Peoples Life Insurance Company v. United States

• Citation: 179 Ct. Cl. 318,373 F.2d 924
• Decision Date: 17 March 1967
• Docket Number: No. 348-63.,348-63.
• Parties: PEOPLES LIFE INSURANCE COMPANY v. The UNITED STATES.
• Court: Court of Federal Claims

179 Ct. Cl. 318, 373 F.2d 924 (1967)

PEOPLES LIFE INSURANCE COMPANY v. The UNITED STATES.

No. 348-63.

United States Court of Claims.

March 17, 1967.

Deane E. McCormick, Jr., Washington, D. C., for plaintiff. Robert J. Bird, Washington, D. C., attorney of record.

Ira M. Langer, Silver Spring, Md., with whom was Asst. Atty. Gen., Mitchell Rogovin, for defendant. Lyle M. Turner and Philip R. Miller, Washington, D. C., of counsel.

Before LARAMORE, Acting Chief Judge, and DURFEE, DAVIS, COLLINS, SKELTON and NICHOLS, Judges.

OPINION

PER CURIAM:

This case was referred to Trial Commissioner Saul Richard Gamer with directions to make findings of fact and recommendation for conclusions of law. The commissioner has done so in a report and opinion filed on January 11, 1966. Exceptions to the commissioner's findings, opinion and recommended conclusion of law were filed by the defendant, briefs were filed by the parties and the case was submitted to the court on oral argument of counsel. Since the court is in agreement with the opinion, findings and recommendation of the commissioner, it hereby adopts the same as the basis for its judgment in this case, as hereinafter set forth. Plaintiff is therefore entitled to recover and judgment is entered for plaintiff in the amount of $6,493.96, plus interest paid thereon, for 1958, and $6,288.76, plus interest paid thereon, for 1959, together with interest on these amounts as provided by law.

OPINION OF COMMISSIONER^*

GAMER, Commissioner:

The question in this case is whether expenditures plaintiff made, principally to hotels and bus companies, for the purpose of holding conventions for certain of its employees (and their wives) in fact constituted "wages" to such employees which were subject to income tax withholding by plaintiff.

Plaintiff, an insurance company with its home office in Washington, D. C., sells life, accident, and health insurance. Its sales organization consists primarily of an Agency Department, located in the home office, and 60 District Offices located in the District of Columbia and the seven States in which it is authorized to do business (Delaware, Maryland, North Carolina, Ohio, Pennsylvania, Virginia, and West Virginia), over which the Agency Department has general responsibility. Each district office is headed by a manager and two to four assistant managers. All sales of insurance are made by agents, who work out of the district offices.

Annually plaintiff holds a convention, normally in an eastern city, and provides an all-expense trip thereto from the various district offices to those of its agents who, during the year, succeed in selling a prefixed amount of insurance, as well as to those managers and assistant managers of the district offices who qualify on the basis of the overall performance of the agents on their staffs also meeting a certain standard. Generally, about 18-20 percent of the agents qualify for the convention. In addition certain home office officials and employees attend, also without expense to themselves. The wives of all qualified to attend are also invited, with their expenses too being defrayed by plaintiff. The primary responsibility for planning and conducting the conventions, as well as for fixing the eligibility standards for attendance, is that of the Agency Department.

In 1958, the convention was held in New York City and plaintiff's costs therefor were approximately $36,000, the large part of the expenses constituting payments to the convention hotel and to bus companies for the cost of transporting the employees to and from New York City. There were also en route costs, i. e., en route meals and, where the distance of the district office necessitated overnight accommodations, en route hotel expenses. In 1959, the convention was held in Washington, the bulk of the approximately $35,000 expenses being of the same nature.

Both conventions followed substantially the same pattern. In brief, as to the 1958 New York City convention, most of the buses left the district offices (the majority of which are located in Maryland, Virginia, and West Virginia) on Wednesday morning, August 20, 1958, and arrived in New York City during the afternoon. (A few employees coming from more distant points left Tuesday, staying overnight en route, and also arriving in New York City on Wednesday.) Upon the arrival of a bus at the convention hotel (the Biltmore), the occupants were greeted by home office officials and assigned their rooms.

The first planned event, the "Welcoming Dinner," occurred that evening. The roll of all those attending was called and the leading agents recognized (a process that took around 45 minutes), and speeches were made by plaintiff's president, "Vice President, Agency and Personnel," and "Assistant Vice President, Agency" (who acted as Master of Ceremonies).

The next planned activity was the following morning, when, after a breakfast in a room specially reserved for this purpose (all meals were so arranged to keep the convention group together), an "Agency Meeting" was held. This was in the nature of a work session lasting over 2 hours, with prepared speeches delivered by 10 speakers, i. e., one by plaintiff's Agency and Personnel Vice President, two by the Superintendents of Agents of plaintiff's Western and Eastern Divisions, one by a district manager, two by assistant managers, one by an insurance consultant, and three by wives of agents.¹

There then followed a luncheon (at which there were announcements but no formal program) and a free afternoon. However, plaintiff maintained a "Headquarters Room" where home office officials were available during "free time" for discussion and advice. The room was maintained essentially as a business meeting place (with no bar being maintained therein.) Practically all the conventioneers visited this room at least once for discussions with home office officials as well as among themselves.

That evening there followed a dinner, at which there was no formal program (although there were various announcements made), the balance of the evening being free time, and with the next planned activity (again following breakfast) being another "Agency Meeting" on Friday morning of approximately 2 hours at which there were again nine prepared speeches, including two by wives of agents.

There then followed a lunch (with no formal program), a free afternoon (during which conventioneers could take a sightseeing tour arranged and paid for by plaintiff), and the "Agency Leaders Banquet" that evening (preceded by a cocktail party). Seven company officers spoke at the banquet (the president, five vice presidents, and the treasurer), which was then followed by a "Company Dance" (but during which time, the "Headquarters Room" remained open).

There were no planned activities on Saturday, the first bus departures to the home districts (after breakfast and lunch) commencing at around 1:15 p. m.²

The annual "Agency Leaders Convention" is considered by plaintiff as an important part of its overall program of sales stimulation, not only as a result of attempts to qualify, but also as a result of the recognition received as a leading agent, assistant manager, or manager. Plaintiff's policy-making officials feel that recognition of achievement is a strong stimulus to motivation and to resulting sales performance. In addition, plaintiff is convinced that the cross fertilization of ideas at the formal programs and the headquarters room, as well as those resulting from 2-3 days of general commingling between the most successful sales personnel from all the districts, can contribute importantly to the overall education of the agent and to his ability to achieve even better sales results. Further, it gives an opportunity to the company's highest officials, at the headquarters room, through their dinner and banquet speeches, and elsewhere during the course of the convention, to indoctrinate the company's top sales personnel with the company's policies and goals, as well as to receive ideas themselves from the company's best field personnel. This kind of "convention" is recommended by the industry's management experts and consultants.

When plaintiff first began holding these conventions in 1948, the wives were not invited to attend. This policy was subsequently changed not only because it was found that a better convention resulted from the wives' presence, but also in furtherance of the company's attempt to integrate the wife into the agent's business life and activities. Plaintiff, as a matter of operating policy, stresses the importance of the wife's contribution to the husband-agent's success. Plaintiff is plagued by a huge annual turnover in its staff of agents. Forty to 50 percent of the agents terminate each year. The work is, at times, discouraging and may, during certain periods, be quite unrewarding financially, despite the necessity of many hours spent away from home in the evenings. Unless a wife understands the realities of the demands made by the insurance business and the agent's problems, approaches the entire situation sympathetically, and can appropriately adjust the home life to the husband's working conditions, an early termination may well result.

Furthermore, plaintiff has found that the wife of an agent such as it employs can contribute in many tangible ways to his success. For instance, she may take over the record-keeping duties.³ She may, through her own organization activities and the providing of entertainment in the home, obtain prospects. She may even make appointments for her husband with such prospects.

Plaintiff attempts to hire agents who are married, experience indicating that such an agent is normally more successful, and placing as it does such importance upon the wife's role in the overall picture, makes certain that before the agent is hired the home is visited and the wife interviewed. In appraising her, the nature of the insurance business and her...