531 F.2d 554 (Fed. Cir. 1976), 173-73, McCormick v. United States

Docket Nº:173-73
Citation:531 F.2d 554
Party Name:McCormick v. United States
Case Date:March 17, 1976
Court:Court of Federal Claims

Page 554

531 F.2d 554 (Fed. Cir. 1976)

James P. McCORMICK

v.

The UNITED STATES.

No. 173--73.

United States Court of Claims.

March 17, 1976

Page 555

Herbert L. Awe, Washington, D.C., attorney of record, for plaintiff. Michael Mulroney, Washington, D.C. and William L. Goldman, of counsel.

Donald H. Olson, Washington, D.C., with whom was Asst. Atty. Gen. Scott P. Crampton, Washington, D.C., for defendant. Theodore D. Peyser, Jr., Washington, D.C., of counsel.

Before SKELTON, KUNZIG and BENNETT, Judges.

OPINION

PER CURIAM:

This case comes before the court on plaintiff's exceptions to the recommended decision, filed March 24, 1975, by Trial Judge Roald A. Hogenson, pursuant to Rule 134(h), having been submitted to the court on the briefs and oral argument of counsel. Upon consideration thereof, since the court agrees with the trial judge's recommended decision, as hereinafter set forth, it hereby affirms and adopts the same as the basis for its judgment in this case. Therefore, it is concluded that plaintiff is not entitled to recover and the petition is dismissed.

OPINION OF TRIAL JUDGE

HOGENSON, Trial Judge:

This is an action to recover an alleged overpayment of Federal employment taxes for the quarter ending September 30, 1972. Commonly known as social security taxes, such taxes are imposed on wages by the Federal Insurance Contributions Act, under section 3101 of the Internal Revenue Code of 1954 as to the employee's share of the tax, and under section 3111 as to the employer's share, with the employer charged by law with collecting and paying the employee's share of the tax by withholding from wages.

The issue is whether certain persons known as free-lance exercise boys (riders) and hotwalkers, who perform services for plaintiff in his business of training racehorses, are independent contractors, in which status their compensation for such services would not be wages subject to the tax, or whether such persons are employees of plaintiff, with their compensation as wages subject to the tax.

For the purposes of such taxes, section 3121(d) defines the term 'employee' as 'any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee * * *.'

For the reasons stated herein, it is concluded that plaintiff's free-lance exercise riders and hotwalkers are employees of plaintiff, that the employment taxes were properly collected from plaintiff, and that plaintiff's petition should be dismissed.

Page 556

The facts in this case are set forth in detail in the findings of fact which follow. They will be summarized here only to the extent necessary to explain the basis for the decision that plaintiff is not entitled to recover.

Taxpayer, James P. McCormick, is a public trainer of thoroughbred racehorses. As such, he trains horses of various owners to win horse races. Sometimes he is the owner or partial owner of horses he stables and trains. His obligations to a racehorse owner include providing shelter, feed, the basic equipment needed for training, daily maintenance and a training program directed toward making the horse a winner of races. The trainer is paid a flat daily fee of approximately $20 for his services and receives a portion of the purse when a horse wins a race. The trainer's relationship to the owner is that of an independent businessman. When necessary peripheral services, such as those of a veterinarian or a blacksmith, are needed the trainer engages the personnel and the cost is normally paid by the owner. In the regular conduct of the horse training business, the trainer retains the services of personnel necessary to assist him in properly training the horses.

Plaintiff uses the services of a foreman, grooms, hotwalkers and exercise riders on a regular basis. He acknowledges that those among such personnel who have a regular, permanent relationship with him are his employees for Federal employment tax purposes. As is commonly done in the racehorse training business, plaintiff obtains the services of other hotwalkers and exercise riders on an irregular basis to walk or exercise horses when the regular personnel are unavailable. It is the status of these people, hired on an irregular, nonpermanent basis, that is in issue here.

The training program involves conditioning the horse for racing through a regimen devised by the trainer according to the trainer's assessment of the horse. The program involves giving the horse some exercise every day. The basic exercises take the form of a 'walk' (leaidng the horse at a walking pace to provide light exercise or to 'cool' the horse gradually after strenuous exercise), a 'gallop' (running the horse on the track at less than full speed), and a 'work' (running the horse at full speed for short distances). The 'walk' is performed by a person called a 'hotwalker,' or when available and weather conditions permit, by a hotwalking machine which mechanically leads the horse around in a circle. An exercise rider puts the horse through a 'gallop' or a 'work.' The trainer tells such rider what type of exercise is to be accomplished and at which speed and for what distance the horse should be ridden on each occasion.

The trainer is normally in attendance at the track, whether a regular or irregular exercise rider is handling the horse, observing the exercise. The trainer is more cautious and more likely to be present when an irregular or so-called free-lancer 1 is handling the horse because of the free-lancer's unfamiliarity with the horse, or his lack of understanding of the trainer's 'modus operandi,' or because of the trainer's unfamiliarity with the free-lancer's ability. As a trainer's confidence in a free-lancer increases, the amount of instruction...

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