New Deal Cab Co. v. Fahs

• Decision Date: 03 May 1949
• Docket Number: No. 12455.,12455.
• Parties: NEW DEAL CAB CO. v. FAHS, U. S. Collector of Internal Revenue.
• Court: U.S. Court of Appeals — Fifth Circuit

174 F.2d 318 (1949)

NEW DEAL CAB CO. v. FAHS, U. S. Collector of Internal Revenue.

No. 12455.

United States Court of Appeals Fifth Circuit.

May 3, 1949.

John W. Donahoo and William T. Rogers, both of Jacksonville, Fla., for appellant.

Theron L. Caudle, Asst. Atty. Gen., George A. Stinson, Sp. Asst. to Atty. Gen., Howard P. Locke, Atty., Dept. of Justice, of Washington, D. C., and Herbert S. Phillips, U. S. Atty., of Jacksonville, Fla., for appellee.

Before SIBLEY, McCORD, and WALLER, Circuit Judges.

SIBLEY, Circuit Judge.

Social Security taxes were assessed against and paid under protest by New Deal Cab Company for the years 1941, 1942, and 1943; refund was sought and denied, and the Collector is sued for their recovery. The district judge, sitting without a jury, found that the drivers of the Company's cabs were its employees and taxes were due in respect of their earnings as wages under the cases which then seemed controlling, United States v. Silk, 331 U.S. 704, 67 S.Ct. 1463, 91 L.Ed. 1757; Bartels v. Birmingham, 332 U.S. 126, 67 S.Ct. 1547, 91 L. Ed. 1947, 172 A.L.R. 317, and Fahs v. Tree-Gold Co-op. Growers, 5 Cir., 166 F.2d 40. The Company's contention is that each driver severally rents his cab, and is at most an independent contractor, the Company paying him nothing and having no concern with his earnings, and receiving a fixed rental for the use of the cab.

The statute levying the tax, Internal Revenue Code, Secs. 1400, 1600, 26 U.S.C. A. §§ 1400, 1600, speaks of "wages", "employer," and "employment." The Treasury Regulations (Reg. 106, sec. 402.204) defined thus:

"Who are employees — Every individual is an employee if the relationship between him and the person for whom he performs services is the legal relationship of employer and employee. Generally such employment exists 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 method by which that work 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 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 the means and methods for accomplishing the result, he is an independent contractor. An individual performing services as an independent contractor is not as to such services an employee."

This is an excellent statement of the legal relations mentioned. The courts, however, desiring to further the objects of the tax, overrode the Regulation in the cases relied on by the district judge and added other tests. The late Congress, however, with the purpose expressed in the committee reports to reestablish the common law tests as stated in the Regulation, amended Internal Revenue Code, Secs. 1420(d), and 1607(i), 62 Stats. 438, 26 U.S.C.A. §§ 1420 (d), 1607(i), so as to make common law rules applicable in determining the employer-employee relationship and the status of an independent contractor; and the amendments were made retroactive to the date of the original enactment of the sections. Congress thus rebuked the overzeal of the courts in trying to make a better law than the words of Congress had made.

Because of this legislative change we are of opinion that the judgment should be reversed. The evidence is not in material conflict. Beginning prior to 1937 this corporation has been furnishing transportation to colored citizens in Jacksonville, Florida, by taxicabs it owned or controlled, driven by colored drivers, substantially on the plan about to be described. The drivers were members of Colored Taxicab Drivers Local Union No. 674, AF of L, which for them made the written contract between the Union and the Company in effect during the tax years. That contract states the terms on which the cabs were operated. Its first provision is:

"The said Union shall be the sole representative of the drivers who rent automobiles from said Company for use as taxicabs * * * in all collective bargaining had by lessees with the Company. The said Company shall not rent automobiles for use as taxicabs and shall permit taxicabs operated in its name only by members of said Union or persons eligible for membership, except as hereinafter provided."

"Rent" and "lessee" are the words used throughout. New drivers are required to join the Union. The Union is to handle all grievances and disputes, and if need be arbitrate them. Article 5 is:

"The Company agrees that the taxicab rental to be charged to lessees shall be as follows: From May 1 to Oct. 31 shall be $3.55 for the day shift and $2.85 for the night shift. From Nov. 1 to April 1 the rental shall be $3.50 for the day shift and $3.00 for the night shift. The above charges shall include the cost of all lubricating oil used by the taxicabs,...