Employment Sec. Commission v. Champion Distributing Co.

• Court: North Carolina Supreme Court
• Citation: Employment Sec. Commission v. Champion Distributing Co., 53 S.E.2d 674, 230 N.C. 464 (N.C. 1949)
• Decision Date: 25 May 1949
• Docket Number: 593
• Parties: EMPLOYMENT SECURITY COMMISSION v. CHAMPION DISTRIBUTING CO., Inc.

53 S.E.2d 674

230 N.C. 464

EMPLOYMENT SECURITY COMMISSION v. CHAMPION DISTRIBUTING CO., Inc.

No. 593

Supreme Court of North Carolina

May 25, 1949

This proceeding is prosecuted by the State ex rel. the Employment Security Commission, against the defendant as employer, to enforce contribution under the State Employment Security Act, G.S. Chapter 96, (see Public Laws, 1947 Chapter 598, changing name), with respect to the alleged employment of eight or more persons, under conditions named in the statute, during the year 1946.

During that period the respondent was, and now is, a corporation having its principal place of business in Wilmington, North Carolina, engaged in the wholesale, and to some extent, in the retail business of selling automobile supplies, radios sporting goods, and general merchandise. The proceeding was instigated by the report of a Field Representative of the Commission suggesting that it appeared that the Distributing Company, as an employing unit, had eight or more persons employed in its service during the year 1946, rendering it liable under the law for contribution or tax, with respect to said employment.

On notice to the respondent Distributing Company a hearing was had, at which respondent appeared with counsel, to determine the liability or non-liability of the Company for the tax and evidence was taken.

The inquiry, in fact and by stipulation in the record, narrows down to the question whether certain distributing or route salesmen, selling and distributing goods and merchandise of the respondent, were employees as defined in the statute, and contemplated by it, or independent factors or consignees handling the respondent's wares on a purely commission basis, inconsistent with the concept and legal definition of employment, as an independent business.

For convenience, relevant provisions of the statute, intended to arrive at an answer to the question here presented, are quoted below. The provisions are definitional, intended to present in more positive form, by way of analysis,--inclusion and exception,--the criteria which, in the statutory sense must be considered in determining liability as an employing unit, or non-liability because of an independent status.

The quoted provisions of the statute are here given for comparison with the summary of the evidence immediately following, and with the findings of fact:

'96-8(m) From and after March 10, 1941, 'wages' means all remuneration for services from whatever source * * *.'

'96-8(n) From and after March 10th, 1941, 'wages' shall include commissions and bonuses and the cash value of all remuneration in any medium other than cash. * * *'

These principles are comprehended succinctly in the following:

'Section 96-8(g) (6) (A) (B) (C):

'(6) Services performed by an individual for remuneration shall be deemed to be employment subject to this chapter unless and until it is shown to the satisfaction of the commission that:

'(A) Such individual has been and will continue to be free from control or direction over the performance of such services, both under his contract of service and in fact; and

'(B) Such service is either outside the usual course of the business for which such service is performed, or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and

'(C) Such individual is customarily engaged in an independently established trade, occupation, profession, or business.'

The evidence taken on the hearing may be summarized as tending to show:

1. The persons handling the respondent's products were assigned territory by the defendant.

2. They did not sell any competitor's goods, but were required to sell no goods except those received from the respondent. Sometimes, as a matter of accommodation, and at request, they brought in some small needed article, but for no profit, when making a trip, but never anything in competition with goods sold by respondent.

3. Field sellers and distributors were bonded.

4. The field men were remunerated for their service at a commission rate, determined by the respondent on a wholesale price, fixed by him. No part of the sales price, or commission, was retained by these salesmen, that is, all the money received was truned over to the respondent, and payment was made direct to them by it weekly.

5. The respondent deducted from the sums paid to each of the field representatives the withholding tax as required by the Federal Government and filed report as required; reporting the old-age benefit and social security tax for each of the salesmen.

6. The field representatives, or salesmen, came in to respondent's place to get the merchandise and return that unsold after each trip.

7. The merchandise remained that of the respondent until sold. That taken out, and that sold, listed;--two lists made, one given to the customer and one brought back in to the respondent. 'When we check the merchandise in against that and what they have left, together with the receipt that they have sold should equal the amount of merchandise that they take out. ' (Isadore Swartz.)

8. The testimony of Ann Williams was to the effect that these parties (the salesmen) were carried on the 'payroll' to keep out of trouble, on account of unfamiliarity with the laws of various tax collecting offices. However they made the deductions and withheld tax from the amounts earned by the route salesmen, issuing the forms to the individuals required by the Federal practice, (W-2), of the withholding tax. The payments were not made to the men as they made trips, but weekly.

9. When necessary, the respondent sent a 'trouble shooter' to straighten out difficulties occurring in the field.

As there is no challenge to the correctness of the procedure, a more formal history of the case may be omitted. The evidence above summarized is that upon which the Commission acted in making its findings of fact, conclusions of law, and final orders.

Following its regular course the matter came to the final hearing before the Commission on July 18, 1947, and on August 20 following, the Commission made its findings of fact, concluded that respondent was liable to the contribution, or tax, as an employer of eight persons or more, subject to the Act, during the year 1946, and until the relationship should be terminated as provided by statute; and ordered that the respondent, as employer, report and pay contributions on all wages and remunerations received by individuals performing service for it during the period in question.

The findings of fact, omitting those merely formal, were as follows:

'3. These salesmen sell goods of the employing unit to dealers, garages and service stations and other establishments located within a radius of 75 or 100 miles of Wilmington, North Carolina, this merchandise being sold by the individuals under the following arrangement between the salesmen and Champion Distributing Company, Inc.:

'a. The salesmen load merchandise on trucks at the employer's premises at which time an inventory is made of the goods loaded on the trucks.

'b. The salesmen cannot give credit to customers and must sell the merchandise for cash.

'c. The salesmen usually report back...