Adams v. Sullivan, 90-5448

Decision Date08 January 1991
Docket NumberNo. 90-5448,90-5448
Citation928 F.2d 725
Parties, Unempl.Ins.Rep. CCH 15978A Robert S. ADAMS, Plaintiff-Appellant, v. Louis W. SULLIVAN, M.D., Secretary of Health and Human Services, Defendant-Appellee.
CourtU.S. Court of Appeals — Sixth Circuit

Richard E. Wentz (argued), Robinson, Arnzen, Parry & Wentz, Covington, Ky., for plaintiff-appellant.

Louis DeFalaise, U.S. Atty., John S. Osborn, III, Asst. U.S. Atty., Office of U.S. Atty., Lexington, Ky., Sharon F. Adams, John Jarrett (argued), Department of Health & Human Services, Atlanta, Ga., for defendant-appellee.

Before KRUPANSKY, GUY, and SUHRHEINRICH, Circuit Judges.


Plaintiff, Robert Adams, appeals the district court's order affirming a decision by the Secretary of Health and Human Services (Secretary). The Secretary found that Adams was overpaid Social Security retirement benefits for the years 1985, 1986, and 1987. Adams began receiving Social Security retirement benefits in 1985, but he continued working as a traveling salesman, earning income in amounts sufficient to reduce his Social Security benefits. Adams does not contest the reduction, but the amount of the reduction. It is Adams' contention that he is "self-employed" and not an "employee." The distinction is a significant one because, if construed to be self-employed, only his net earnings after the deduction of business expenses would be used as an offset against his retirement benefits.

The district court concluded that substantial evidence supported the Secretary's decision that Adams was an employee. We agree and affirm.


Prior to retirement in 1985 at the age of sixty five, Adams worked for Bowman Distribution (Bowman) as a traveling salesman. After his retirement, he continued to work for Bowman as a travelling salesman. What differences, if any, existed between his job on a day-to-day basis before retirement and after retirement are not set forth in the record. We do know, however, that the work performed for Bowman after 1985 was pursuant to a salesman's agreement, whereby Adams agreed to devote his best efforts to the performance of duties for the company; to give proper time and attention to furthering the company's business; to confine his activities to the classifications of customers and territory assigned to him; to refrain from soliciting or accepting orders from other classifications of customers or territories; and to comply with all rules, regulations, and instructions contained in the sales manual and official bulletins issued by Bowman. He further agreed that he would not enter into or engage in any business that competes with Bowman's business, and that he would bear responsibility for all expenses in connection with his sales activities, including but not limited to travel, automobile, supplies, and telephone.

Bowman filed regular W-2 forms for Adams in the years 1985, 1986, and 1987, showing earnings from commission sales of $18,645.39, $20,605.32, and $21,751.95, respectively. For the years in question, Adams filed a Schedule C with his income tax returns, indicating expenses incurred of $3,510 in 1985, $4,002 in 1986, and $7,126 in 1987. For purposes of the Social Security benefits offset, Adams contends that his income for 1985, 1986, and 1987 should be reduced by the amounts he claimed on Schedule C as business expenses. 1 There is no dispute that if Adams were self-employed he could have deducted his business expenses from his gross wages for purposes of determining the proper offset against Social Security benefits. Our first task, then, is to determine whether substantial evidence supports the Secretary's determination that Adams is not self-employed. We first look to the Secretary's regulations that address the issues of self-employment status:

(c) Factors that show self-employed status. Some aspects of a job arrangement or business venture that may show you are self-employed are as follows:

(1) You make a profit or suffer a loss.

(2) You are hired to complete a certain job and if you quit before the job is completed you may be liable for damages.

(3) You work for a number of persons or firms at the same time.

(4) You advertise to the general public that you are available to perform services.

(5) You pay your own expenses and have your own equipment and work place.

20 C.F.R. Sec. 404.1007(c). Although Adams would appear to meet criterion (5), he does not meet the other criteria. Of particular significance is the fact that he has committed himself to work exclusively for Bowman. In this regard, the Internal Revenue Service (IRS) issued a ruling in 1960 involving another of Bowman's salesmen. In pertinent part, this ruling holds:

Information furnished by Mr. Goodwin indicates that his entire business activity is the solicitation of orders for the Company from the requisite types of customers. If this is the case he should be considered an employee of the Company for purposes of the taxes imposed under the Federal Insurance Contributions Act....

The Social Security Act, 42 U.S.C. Sec. 410(j), defines the term employee. Subsection (3)(D) specifies that

any individual ... who performs services for remuneration for any person--


(D) as a traveling or city salesman ... engaged upon a full-time basis in the solicitation on behalf of, and the transmission to, his principal (except for side-line sales activities on behalf of some other person) of orders from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments for merchandise for resale or supplies for use in their business operation....

The accompanying regulation, 20 C.F.R. Sec. 404.1008(e), provides additional explanation:

(e) Traveling or city salesman. The main activity of a traveling or city salesman is taking orders for merchandise for another person or firm.... The salesman sells merchandise to others for resale or for use in their own business. We consider you a traveling or city salesman if most of your work is done for a single person or firm even though you have incidental sideline sales activities. However, you are not an employee under this paragraph as to those sideline sales. If you take orders for a number of persons or firms as a "multiple line" salesman, you are not a traveling or city salesman.

Adams never argues that he is a "multiple line" salesman within the meaning of the statute. In fact, during the hearing before the ALJ, Adams stated that he worked only for Bowman. The record does not indicate whether Adams worked full or part-time for Bowman, only that Adams had no prearranged work hours. Although the Salesman's Agreement states that Adams is...

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1 cases
  • Clarke v. Chater, 95-3909NE
    • United States
    • U.S. Court of Appeals — Eighth Circuit
    • August 28, 1996
    ... ... See 20 C.F.R. § 404.1007 (relevant factors for determining employment status); Adams v. Sullivan, 928 F.2d 725, 726-27 (6th Cir.1991) (standard of review). We affirm the district ... ...

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