Air Terminal Cab, Inc. v. United States

• Citation: 478 F.2d 575
• Decision Date: 30 April 1973
• Docket Number: No. 72-1348.,72-1348.
• Parties: AIR TERMINAL CAB, INC., Appellee, v. UNITED STATES of America, Appellant. AIRWAY TAXI COMPANY, INC., Appellee, v. UNITED STATES of America, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

478 F.2d 575 (1973)

AIR TERMINAL CAB, INC., Appellee, v. UNITED STATES of America, Appellant.

AIRWAY TAXI COMPANY, INC., Appellee, v. UNITED STATES of America, Appellant.

No. 72-1348.

United States Court of Appeals, Eighth Circuit.

Submitted January 10, 1973.

Decided April 30, 1973.

Rehearing and Rehearing Denied May 22, 1973.

Wesley Filer, Atty., Dept. of Justice, Washington, D. C., for appellant.

William I. Rutherford, St. Louis, Mo., for appellees.

Before LAY, HEANEY and STEPHENSON, Circuit Judges.

Rehearing and Rehearing En Banc Denied May 22, 1973.

STEPHENSON, Circuit Judge.

The question before the Court is whether drivers of respondent's taxicabs are employees within the provisions of the Federal Insurance Contributions Act (FICA) (26 U.S.C. § 3101 et seq.) and the Federal Unemployment Tax Act (FUTA) (26 U.S.C. § 3301 et seq.), which impose taxes on employers to finance government benefits for employees.

These consolidated cases are suits for refund by two taxicab companies of partial payment of an assessment of withholding, FICA and FUTA taxes, penalties and interest allegedly owed by the plaintiffs. The plaintiff taxpayers have each paid one quarter of the alleged liabilities under protest.¹ The Government counterclaimed below for alleged liabilities for other quarters. The years in question are 1965 through 1968. The District Court for the Eastern District of Missouri, Judge Wangelin presiding, found that the taxicab drivers were not employees for purpose of federal income tax withholding, FICA and FUTA taxes. Air Terminal Cab, Inc. v. United States, 341 F.Supp. 1257 (E.D.Mo.1972).

The resolution of the question whether the taxicab drivers are employees must be made by applying common law definitions of "employee" and "independent" contractor. It was thought by some that the decisions in United States v. Silk, 331 U.S. 704, 67 S.Ct. 1463, 91 L.Ed. 1757 (1947) and Bartels v. Birmingham, 332 U.S. 126, 67 S.Ct. 1547, 91 L.Ed. 1947 (1947) resulted in a more relaxed meaning of the term "employee" as used in the tax statutes. Shortly after those decisions, however, Congress amended the definition sections of the pertinent acts to make it clear that the term "employee" should be read "under the usual common law rules." 26 U.S.C. § 3121(d) (2) and § 3306(i). See H.Conf.Rep.No. 2771, 81st Cong. 2d Sess. p. 104. See also, Hoosier Home Improvement Company v. United States, 350 F.2d 640, 642 (CA 7 1965).

The working relationship between the taxicab drivers and the appellees is undisputed and the facts are fully stipulated. The pertinent facts necessary for determination of the issue are as follows: Appellees, Air Terminal Cab, Inc. (Air Terminal) and Airway Taxi Company (Airway) are corporations organized and existing under and by virtue of the laws of Missouri. The method of operation of the two companies is substantially similar, but each is separately owned and operated. The two companies obtained franchises from St. Louis County to operate a specified number (12 each) of taxicabs within that county. Their cabs can only pick up passengers within the unincorporated areas of St. Louis County. The primary source of passengers in this restricted area is Lambert Airfield where passengers are picked up by the taxicabs waiting in line. The County granted franchises to appellees whose businesses involve company owned cabs operated by drivers who receive their compensation by retaining a percentage of the fares collected.

The companies do not have formal business offices but are operated from the homes of their respective presidents. They do not advertise nor do they have listed telephone numbers in the telephone directory. The taxicabs owned by the companies are not radio equipped, nor is there any kind of an operational dispatcher system. The drivers do not regularly report their whereabouts, nor do they receive instructions from the company presidents. The presidents may, if it becomes necessary to contact a driver, leave messages at the service stations where the taxicabs are left overnight, or they may call the drivers at their homes after working hours.

The taxicabs used in the businesses were owned and insured for liability by appellees. The drivers do not carry any insurance on their operation of the taxicabs. They are equipped with fare meters and have the company name, either "Lambert Airfield Cab, Co." or "Lambert Airport Cab, Co." painted in black letters on the door. When not in use, the taxicabs owned by each company are parked at separately owned service stations, in return for which each company contracts out to the particular service station the minor maintenance work needed on the taxicabs.

During the years in suit—1965 through 1968—the drivers of the companies' taxicabs operated in the following way:

(a) At the beginning of their shifts, each of the drivers pick up the taxicab he is to drive at the service station where the particular driver\'s company keeps the taxicabs pursuant to the maintenance-parking arrangement described above.

(b) From the service station, the drivers usually proceed directly to Lambert Airfield to pick up fare-paying passengers.

(c) After a passenger has been left at his destination, the drivers usually return directly to Lambert Airfield to pick up another fare-paying passenger. A driver makes an average of six (6) trips a day, consisting of transportation of a passenger from Lambert Airfield to the passenger\'s destination and return to the Airfield.

(d) The drivers maintain a trip sheet on which is to be noted the pick up point and destination of each fare-paying passenger and the amount of the fare paid by each passenger.

(e) At the end of the shift, each driver deducts from the total amount of fares collected, the amount expended for gasoline and oil. The amount remaining is then divided equally between the company and the driver. The driver takes the company\'s share and puts it in an envelope then along with the trip sheet drops the envelope through a slot in a metal strong box at the service station where the taxicabs are parked when not in use. The driver retains his own share of the fares collected and receives no other remuneration. These envelopes are picked up regularly by the president of the company. The trip sheets and envelopes are furnished to the drivers by the companies.

(f) The drivers do not use the taxicabs for their personal use. At the end of their shift, the drivers return the taxicabs to the service station to be parked and left until the next shift.

The drivers who drive the taxicabs owned by the plaintiff companies, as well as drivers for other taxicab companies in the St. Louis and St. Louis County areas, are organized into and are members of Local 688 Warehouse and Distribution Workers Union, affiliated with the International Brotherhood of Teamsters, Chauffeurs and Warehousemen of America. Pursuant to contracts entered into with Local 688, effective September 1, 1965 and extending through 1968, "owner-drivers"² are regarded as employees of taxpayers and taxpayers reserve "the right to control the manner, means and details of, and by which the owner-operator performs his services, as well as the ends to be accomplished."

The drivers are required to work a minimum of nine hours per day, five days per week pursuant to the union contract. They may work a maximum of 14 hours per day and six days per week. In addition, starting times and days to be worked are set by taxpayers. After drivers have completed one year of work they are entitled to a one-week paid vacation, sick leave benefits, and specified paid holidays. Article XII of the union contract gives the companies the right to discharge drivers pursuant to the union grievance procedure.

The issue of whether an employer-employee relationship exist for purposes of employment taxes has generally been held to be one of fact. Saiki v. United States, 306 F.2d 642, 648 (CA8 1962); American Consulting Corp. v. United States, 454 F.2d 473, 477 (CA3 1971); Lanigan Storage & Van Co. v. United States, 389 F.2d 337, 340-341 (CA6 1968); Lifetime Siding, Inc. v. United States, 359 F.2d 657, 662 (CA2 1966); Hoosier Home Improvement Co., Inc. v. United States, 350 F.2d 640, 643 (CA7 1965); McGuire v. United States, 349 F.2d 644, 646 (CA9 1965); Service Trucking v. United States, 347 F.2d 671, 672 (CA4 1965).

In the instant case the trial court likewise held it was a question of fact, stating at page 1263 of 341 F.Supp.:

"The question of plaintiffs\' control over the manner and means of the operation of the taxicab is a factual question. Considering all factors, the Court concludes that the plaintiff had little, if any, control over the means and method by which the drivers performed their services." (emphasis added)

However, this Court has not hesitated to reverse where the evidence did not support the conclusion reached by the trier of fact. Saiki v. United States, supra, 306 F.2d 642, 652 (CA8 1962); United States v. Kane, 171 F.2d 54 (CA8 1948).

Where the facts are stipulated "and there is no conflict in the evidence, or in the inferences which reasonably can be drawn therefrom, this Court may rule upon the question of law presented and is not restricted by the limitation of Rule 52(a) F.R.Civ.Proc." United States v. Kavanaugh, 308 F.2d 824, 828 (CA8 1962); United States v. Mississippi Valley Barge Line Co., 285 F.2d 381, 388 (CA8 1960); Compare, Commissioner v. Duberstein, 363 U.S. 278, 291, 80 S.Ct. 1190, 4 L.Ed.2d 1218 (1960); Azad v. United States, 388 F.2d 74, 78 (CA8 1968).

Moreover, even if we would apply the "clearly erroneous" rule, the Supreme Court has pointed out that "a finding is `clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been committed." United States v. U. S. Gypsum Company, 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948). In ...