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August 18, 1978

UNITED STATES of America, Defendant

The opinion of the court was delivered by: BARTELS

Plaintiff, Mav Freight Service, Inc. ("Mav") seeks a refund of $ 9,863.10 together with interest in withholding and Federal Insurance Contributions Act ("FICA") taxes paid for the calendar year 1969. The taxes were assessed on amounts paid by Mav to a number of individuals for work performed in unloading shipments of beef delivered in the metropolitan New York area.


Mav is a New York corporation engaged in the freight trucking business, and in 1969 was involved in the delivery of beef and other meat products shipped from slaughterhouses in the midwest to consignees in the New York area. This beef was packed and sealed by shippers in railroad owned "piggyback" trailers which were then placed on flatbed railroad cars and consigned for delivery to processing warehouses in the metropolitan New York area. Mav was one of the companies retained by shippers to transport these "piggyback" trailers from the receiving railroad yards to the consignees' warehouses.

 Upon dispatching a loaded trailer, a shipper would notify Mav by phone of the name of the shipment's consignee and the time and place of arrival of the train carrying the "piggyback" trailer. Upon arrival, Mav would be notified by the railroad as to the trailer's availability for pick-up.

 Rather than maintaining a fleet of tractors large enough to handle the hundred or more trailers arriving each week, Mav contracted with individuals who owned and operated tractors to make the deliveries. Upon arrival of a trailer, Mav would contact one of these owner-operators and instruct him as to when and where to make the pick-up and delivery. Although Mav utilized a number of different owner-operators during 1969, most of its deliveries were limited to two or three owner-operators. Mav itself owned two tractors, and on occasion, Mav's general manager would also make deliveries. The service which Mav provided included not only delivery of the loaded trailers to their respective consignees, but also included unloading of the trailers at the consignees' warehouses, and return of the empty trailers to the railroad yards at which they were picked up.

 In order to perform the unloading portion of its service, Mav authorized owner-operators to engage, from time to time, unloaders on Mav's behalf, and to obligate Mav to pay them. These unloaders were uncommitted individuals who hung around in the vicinity of the consignees' warehouses looking for work. They were available to work not only on Mav trucks but on any truck and, as a tractor-trailer neared the warehouse, would approach it and offer their unloading services. The price of this service for unloading swinging beef in 1969 was $ 30 or $ 35 a trailer, and was non-negotiable, being the same regardless of which unloader was hired. Generally, a driver would hire the first unloader to reach his truck, whether by virtue of a scramble between the unloaders, or the informal rotation system which prevailed at some warehouses. Although this was the common practice, a driver was free to hire a particular unloader with whom he was familiar. In some instances, Mav contacted unloaders with whom it had dealt previously, to arrange to have them available to unload its trailers at a particular time and location.

 After engaging an unloader, a driver waited until the consignee had assigned him a dock at which to unload his trailer. When an unloading dock was assigned, the driver would back his trailer to the dock and the driver, or the unloader under his supervision would break the seal on the trailer, allowing unloading to proceed. In order to unload a trailer of swinging beef, an unloader had to remove the beef forequarters and hindquarters from the hooks on which they were hung, and carry them to hooks suspended from rails on the unloading dock. To facilitate the handling of these sides of beef, each of which weighed between 180 and 220 pounds, unloaders made use of hand held meat hooks which they supplied themselves at a cost of $ 2 to $ 3. During unloading, unloaders were required, pursuant to federal regulations, to wear white coats and gloves. Some of the unloaders who worked for Mav supplied their own coats and gloves, while others made use of garments which consignees' employees had used and placed in receptacles for dirty laundry.

 At some warehouses, a single unloader was permitted to unload a full trailer of swinging beef. At other warehouses, consignees required at least two unloaders to work on a trailer. Regardless of whether more than one unloader was required, or whether unloaders decided among themselves to share the work of unloading a particular trailer, the driver made the unloading arrangement with a single individual, and paid only the flat rate of $ 30 to $ 35 per load.

 Although unloading forequarters and hindquarters of beef requires a combination of strength and agility, no significant amount of skill is required, and an unloader could become proficient in a month or less. An inexperienced or careless unloader might cause damage to a side of beef by dropping it or improperly inserting his hook through the more valuable cuts, but in general this was rare and any damage was slight.

 The speed at which the unloaders worked was controlled by the speed at which the consignees' employees worked. Unloaders could only bring beef out to the dock if hooks were available to hang it on, and this depended on factors such as the consignees' need for a particular cut at a particular moment and the pace at which consignees' employees moved the beef off the dock and into the warehouse. When consignees' employees took coffee breaks and lunch breaks, unloaders were not permitted to continue unloading and had to adjust their schedules accordingly. Because unloaders could not determine the pace at which the trailers were unloaded, they could not profit through the use of any management skills. Similarly, when two or more unloaders worked together on a load, they divided the flat rate payment evenly, and thus neither profited from the other's work.

 Although the drivers were free to supervise the unloading process, the general level of experience among the unloaders and the fact that the pace of unloading was set by consignees' employees made it unnecessary for Mav's drivers to exercise such supervision over the unloaders they hired. As a result, while trailers were being unloaded, owner-operators were able to rest in the cabs of their tractors, or even leave the trailer and return to the railroad yard if necessary to obtain additional trailer loads. However, if at any time it appeared to the driver that an unloader was doing his job improperly, the driver had the right to discharge him.

 As a general matter, when an unloader had completed his job, the driver would then pay the unloader in cash. Although this was the manner in which payments were made by most trucking companies, the method used by Mav was somewhat different. On some occasions, Mav did provide its drivers with cash for paying unloaders. More commonly, though, Mav would not pay unloaders in cash but would instead issue Mav checks to its owner-operators with which to pay the unloaders, or authorize the drivers to obligate Mav to make a single lump-sum payment to an unloader for all of the work he had done during an entire week. As a result of this deferred payment system, some unloaders were unwilling to work on Mav trucks. A number of unloaders, however, did work for Mav on a fairly regular basis between 1967 and 1969. At the end of each week, one or more of these unloaders would go to Mav's business office to receive a check for the week's work or would receive such a check in the mail. At times, the check for all of Mav's unloading at a single location would be issued in the name of one of the unloaders who regularly worked for Mav. This unloader in turn would then divide the amount of the check with the other unloaders, each taking a share proportionate to the number of Mav loads he had unloaded that week. These payments were made by Mav out of its own funds, and Mav subsequently included the cost of unloading in its bills to shippers on a dollar-for-dollar basis.


 The jurisdiction over Mav's claim for refund is based upon 28 U.S.C. § 1346(a)(1). The taxes which it seeks to recover were collected pursuant to the FICA and withholding tax provisions of the Internal Revenue Code, 26 U.S.C. §§ 3101 Et seq. and 26 U.S.C. §§ 3401 Et seq., respectively. The assessment of FICA and withholding taxes against Mav was based upon names appearing on checks paid to the unloaders and petty cash receipts received from them by Mav. Mav has the burden of proving not only that the assessment ...

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