Powers v. United States

• Decision Date: 17 April 1970
• Docket Number: No. 38-67.,38-67.
• Citation: 191 Ct. Cl. 762,424 F.2d 593
• Parties: Billy G. POWERS, t/a Powers Roofing Company v. The UNITED STATES.
• Court: U.S. Claims Court

191 Ct. Cl. 762, 424 F.2d 593 (1970)

Billy G. POWERS, t/a Powers Roofing Company v. The UNITED STATES.

No. 38-67.

United States Court of Claims.

April 17, 1970.

Joseph J. Lyman, Washington, D. C., attorney of record, for plaintiff.

Mark Segal, Washington, D. C., with whom was Asst. Atty. Gen. Johnnie M. Walters, for defendant.

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

OPINION

PER CURIAM:

This case was referred to Chief Trial Commissioner Marion T. Bennett with directions to make findings of fact and recommendation for conclusions of law under the order of reference and Rule 134(h). The commissioner has done so in an opinion and report filed on October 1, 1969. Defendant filed, then subsequently was allowed to withdraw, a notice of intention to except to the commissioner's report. On March 11, 1970, plaintiff filed a motion requesting that the court adopt the commissioner's opinion, findings and recommended conclusion of law. Since the court agrees with the commissioner's opinion, findings and recommended conclusion of law, as hereinafter set forth, it hereby grants plaintiff's motion and adopts the same as the basis for its judgment in this case without oral argument. Therefore, plaintiff is entitled to recover and judgment is entered for plaintiff with the amount of recovery to be determined pursuant to Rule 131(c) (2).

OPINION OF COMMISSIONER

BENNETT, Chief Commissioner:

This is a suit to recover Federal Unemployment Tax Act (FUTA) taxes of $1,579.90, together with statutory interest thereon, paid by plaintiff taxpayer for the year 1965. It is stipulated that the single issue presented is whether during the period involved, applicators performing services for plaintiff were "employees" of plaintiff within the meaning of the Federal Unemployment Tax Act, Internal Revenue Code of 1954, 26 U.S.C. § 3306(i), and pertinent regulations.

Plaintiff's business is that of repairing building exteriors needing roofing and siding. His commission salesmen obtain contracts for such work in Arkansas City, Kansas, and in a wide area out of that city. The workers who install roofing and siding are known in the trade as applicators. They are called by plaintiff or come to him on their own initiative in connection with work opportunities presented following storms and other circumstances. They are presented with a work order or worksheet describing the work to be done. They can take the work or leave it. If they don't like the job or the price they can reject it or negotiate with plaintiff.

In addition to the work order, plaintiff presented to applicators a document variously called Rules and Regulations for Sub-Contractors or Specifications for Sub-Contractors. The information thereon was prepared by plaintiff and delineated the job relationship with plaintiff, the prime contractor. In summary, the applicators were required by these documents to do their work in a workmanlike manner and as quickly as possible, although it was left to them when they would start and what hours they would work. Plaintiff furnished the materials for the job but applicators furnished their own equipment (worth several hundred dollars) under the agreement; they were paid only after inspection showed the completed job to be satisfactory, and they forfeited the job if neglected or left so that it had to be finished by another.

In 1964 or 1965, applicators were expected to obtain a release from plaintiff before hiring out to one of plaintiff's competitors for "side work" done in a storm or catastrophe area. Applicators were free to work for other contractors before or after working for plaintiff and this did not prejudice them for future jobs with plaintiff. Plaintiff had no preferred call on an applicator's time except for the performance of an accepted work order nor did plaintiff guarantee applicators any work. Applicators paid their own expenses of travel, food and lodging, but they could draw advances on sums due them for work already partially completed. Applicators working for plaintiff performed in plaintiff's name on plaintiff's contracts.

A percentage was withheld from the sum due applicators to cover insurance, if they did not provide their own, and to cover the contingency of leaks in completed work. The unused portion of the percentage was refundable. Verbal instructions sometimes supplemented the work order and the rules and specifications. The percentage arrangement was verbal.

Applicators were paid on the basis of a specified price per 100 square feet of material applied. Different rates applied to different types of materials. Extra pay was given for extra work such as removing an old roof.

The applicators sometimes employed helpers who were paid out of the lump sum due the applicator from plaintiff. The pay of helpers was fixed by the applicator. However, by request of an applicator plaintiff would pay the helpers by check, deducting the amount from the sum due the applicator. Plaintiff did not withhold or pay any taxes for helpers. Helpers were supervised by the applicators who hired them. Plaintiff supervised the work of applicators, if at all, in only a cursory manner. He relied upon their skill and experience and the satisfaction of the property owner with their work. The larger jobs were sometimes inspected during their progress. On one occasion where plaintiff observed that an applicator had disappeared from the job and his helper was working for a competitor of plaintiff in violation of the aforesaid rules, plaintiff terminated the subcontract.

Applicators would occasionally contract independently with the property owners for comparatively minor repair work, such as carpentry, not contemplated in the prime contract between plaintiff and the owner. Plaintiff had no objection to this. However, if the applicator learned of a roofing or siding job he was expected to turn the information in to the plaintiff's office so that a salesman could attempt to get the contract. In turn, the applicator was normally offered the subcontract if the salesman was successful.

Plaintiff did not pay Unemployment Act taxes on these applicators, considering them to be independent subcontractors. He did so for the year 1965 only after being required to do so. This is plaintiff's second round with the Internal Revenue Service. On March 27, 1958, the United States District Court for the District of Kansas, in the unreported case of Billy G. Powers, t/a Powers Roofing & Siding Co. v. United States, Civil No. W-1365, determined that applicators performing services for plaintiff in his business were not employees for federal tax purposes. Defendant now contends that the facts in 1965 are stronger for the Government's position and that the applicators are employees within the terms of the law. A trial was held. Plaintiff and several applicators were heard, together with other witnesses. This case turns squarely on its facts and the weight of the credible evidence firmly establishes that the Government is wrong and that plaintiff is entitled to recover.

As previously noted, the sole issue for determination in this case is whether the applicators are "employees" as defined in applicable statutes and decisional law. The statutes define both what an employee is and what he is not. An employee is "any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee * * *." 26 U.S.C. § 3121(d) (2).

The term "employee" does not include

(1) any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an independent contractor, or

(2) any individual (except an officer of a corporation) who is not an employee under such common law rules. 26 U.S.C. § 3306(i).

Both sections direct attention outside of themselves into the broader scope of "employee" as defined under the common law. Guidance to relevant criteria is found in the applicable Treasury regulation, which provides in pertinent part:

(b) Generally such relationship 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 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 shall be done but how it shall be done. In this connection, it is not necessary that the employer actually direct or control the manner in which the services are performed; it is sufficient if he has the right to do so. The right to discharge is also an important factor indicating that the person possessing that right is an employer. Other factors characteristic of an employer, but not necessarily present in every case, are the furnishing of tools and the furnishing of a place to work, to the individual who performs the services. 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 as to 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 * * *.

(c) Whether the relationship of employer and employee exists will in doubtful cases be determined upon an examination of the particular facts of each case.

(d) If the relationship of employer and employee exists, the designation or description of the relationship by the parties as anything other than that of employer and employee is immaterial. Thus, if such relationship exists, it is of no consequence that the employee is designated as a partner, coadventurer, agent, independent contractor or the like. Treas.Reg. § 31.3306(i)-1(b)-(d) (1956).

The latter statute and interpreting regulation represent congressional...