Illinois Tri-Seal Products, Inc. v. United States

Decision Date12 November 1965
Docket NumberNo. 429-61 — 431-61.,429-61 — 431-61.
PartiesILLINOIS TRI-SEAL PRODUCTS, INC. v. The UNITED STATES. John D. BUCHANAN, Howard Brown and Edward Marcus, d/b/a Tri-Seal Installation Co. v. The UNITED STATES. John D. BUCHANAN and Frank Commiso d/b/a Tri-State Installation Co. v. The UNITED STATES.
CourtU.S. Claims Court

Joseph J. Lyman, Washington, D. C., for plaintiff.

Philip R. Miller, Washington, D. C., with whom was Acting Asst. Atty. Gen. Richard M. Roberts, for defendant. C. Moxley Featherston, Lyle M. Turner, and Mitchell Samuelson, Washington, D. C., of counsel.

Before COWEN, Chief Judge, and LARAMORE, DURFEE, DAVIS, and COLLINS, Judges.


These related cases — testing whether certain "installers" were plaintiffs' employees for the purposes of the Federal Insurance Contributions Act and the Federal Unemployment Tax Act — were referred pursuant to former Rule 45(a) (now Rule 57(a)) to Trial Commissioner Herbert N. Maletz, with directions to make findings of fact and recommendations for a conclusion of law. The commissioner has done so in an opinion and report filed on April 29, 1964. He has concluded that these installers were not the taxpayers' employees under the two taxing statutes, that the plaintiffs are entitled to recover the taxes assessed against and paid by them, and that defendant's counterclaims for unpaid taxes must be rejected. The defendant accepts the trial commissioner's findings (with one exception) but urges that his legal conclusions are erroneous. The plaintiffs ask the court to adopt the commissioner's findings and his conclusions. The parties have filed briefs and the cases have been argued orally.

The court agrees with Commissioner Maletz's findings, opinion (with a slight modification), and recommended conclusions of law. Without minimizing the other factors and circumstances discussed by the commissioner, the court lays particular stress in these cases on the fact that the installers themselves considered that they had their own business and were self-employed (finding 52), as well as on the correlative fact that they themselves paid self-employment taxes based on the sums paid them by plaintiffs, but that plaintiffs did not assume any liability for employment taxes (findings 54, 56). In close cases, such as these, the view of their own relationship which is taken and acted upon by the parties — particularly with respect to the payment of employment taxes — is very significant. See Restatement of the Law, Agency 2d, § 220, pp. 486, 492.

The court adopts the trial commissioner's findings and his opinion (with a slight change), as supplemented by this opinion, as the basis for its judgment. Plaintiffs are entitled to recover and judgment is entered to that effect. The amount of recovery will be determined under Rule 47(c). The defendant is not entitled to recover on its counterclaims which are dismissed.

The opinion of Commissioner Maletz, with a small modification by the court, is as follows:

The Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act (FUTA) impose a tax on every employer with respect to individuals in his employ based on the wages paid. Section 3121(d) (2) of the Internal Revenue Code of 1954 defines an "employee" under FICA as "any individual who under the usual common law rules applicable in determining the employer-employee relationship has the status of an employee." A similar definition is contained in section 3306(i) dealing with FUTA.1

In 1961 the Government assessed deficiencies, penalties and interest against plaintiffs in these three actions for FICA, FUTA and withholding taxes. Such assessments were computed on the earnings of persons known as "installers" who performed services for plaintiffs by installing aluminum storm doors and windows in homes and buildings of plaintiffs' customers. The Commissioner of Internal Revenue determined that the installers were employees of the plaintiffs for Federal Tax purposes and that plaintiffs should, therefore, have withheld income taxes from their earnings and contributed and paid FICA and FUTA taxes thereon. In each case, $200 of the deficiency assessment was paid and suit brought here for recovery. The Government, in turn, has filed counterclaims totaling $202,149.18 for the unpaid deficiencies. The three cases have been consolidated and present a single issue: whether the installers were, during the period from January 1, 1954 through March 31, 1958, employees of plaintiffs within the meaning of sections 3121(d) (2), 3306(i) and 3401(c) of the Code.

Plaintiff Illinois Tri-Seal Products, Inc. (Illinois Tri-Seal) was engaged in the manufacture and sale of aluminum storm doors and windows. Its salesmen (who were independent contractors) would obtain written contracts from home owners under which the company agreed to sell and to install the doors and windows in the customers' homes. Installation of Illinois Tri-Seal's products was handled initially through the plaintiff-partnership known as Tri-Seal Installation Co., and later through the plaintiff-partnership known as Tri-State Installation Co. Also during part of the period installation was handled directly by Illinois Tri-Seal.

After a sales contract was entered into between Illinois Tri-Seal and a customer, the company's measuring man (a regular salaried worker) went to the customer's home to measure the size of the doors and windows: he then filled out a work sheet setting forth the name and address of the customer; the number, location and measurement of the windows and/or doors to be installed; and in some instances the promised completion date. When the installation was a normal one, no special instructions were generally set forth in the work sheet; special instructions were, however, included in the work sheet when extra or carpentry work was required. From the information contained in the work sheet, the doors and windows were manufactured by Illinois Tri-Seal; thereafter plaintiffs' "expediter" gave the work sheet to an installer who affixed the doors and windows to the home of Illinois Tri-Seal's customer in accordance with the specifications contained in the work sheet.2

Installers did not maintain an office, nor did they advertise in the newspapers or the yellow pages of the telephone directory. Some however, had their own business cards. Installers would come to plaintiffs' office looking for installation work which they usually learned about through word of mouth. On occasion, if work was not available, they were told to come back at a certain time. Plaintiffs also maintained a list of installers who had performed work for them in the past and from time to time called them to advise that work was available. Plaintiffs dealt only with long-experienced installers and relied on their experience for satisfactory work, all of which was performed away from plaintiffs' premises. There was no written contract between the installers and plaintiffs concerning their arrangement. With the exception of the work sheet, the arrangement was entirely oral.

The installers furnished their own tools and equipment which generally had a value of $200-$300 and consisted mainly of carpentry items such as hammers, screw drivers, hacksaws, power tools, caulking guns and ladders. The installers also provided their own trucks for transportation of their tools and equipment to and from the various job sites, and they paid all the expenses for the upkeep and maintenance of their equipment and trucks.

Plaintiffs furnished the windows, doors and other materials to be installed. The installers picked these up at plaintiffs' plant, loaded them in their own trucks and delivered them to the job sites. Some installers stored doors and windows for assigned jobs at their own expense until they could arrange with the customer to do the work. In the event lumber and other materials required for the installation were not available in plaintiffs' shop, the installers themselves, in their own discretion, purchased these materials and were later reimbursed by plaintiffs. If an installer broke a window in the process of installing it, plaintiffs replaced it without charge to the installer.

The installers had no specified working hours; rather, each determined for himself his own hours, the length of time he would work, and the amount of time that he would take off. The installers hired their own helpers and determined their pay, hours and working conditions. On occasion, when an installer had an extra large window he could not handle alone, he, in his own discretion, hired someone in the area to assist him and was later reimbursed by the plaintiffs for the additional expenditure. Alternatively in such a situation, he would request plaintiffs to send one of their employees to assist him; however, in no instance was he required to accept any of plaintiffs' employees as a helper. From time to time, installers joined together in doing a job and usually one check for the work would be issued by plaintiffs with the installers deciding among themselves how the proceeds were to be divided. In some instances, plaintiffs paid each of such installers individually according to the division the installers had agreed upon.

As a general rule an installer's compensation was based on a piecework rate for each door or window that was installed. On occasion an installation job under plaintiffs' contract with the customer required extra work and in that event the installer was paid a flat rate therefor based on a table established by plaintiffs covering common items of extra work. If, however, the nature of the extra work was such that it was not covered by the table, plaintiffs and the installer generally negotiated a flat rate for doing it, though in exceptional instances, particularly where the time required for the extra work could not be determined, the installer would specify an hourly rate therefor. Where the job site was...

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