Birmingham v. Bartels

Decision Date06 January 1947
Docket Number13125,No. 13127.,No. 13124,13124,13127.
Citation157 F.2d 295
PartiesBIRMINGHAM v. BARTELS et al. SAME v. GEER et al. WILLIAMS et al. v. BARTELS et al.
CourtU.S. Court of Appeals — Eighth Circuit


Lyle M. Turner, Sp. Asst. to Atty. Gen. (Samuel O. Clark, Jr., Asst. Atty. Gen., Sewall Key, A. F. Prescott, and Harold D. Cohen, Sp. Assts. to Atty. Gen., Maurice F. Donegan, U. S. Atty., of Davenport, Iowa, and Cloid I. Level, Asst. U. S. Atty., of Des Moines, Iowa, on the brief), for E. H. Birmingham, appellant.

Joseph A. Padway and Robert A. Wilson, both of Washington, D. C., and Chauncey A. Weaver, of Des Moines, Iowa, for Griff Williams et al., interveners, appellants.

Thomas B. Roberts and Clyde B. Charlton, both of Des Moines, Iowa, for Roy Bartels et al. and Larry V. Geer et al., appellees.

Gordon Diesing, of Omaha, Neb. (William J. Hotz, William F. Dalton, and Hotz & Hotz, all of Omaha, Neb., on the brief), for Nebraska National Hotel Co., amicus curiae.

Before GARDNER, WOODROUGH, and JOHNSEN, Circuit Judges.

Writ of Certiorari Granted January 6, 1947. See 67 S.Ct. 494.

JOHNSEN, Circuit Judge.

These are appeals by a Collector of Internal Revenue from judgments of a District Court in favor of two ballroom operators1 for refunds of social security taxes (retirement and unemployment), 26 U.S. C.A. Int.Rev.Code, §§ 1400,2 1410, 1600, collected from the operators on the leaders and members of a number of traveling orchestras, which had furnished the music, mostly on single-night engagements,3 for some public dances held at the ballrooms during 1941 and 1942. The leaders of the orchestras which had played at one of the ballrooms intervened in that suit to oppose recovery and have also taken an appeal.

The question is whether such a relationship was involved in the engagements as entitled the Commissioner of Internal Revenue to treat the leaders and members of the orchestras as employees of the ballroom operators for social-security-tax purposes. The ballroom operators contended that the relationship between them and the leaders and members of the orchestras had not been that of employer and employee, but that each of the leaders was an independent contractor and that the members of the orchestras were employees of the leaders in the engagements. The District Court adopted this view, 59 F.Supp. 84, and held4 that the tax authorities had accordingly erred in requiring the ballroom operators to pay social security taxes on the leaders and their orchestra-members.

The engagement in each instance was entered into by a standard-form contract,5 referred to as "Form B", which the American Federation of Musicians6 had prepared in 1941 and thereafter required all its members to use. The contract designated the ballroom operator as "employer" and the leader and his orchestra-members as "employees". It contained a recitation that "the employer employs the personal services of the employees, as musicians severally", and a provision that "the employees severally, through their representative, agree to render collectively to the employer services as musicians in the orchestra under the leadership of the regular leader, by whose name the orchestra was known", in accordance with the terms and conditions of the contract. The place, the date, and the hours of the engagement were specified, together with the price to be paid, which was set out as a lump sum, with the option in some instances to take a fixed percentage of the gross receipts of the dance.

The contract further provided: "The employer shall at all times have complete control of the services which the employees will render under the specifications of this contract. On behalf of the employer the Leader will distribute the amount received from the employer to the employees, including himself, as indicated on the opposite side of this contract, or in place thereof on separate memorandum supplied to the employer at or before the commencement of the employment hereunder and take and turn over to the employer receipts therefor from each employee, including himself. The amount paid to the Leader includes the cost of transportation, which will be reported by the Leader to the employer. The employer hereby authorizes the Leader on his behalf to replace any employee who by illness, absence, or for any other reason does not perform any or all of the services provided for under this contract."

The Regulations defining employer-employee relationship for social-security-tax purposes, Treasury Regulations 106, § 402.204, Treasury Regulations 107, § 403.204, promulgated under the authority of 26 U.S.C.A. Int.Rev.Code, §§ 1429, 1609, provide: "Every individual is an employee if the relationship between him and the person for whom he performs services is the legal relationship of employer and employee. Generally such relationship exists when the person for whom services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished. That is, an employee is subject to the will and control of the employer not only as to what shall be done but how it shall be done. In this connection, it is not necessary that the employer actually direct or control the manner in which the services are performed; it is sufficient if he has the right to do so. The right to discharge is also an important factor indicating that the person possessing that right is an employer. Other factors characteristic of an employer, but not necessarily present in every case, are the furnishing of tools and the furnishing of a place to work, to the individual who performs the services. In general, if an individual is subject to the control or direction of another merely as to the result to be accomplished by the work and not as to the means and methods for accomplishing the result, he is an independent contractor. An individual performing services as an independent contractor is not as to such services an employee. Generally, physicians, lawyers, dentists, veterinarians, contractors, subcontractors, public stenographers, auctioneers, and others who follow an independent trade, business, or profession, in which they offer their services to the public, are independent contractors and not employees. Whether the relationship of employer and employee exists will in doubtful cases be determined upon an examination of the particular facts of each case. If the relationship of employer and employee exists, the designation or description of the relationship by the parties as anything other than that of employer and employee is immaterial. Thus, if such relationship exists, it is of no consequence that the employee is designated as a partner, coadventurer, agent, or independent contractor. * * *"

The Regulations have merely reiterated definitions and tests of the common law for determining master-and-servant and independent-contractor relationships in vicarious tort-liability. Cf. Singer Manufacturing Co. v. Rahn, 132 U.S. 518, 523, 10 S.Ct. 175, 33 L.Ed. 440; Casement v. Brown, 148 U.S. 615, 622, 13 S.Ct. 672, 37 L.Ed. 582; Restatement, Agency, § 220.7

It will be noted that the "Form B" contract expressly purported to establish the common-law relation of employer and employee between the ballroom operator and the leader and each of his orchestra-members by providing, after designating the ballroom operator as "employer" and the leader and his orchestra-members as "employees", that "The employer shall at all times have complete control of the services which the employees will render under the specifications of this contract." That the purpose of the American Federation of Musicians in adopting the contract form was to shift as nearly as possible the social-security-tax burden previously borne by a leader on his orchestra-members to those engaging the services of the orchestra, and also to bring the leader himself under the benefits of the Social Security Act, is conceded.

Previously, an orchestra assembled and directed by a leader and performing transient engagements for establishment owners, such as hotels, clubs, ballrooms, etc., for which the leader or his booking agent entered into the contracts, had been regarded as an entrepreneurial enterprise of the leader. Thus, in Williams v. United States, 7 Cir., 126 F.2d 129, certiorari denied 317 U.S. 655, 63 S.Ct. 52, 87 L.Ed. 527, such a leader had been held to be an independent contractor and to be liable for the payment of social security taxes on his orchestra-members. Spillson v. Smith, 7 Cir., 147 F.2d 727, had repeated this view. There had been holdings also by state courts, under state unemployment-insurance statutes, that leaders of orchestras, who directed, hired and fired, and were liable to the individual musicians for their services, were the employers of the orchestra-members, as opposed to the owners of the establishments with whom the engagements were had, even where the engagements had been for extensive periods, the performances had constituted a part of the regular business of the establishment-owner, and the establishment-owner had exercised some measure of control over the execution of the performances. See e. g. People v. Grier, 53 Cal.App.2d Supp. 841, 128 P.2d 207; and cf. also Hill Hotel Co. v. Kinney, 138 Neb. 760, 295 N.W. 397; Seattle Aerie No. 1 of Fraternal Order of Eagles v. Commissioner of Unemployment Compensation, 23 Wash.2d 167, 160 P.2d 614, 163 P.2d 921.

After the "Form B" contract came into use, however, the Commissioner of Internal Revenue had ruled that an establishment-owner engaging the services of an orchestra under such a contract and receiving performance thereunder was liable as an employer for the payment of social security taxes on the leader and the members of the orchestra, because the...

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