Lifetime Siding, Inc. v. United States

• Decision Date: 22 March 1966
• Docket Number: No. 58,Docket 29184.,58
• Citation: 359 F.2d 657
• Parties: LIFETIME SIDING, INC., Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

359 F.2d 657 (1966)

LIFETIME SIDING, INC., Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.

No. 58, Docket 29184.

United States Court of Appeals Second Circuit.

Argued November 4, 1965.

Decided March 22, 1966.

Thomas C. Hartzell, Rochester, N. Y., for plaintiff-appellant.

Marvin J. Garbis, Atty., Dept. of Justice, Washington, D. C. (John B. Jones, Jr., Acting Asst. Atty. Gen., Lee A. Jackson and George F. Lynch, Attys., Dept. of Justice, Washington, D. C., John T. Curtin, U. S. Atty., and Stephen S. Joy, and C. Donald O'Connor, Asst. U. S. Attys., Buffalo, N. Y., on the brief), for defendant-appellee.

Before KAUFMAN and HAYS, Circuit Judges, and TIMBERS, District Judge.^*

TIMBERS, District Judge:

Lifetime Siding Inc., a New York corporation engaged in the vicinity of Rochester in selling and applying new roofing and siding for homes in need of repair, appeals from a judgment of the United States District Court for the Western District of New York, John O. Henderson, District Judge, after a 4 day jury trial, dismissing its complaint in a tax refund suit brought pursuant to 28 U.S.C. § 1346(a) (1) to recover $7,556.80 of social security and unemployment taxes claimed to have been erroneously assessed and collected during the tax periods from July 1, 1957 through June 30, 1960 pursuant to the Federal Insurance Contributions Act (FICA)¹ and the Federal Unemployment Tax Act (FU TA).² On this appeal the critical issues are (1) whether the district court submitted to the jury under correct instructions the question whether the roofing and siding applicators were employees of appellant rather than independent contractors within the meaning of the statutes³ and (2) whether the jury's special verdict that the applicators were employees is supported by the evidence. We hold that the question was correctly submitted to the jury and that the jury's special verdict is amply supported by the evidence. Accordingly, we affirm.⁴

FACTS

Lifetime Siding, Inc. (the "company") employed salesmen (its employees, to be distinguished from "applicators") who obtained written contracts from home owners for application of roofing and siding materials to houses. The company checked the customer's credit; if satisfactory, the company made out a work order and gave it to an applicator who performed the work of affixing the roofing and siding materials to the building.

The work order given to the applicator described the work to be done, the amount of material to be applied, and the sum to be paid the applicator computed at $10 per square of material to be applied (a square consisting of 100 square feet). The applicator was directed to pick up a completion slip from the customer and, in some instances, a specified sum of money. The applicator was paid when the job was completed.

The required materials were furnished by the company and were delivered to the job site by the wholesaler at the company's request. Applicators provided their own tools, equipment and transportation. Aside from these items, they incurred no other expenses on the job. No time was specified within which the job must be completed.

The company's general manager inspected jobs in progress to see if the work was being performed according to specifications and in a workmanlike manner. Signs were placed at some job sites reading "Lifetime Siding, Inc." If the work was being done unsatisfactorily, the general manager would take the applicator off the job and bring in another crew to finish it. When completed work had to be corrected, the applicator was brought back to make the repairs without additional compensation.

Applicators were obtained through the company's newspaper advertisements promising "year-round steady work." The company's general manager passed on their capabilities, hiring only experienced men who did not need much supervision. While the company had hundreds of applicators on its pay records during the course of a year, there were about 25 regulars upon whom it could rely. During the years in question, the company had applicators who had worked from 5 to 10 years. It was the company's practice to continue using an applicator as long as his work was satisfactory. Applicators were free to turn down work orders from the company, but seldom did so. While free to take jobs on their own, applicators were encouraged to turn leads over to the company if they "wanted to work steady." They determined their own working hours, arranged their own work schedule and hired and paid their own helpers.

The company carried liability insurance for the applicators, although some carried their own. The benefits of a company pension plan, upon which the company paid all premiums, were made available to those applicators who had worked for the company 4 or more years. Bonus or vacation payments were given to the applicators based on their length of service.

There was other evidence, some indicating the employee status of the applicators and some pointing toward an independent contractor status. The foregoing summary is sufficient, however, to demonstrate that upon what may be said to have been a close question of fact the jury's special verdict that the applicators were employees and not independent contractors was amply supported by the evidence. The verdict must stand if the question was submitted to the jury under correct instructions.

STANDARD FOR DETERMINING STATUS OF APPLICATORS

The FICA and FUTA taxes here involved are measured by "wages" paid by an employer to an employee.⁵ The definition of an "employee" under the FICA is "any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee."⁶ Under the FUTA the term "employee" is defined to exclude "any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an independent contractor."⁷

The district court instructed the jury, in a charge to which no exceptions were taken, that the test to be used in determining the status of the applicators is the common law one applicable in tort actions under the doctrine of respondeat superior:

"Generally, an employer-employee relationship exists when the person for whom the services are performed has the right to control and direct the individual who performs the service, 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 is to be done, but also as to how and when it shall be done."

We hold that this is the correct test for determining whether employee status exists for purposes of FICA and FUTA taxes. As Judge Learned Hand succinctly stated in Radio City Music Hall Corp. v. United States, 135 F.2d 715, 717 (2 Cir.1943), "The test lies in the degree to which the principal may intervene to control the details of the agent's performance; and that in the end is all that can be said * * *." See cases cited supra note 4; Restatement (Second), Agency § 220(2) (1958); Treas. Reg. § 31.3121(d)-1 (c) (2) (1954).

The district court enumerated some 18 relevant factors which the jury might take into account in applying the test it prescribed to determine the status of the applicators, emphasizing that no single factor was determinative. We hold that the district court was correct in so instructing the jury.

Appellant, having taken no exceptions to the charge and having failed to request the court further to charge the jury, may not be heard in this Court on its claim of "Basic Errors in Charge of The Court." Rule 51, Fed.R.Civ.P.; Guarnieri v. Kewanee-Ross Corp., 270 F. 2d 575, 577 (2 Cir.1959); Maupin v. Erie R. Co., 245 F.2d 461, 462 (2 Cir. 1957); Troupe v. Chicago, D. & G. Bay Transit Co., 234 F.2d 253, 259-260 (2 Cir.1956); Kane v. American Tankers Corp. of Delaware, 219 F.2d 637, 640 (2 Cir.1955); United States v. Bruswitz, 219 F.2d 59 (2 Cir.1955), cert. denied, 349 U.S. 913, 75 S.Ct. 600, 99 L.Ed. 1247 (1955); Moore v. Waring, 200 F.2d 491, 492 (2 Cir.1952); Falkerson v. New York, New Haven & Hartford R. Co., 188 F.2d 892, 896 (2 Cir.1951); Westmoreland Asbestos Co. v. Johns-Manville Corp., 136 F.2d 844 (2 Cir.1943); 5 Moore's Federal Practice ¶¶ 51.03, 51.04, at 2502-2506 (2d ed. 1964).

ADMISSIBILITY OF EXHIBITS ON ISSUE OF INTENT

Appellant urges as error the admission in evidence of various exhibits, and testimony with respect thereto, purporting to reflect the intent and belief of the parties as to the status of the applicators. Such evidence included a ruling by the New York State Labor Department, obtained at the request of the company's counsel, that the applicators were "independent persons" for purposes of the state unemployment tax; a determination by the Internal Revenue Service, obtained at the request of the company's counsel, that the company's pension plan, which was open to the applicators, qualified for certain tax benefits because the applicators were treated as "employees"; records showing the withholding of income taxes by the company from payments to the applicators; worksheets or contracts between the company and the applicators in which the latter were referred to as "subcontractors"; correspondence from the company's president to the Better Business Bureau of Buffalo and to a customer referring to the applicators in substance as employees; and a pamphlet, "The Voice of Lifetime," distributed by the company to the applicators, in which there appears the statement, "It seems that so often the salesmen forget that it's a team of sales personnel, office personnel and applicators that get the job done at Lifetime."

Appellant's claim of error with respect to this evidence is two-fold: (1) that it was irrelevant because the intent and belief of the parties as to the status of the applicators should have no...