1463, 91 L. Ed. 1757 and Bartels v. Birmingham, 332 U.S. 126, 67 S. Ct. 1547, 91 L. Ed. 1947, nor the effect of the 1943 amendment to the statute. The case of Ringling Bros.-Barnum & Bailey Combined Shows v. Higgins, 2 Cir., 189 F.2d 865, decided by the Court of Appeals of this circuit and therefore binding upon this Court, held that the 'economic reality' test adopted by the Supreme Court was not overridden by the amendment. A realistic as opposed to a restricted approach to the determination of the employee status appears to be the obligation of the court, to be performed in the light of the purpose of the statute.
The question here is plainly a question of fact and the following quotations are appropriate.
'* * * the courts will find that degrees of control, opportunities for profit or loss, investment in facilities, permanency of relation and skill required in the claimed independent operation are important for decision. No one is controlling nor is the list complete.' United States v. Silk, supra, 331 U.S. at page 716, 67 S. Ct. at page 1469.
'It is the total situation that controls.' Bartels v. Birmingham, supra, 332 U.S. at page 130, 67 S. Ct. at page 1550.
The findings made above are sufficient in themselves to show the presence or absence of many of the elements above mentioned, so that reference will be made only to a few which might be considered as debatable or which are especially urged in the briefs filed.
The right of control of the individual performing the service as to the means and methods for accomplishing the desired result seems to be emphasized in the regulations. Without repeating facts already stated, this Court sees no more power of control by Morris over the applicators than a house owner would exercise over the independent contractor who undertook the painting of his house. Radio City Music ...