Cape Shore Fish Co. v. United States, No. 120-59.

• Court: Court of Federal Claims
• Writing for the Court: PER CURIAM
• Citation: 165 Ct. Cl. 630,330 F.2d 961
• Docket Number: No. 120-59.
• Decision Date: 17 April 1964
• Parties: CAPE SHORE FISH CO., Inc., v. The UNITED STATES.

165 Ct. Cl. 630, 330 F.2d 961 (1964)

CAPE SHORE FISH CO., Inc.,
v.
The UNITED STATES.

No. 120-59.

United States Court of Claims.

April 17, 1964.

330 F.2d 962

Francis P. Noonan, Washington, D. C., for plaintiff. Robert S. Caviness, Washington, D. C., was on the brief.

J. Mitchell Reese, Jr., Washington, D. C., with whom was Asst. Atty. Gen., Louis F. Oberdorfer, for defendant. Edward S. Smith, Lyle M. Turner and Philip R. Miller, Washington, D. C., were on the brief.

Before JONES, Chief Judge, WHITAKER, LARAMORE, DURFEE and DAVIS, Judges.

PER CURIAM.

This case was referred pursuant to Rule 45 to Herbert N. Maletz, a trial commissioner of this court, with directions to make findings of fact and recommendation for conclusions of law. The commissioner has done so in a report filed January 24, 1963. Exceptions to the commissioner's report were taken by the plaintiff, briefs were filed by the parties and the case was submitted to the court on a waiver of oral argument by counsel. Since the court is in agreement with the findings and recommendation of the trial commissioner, as hereinafter set forth, it hereby adopts the same as the basis for its judgment in this case. Plaintiff is therefore not entitled to recover and its petition is dismissed.

Cape Shore Fish Co., owner and operator of the Lauren Fay, a boat engaged in fishing for scallops out of New Bedford, Massachusetts, has brought this action for refund of social security and unemployment taxes it paid for 1953 and 1954 with respect to the captains and crews of the vessel.

Section 1410 of the Internal Revenue Code of 1939, 26 U.S.C. § 1410 (1952), imposed a social security excise tax on every "employer" of 1½% in 1953 and 2% in 1954 of "wages" paid by him with respect to "employment". "Wages" were defined in section 1426(a) as "all renumeration for employment", with exceptions not relevant here. "Employment" was defined in section 1426(b) as "* * * any service, of whatever nature, performed after 1950 * * * by an employee for the person employing him * * * on or in connection with an American vessel * * *" "Employee" was defined in section 1426(d) (2) as "any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee * * *"

Section 1600 of the 1939 Code imposed an unemployment excise tax of 3% on every "employer" of "wages" paid by him with respect to "employment". Sections 1607(c) and 1607(i) of the Code defined "employment" and "employee" comparably to sections 1426(b) and 1426(d) (2).

The sole issue in this action is whether the captains and other crew members of the Lauren Fay were employees within the meaning of sections 1426(d) (2) and 1607(i).

During the years in question, the operations of the Lauren Fay were largely governed by provisions of a so-called Independent Scallopers Agreement — a standard form union contract — to which Cape Shore and the Atlantic Fishermen's Union were parties. The owner hired the captain of the Lauren Fay and had the right to fire him at the end of any trip.¹ In practice, the captain was hired with the understanding that if he performed in a manner satisfactory to the owner, his services would be continued; in fact, the owner made every effort to retain a skipper so long as he did a good job. Thus, the first captain continued on for the vessel's first 25 trips; a successor hired in 1954 served for most of that year until fired by the owner.

No special license or papers were required to become a captain; it was enough to be a practical fisherman with at least three years' experience.

In accordance with the custom in the industry, the captain hired and fired the

330 F.2d 963

crew² and supervised and controlled the crew's activities at sea. Since the success of the voyage depended on the combined skill of all hands, the captain tried to obtain qualified fishermen as crew members. Ordinarily a person became a good fisherman after five or six trips

As in the case of its captain, some crew members remained with the boat for repeated voyages. In 1953, for example, two crew members accompanied the boat on all its 25 trips to sea, and five accompanied it on 16 or more trips.

Each captain of the Lauren Fay followed the owner's instructions when they were given and considered that the owner had authority to give him instructions, such as when to return to port, when to paint the boat, and whether liquor would be permitted aboard. The captain was required to telephone the owner a day or two before the end of the voyage and to report on the amount of the catch, what troubles were experienced, and what repairs, if any, were needed. At that time the owner usually instructed the captain to have the boat docked before 5:00 P.M.

The captain felt that if he did not follow the owner's instructions, he might be fired. A captain did not give instructions to the owner; rather, he made suggestions concerning the vessel's operations which the owner might or might not follow.

In accordance with a practice understood and agreed to by the owner and the captain and crew, the Lauren Fay stayed at sea for seven or eight days, or until some 11,000 pounds of scallops were caught, whichever first occurred. The union contract specified that while at sea the hours of labor for the captain and crew were to be no more than six hours on watch and no less than six hours off between a watch. The contract also specified that the captain and crew were to be afforded a four-day rest period ashore after the boat docked. By virtue of the contract, and in accordance with custom, the boat left port the day after the rest period ended, barring bad weather or the need for laying up for repairs. The union contract prohibited departure earlier than 9:00 A.M. or later than 5:00 P.M. Within this period, the captain fixed the exact sailing time.

Fishing was generally done in an area between George's Bank and Nantucket Shoals, some 100 miles from New Bedford, at a location determined by the captain.

When the vessel docked, its catch was sold at public auction in the New Bedford "selling rooms" to the highest bidder. The captain could reject the final bid and have the catch held over and again put up for auction on the next day. This right of holding over was never exercised during the years in question.

The purchaser of the catch paid for it by a check made out to the vessel and the check was deposited in the owner's accounts. The owner then distributed the proceeds in accordance with the following formula referred to in the fishing industry as the "lay": From the total proceeds or "gross stock", there were deductions (referred to as "gross expenditures") for fixed amounts called "pers" for the engineer, mate and cook; for per diem charges for rental of a fathometer; the cost of scallop bags; the cost of a watchman; and for the New Bedford Fishermen's Benevolent Fund.

The remainder was referred to as the "net stock". Thirty-five per cent of the net stock was kept by the owner as the "boat share". From this 35%, the owner paid the captain 10% for his services and $25.00 to the engineer.

Sixty-five percent of the net stock was the crew's share. From this the owner deducted and paid to the respective suppliers the amounts for the crew's groceries, fuel, lubrication oil and the ice in which the bagged scallops were packed. The owner then distributed the remaining amount equally among the members of the crew, including the captain,

330 F.2d 964

after having made deductions for withholding of Federal income and social security and unemployment taxes. In its Federal income tax returns, the owner claimed as deductions under the heading "Salaries and Wages" all amounts paid to the captain and crew

After the catch was sold, the fishermen, including the captain, unloaded it. If a fisherman preferred not to help unload, a substitute, called a "lumper", could be hired. The lumper's wages were deducted from the fisherman's share of the lay.

If the individual's share of the voyage was less than $10.00 per man, the trip was considered a "broker",³ and if the boat were at sea at least five days, the owner was required by the union contract to pay at least $1.00 a day to the captain and each member of the crew. The custom in the industry was that if the same crew sailed on the next trip, all expenses of the broker, including those for the crew's groceries, fuel and ice, would be combined with those of the next trip, and the two trips considered as one for purpose of making distribution of the proceeds from the catch. But if a different crew sailed on a trip following a broker, the owner was responsible for all expenses of the broker.

The union agreement provided for "maintenance and cure" of $3.00 per day to the captain and each member of the crew.⁴

The crew's groceries and other supplies were ordered by the captain or cook on the owner's credit. The owner was responsible for payment of these bills.

All repairs for the boat were paid by the owner, and major repairs could not be undertaken without the owner's authorization.

The owner carried and paid for all insurance on the Lauren Fay.

The fishermen supplied their own clothing and rough-weather gear, together with a scalloping knife which cost about $1.50. The owner provided all the gear used in dredging scallops from the ocean floor. Neither captain nor crew had any investment in the boat.

When the boat was in port and painting or other work was necessary, crew members who performed such work were paid $10.00 per day.

Plaintiff says that on the basis of the above facts the captain and fishermen were not employees within the meaning of sections 1426(d) (2) and 1607(i) of the 1939 Code, both of which specifically adopt the common-law test for ascertaining the existence of the employer-employee relationship.

The touchstone for determining the presence or absence of an employer-employee relationship is, of course, whether...