Breaux and Daigle, Inc. v. U.S.

• Decision Date: 04 May 1990
• Docket Number: No. 89-3364,89-3364
• Citation: 900 F.2d 49
• Parties: -1133, 90-2 USTC P 50,491, Unempl.Ins.Rep. CCH 15433A BREAUX AND DAIGLE, INC., Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee. Summary Calendar.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 49

900 F.2d 49

65 A.F.T.R.2d 90-1133, 90-2 USTC P 50,491,

Unempl.Ins.Rep. CCH 15433A

BREAUX AND DAIGLE, INC., Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.

No. 89-3364

Summary Calendar.

United States Court of Appeals Fifth Circuit.

May 4, 1990.

Peter J. Losavio, Jr., Baton Rouge, La., for plaintiff-appellant.

John P. Volz, U.S. Atty., New Orleans, La., Gary R. Allen, Chief, Appellate Section, Tax Div., Regina S. Moriarty, Dept. of Justice, David J. Pincus, Deborah Swann, Washington, D.C., for defendant-appellee.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before WILLIAMS, SMITH and DUHE, Circuit Judges.

DUHE, Circuit Judge.

Breaux and Daigle, Inc. appeals from the district court's judgment denying its request for a tax refund and ordering it to pay social security and unemployment insurance taxes assessed by the Internal Revenue Service. We affirm.

Breaux and Daigle is a Louisiana corporation which processes and sells crab meat. Crab meat pickers work at Breaux and Daigle's processing plant separating cooked crab meat from its shell. Prior to January 1, 1984, Breaux and Daigle treated the crab meat pickers as employees for tax purposes. However, in 1984 Breaux and Daigle supplied its crab meat pickers with forms, which they signed, stating that they would thereafter be treated as independent contractors and would be responsible individually for the payment of social security and unemployment taxes.

The IRS subsequently determined that the crab meat pickers were employees of Breaux and Daigle under the provisions of the Federal Insurance Contributions Act (FICA) ¹ and the Federal Unemployment Tax Act (FUTA) ² and assessed social security and unemployment taxes for 1984 and 1985. Breaux and Daigle paid a small portion of the assessment and filed a refund claim. When the IRS disallowed the claim, Breaux and Daigle filed suit in the district court to recover the amount paid, and the IRS counterclaimed for the remaining unpaid taxes. Finding that the crab meat pickers were employees of Breaux and Daigle for purposes of FICA and FUTA taxation, the district court rejected Breaux and Daigle's refund claim and ordered it to pay the remaining unpaid taxes.

The sole issue in this case is whether the crab meat pickers who work for Breaux and Daigle are its employees or independent contractors. The district court's findings of fact are reviewed for clear error under Fed.R.Civ.Pro. 52(a). See Icicle Seafoods, Inc. v. Worthington, 475 U.S. 709, 714, 106 S.Ct. 1527, 1530, 89 L.Ed.2d 739 (1986); Brock v. Mr. W. Fireworks, Inc., 814 F.2d 1042, 1044 (5th Cir.), cert. denied, 484 U.S. 924, 108 S.Ct. 286, 98 L.Ed.2d 246 (1987). Although we may only set aside factual findings of the district court if we have a firm and definite conviction that a mistake has been made, United States v. United States Gypsum Co., 333 U.S. 364, 394, 68 S.Ct. 525, 541, 92 L.Ed. 746 (1948), the district court's legal analysis of the inferences to be drawn from those facts is subject to plenary review. Radio WHKW, Inc. v. Yarber, 838 F.2d 1439, 1442 (5th Cir.1988); see Icicle Seafoods, 475 U.S. at 1714, 106 S.Ct. at 1530; Mr. W. Fireworks, 814 F.2d at 1044-45. Thus the lower court's determination of employee status is a finding of law subject to de novo consideration by this court. Halferty v. Pulse Drug Co., Inc., 821 F.2d 261, 265 n. 4 (5th Cir.), modified on rehg., 826 F.2d 2 (1987); Mr. W. Fireworks, 814 F.2d at 1045; Beliz v. W.H. McLeod & Sons Packing Co., 765 F.2d 1317, 1327 and n. 24 (5th Cir.1985).

For purposes of FICA and FUTA the term "employee" includes "any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee." 26 U.S.C. Sec. 3121(d)(2); 26 U.S.C. Sec. 3306(i). The relevant I.R.S. regulations elaborate on this directive:

Generally such relationship exits 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.

26 C.F.R. Sec. 31.3121(d)-1(c)(2)(FICA); see 26 C.F.R. Sec. 31.3306(i)-1(d)(FUTA). The regulations do not provide a workable test complete in themselves but rather provide a "summary of the principles of the common law, intended as an initial guide for the determination" whether an employer-employee relationship exists. United States v. W.M. Webb, Inc., 397 U.S. 179, 194, 90 S.Ct. 850, 857, 25 L.Ed.2d 207 (1970).

In United States v. Silk, 331 U.S. 704, 716, 67 S.Ct. 1463, 1469, 91 L.Ed. 1757 (1947), the Court identified several factors we should consider in determining whether a worker is an employee or an independent contractor for FICA tax purposes: degree of control, opportunities for profit or loss, investment in facilities, permanency of relation, and skill required in the claimed independent operation. No one factor is controlling nor is the list exclusive. ³ See also Restatement of Agency 2d Sec. 220; Usery v. Pilgrim Equipment Co., 527 F.2d 1308 (5th Cir.), cert. denied, 429 U.S. 826, 97 S.Ct. 82, 50 L.Ed.2d 89 (1976) (same factors used to determine employee status for purposes of the Fair Labor Standards Act). Although the determination of employee status is to be made by common law concepts, a realistic interpretation of the term "employee" should be adopted, and doubtful questions should be resolved in favor of employment in order to accomplish the remedial purposes of the legislation involved. Texas Carbonate Co. v. Phinney, 307 F.2d 289, 292 (5th Cir.), cert. denied, 371 U.S. 940, 83 S.Ct. 318, 9 L.Ed.2d 275 (1962).

The district court's findings of fact are fully supported by the record and are as follows. Breaux and Daigle provides the crab meat pickers with a place to work and maintains proper refrigeration and temperatures for the crab meat in accordance with the Food and Drug Administration (FDA) regulations. Breaux and Daigle also sanitizes the pickers' work area each morning before they arrive and cleans it after they leave. Supervision of the crab meat pickers by Breaux and Daigle consists mainly of insuring that they maintain the proper FDA sanitation standards. Such supervision entails assuring that the crab meat pickers wear hair nets and wash their hands before entering the picking area. The pickers are not allowed to smoke or to wear jewelry and are sent home if they fail to comply with these rules. Breaux and Daigle employees inspect the crab meat for excess shell and fat prior to packaging.

Breaux and Daigle does not supervise the manner in which a picker is to pick crabs nor does it train pickers to pick crabs. The pickers learn how to pick crabs primarily from their family members and from watching other pickers. Though one can learn to properly pick a crab within a day or so, it sometimes takes months to learn to pick quickly enough to earn a living. Indeed, some people cannot learn to pick crabs efficiently enough to earn a living doing so.

The pickers are entitled to work whenever they wish, to come and go as they please, to take breaks whenever they desire, to refuse to do any job, and to work for competitors of Breaux and Daigle. Though the pickers are not...