Rayhill v. United States

• Decision Date: 15 July 1966
• Docket Number: No. 21-62.,21-62.
• Citation: 364 F.2d 347
• Parties: Leo M. and Genevieve B. RAYHILL, d/b/a Leo M. Rayhill Company, v. The UNITED STATES.
• Court: U.S. Claims Court

364 F.2d 347 (1966)

Leo M. and Genevieve B. RAYHILL, d/b/a Leo M. Rayhill Company, v. The UNITED STATES.

No. 21-62.

United States Court of Claims.

July 15, 1966.

COPYRIGHT MATERIAL OMITTED

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

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

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

OPINION

PER CURIAM:

This case was referred to Trial Commissioner Herbert N. Maletz with directions to make findings of fact and recommendation for conclusions of law. The commissioner has done so in an opinion and report filed on March 25, 1965. Exceptions to the commissioner's opinion and report were filed by defendant and the case was submitted to the court on the briefs of the parties and oral argument of counsel. Since the court is in agreement with the opinion and recommendation of the commissioner, with slight modifications, it hereby adopts the same, as modified, as the basis for its judgment in this case, as hereinafter set forth. This case is very near to Illinois Tri-Seal Products, Inc. v. United States, 353 F.2d 216, 173 Ct.Cl. ___ (Nov.1965). It differs from Illinois Tri-Seal in some respects — including the fact that the applicators here did not pay their own employment taxes — but we think that these differences, though they may make this a closer case than Illinois Tri-Seal, are insufficient to call for a decision different from that in Illinois Tri-Seal. The major patterns of the work relationships are too much alike. Plaintiff is therefore entitled to recover and judgment is entered for plaintiff with the amount of recovery to be determined pursuant to Rule 47(c).

Commissioner Maletz' opinion^*, as modified by the court, is as follows:

Plaintiff has brought this action to recover federal insurance contributions and unemployment taxes alleged to have been erroneously paid for the period from January 1, 1959 through March 31, 1960 on the earnings of certain workers known as "applicators". The single issue presented is whether during that period such applicators were "employees" of plaintiff within the meaning of sections 3121(d) (2) and 3306(i) of the Internal Revenue Code of 1954 (26 U.S.C. §§ 3121 (d) (2), 3306(i) (1958 ed.)), both of which "specifically adopt the common-law test for ascertaining the existence of the employer-employee relationship." Enochs v. Williams Packing Co., 370 U.S. 1, 3, 82 S.Ct. 1125, 1127, 8 L.Ed.2d 292 (1962). Section 3121(d) provides in part:

For purposes of this chapter, the term "employee" means —

(1) any officer of a corporation; or

(2) any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee; or¹

* * * * * *

Section 3306(i) reads:

For purposes of this chapter, the term "employee" includes an officer of a corporation, but such term 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.²

Plaintiff, a partnership, maintained a regular office in Syracuse, New York, where it engaged in the home-improvement business which consists of selling to homeowners and applying to their houses such structural materials as roofing and siding. Plaintiff's salesmen (who were held to be independent contractors by the District Director of Internal Revenue) obtained written contracts on its behalf from property owners for the sale and installation of the materials, which contracts contained a general description of the improvements to be made; an agreed price for labor and materials; plaintiff's promise to furnish good quality material and to perform all labor in a good workmanlike manner; and a statement by plaintiff that it was fully protected with public liability, property damage and workmen's compensation insurance.

The individuals who performed the labor under these contracts by applying the roofing and siding materials to the homes of plaintiff's customers were called "applicators". They did not maintain an office, advertise in the newspapers or telephone directory, or have their own business cards. Plaintiff acquired the services of applicators by several different methods. Ordinarily it obtained the names of qualified applicators from its wholesale materials supplier; it also had the names of several qualified applicators upon whom it could call to perform a contract job. In some instances, plaintiff's competitors referred applicators to it; on occasion, applicators came to plaintiff's office seeking work; and at times plaintiff advertised in the "Help Wanted" section of the newspapers for applicators.

When a particular contract job was ready, the applicator was proffered a work sheet which contained the name and address of the property owner where the work was to be performed; a general description of the work; an approximation of the number of squares of roofing or siding material to be applied; and the kind, size, type and color of material to be used, and where to apply it. Some work sheets also specified the number of coats of paint to be applied, and the kind and size of the molding to be used. Also, on occasion, a work sheet contained a notation as to when a job was to be started. In the event a particular job was an unusual one, that fact, as well, was usually noted on the work sheet.

Plaintiff proffered work sheets only to experienced applicators who were deemed capable of performing the work but there was no bidding among the applicators for the work sheets. Each applicator was free to accept or reject any job and frequently an applicator rejected a job. Despite this, he was still offered further application work by plaintiff. On many occasions, an applicator, when proffered a work sheet, went out and examined the work premises before advising plaintiff as to whether or not he would take the job.

Contract materials, such as roofing and siding materials, were furnished by plaintiff who had them delivered to the job site. The applicators provided their own tools which usually consisted of ladders, planks, hammers, material cutters, pump jacks and small tools, which in the aggregate cost new from $100.00 to $400.00. They also provided their own station wagons or trucks for transportation of themselves and their equipment to and from the various job sites, and paid all the expenses for the upkeep and maintenance of their equipment and vehicles without accounting to or obtaining reimbursement from plaintiff. Each job was a separate and distinct undertaking between the plaintiff and the applicator, and a separate work sheet was furnished the applicator for each job. Neither plaintiff nor the applicator was obligated to offer or accept another job. The applicators were generally paid by the job and not on the basis of any hourly, daily, weekly or other periodic rate. More particularly, the applicators were generally paid on the basis of a prevailing piecework rate for each square of roofing and siding applied and, consequently, there were no price negotiations between the plaintiff and the applicators except where extra work incident to the job was required. Payment was due at the completion of a job, but the practice was to pay the applicators on Friday for work completed in that week. However, the applicators could and frequently did obtain payment for completed jobs at other times during the week simply upon request.

It was understood that the applicator would start work on a job as soon as he had finished the work with which he was then occupied and that he would complete the job within a reasonable time. The applicators, however, had no specified working hours; rather, each applicator determined his own hours of work, the length of time that he worked, and the amount of time he would take off.

The applicator worked either alone or with an associate applicator of his own choosing. The compensation paid for a job was divided between associate applicators in accordance with the arrangement between them, and the plaintiff did not participate in such arrangement. The applicator was free to and did employ helpers of his own choosing without the approval of the plaintiff and determined the helpers' pay, hours and working conditions without interference by plaintiff. A helper was paid directly by the plaintiff in an amount specified by the applicator, the plaintiff having no voice in the amount of compensation the helper received. The amount the plaintiff paid a helper was taken from the amount of compensation due from the plaintiff to the applicator on the specific job on which the helper was employed.

All work was done away from plaintiff's premises. The plaintiff had no supervisors or other personnel to observe, instruct or direct the applicators as the work progressed and did not undertake to supervise the work of the applicators, although the partner in charge of plaintiff's Syracuse office occasionally visited a job to see if it was being performed in accordance with the terms of the contract. Other than being expected to comply with the requirements set forth in the work sheets, the applicators received no instructions or directions from plaintiff as to the manner or method in which the work was to be done.

The applicators were free to and did on occasion contract directly with a customer of plaintiff for comparatively minor repair or alteration work not covered by the contract or work sheet, in which case the applicator was compensated directly by the customer without intervention by the plaintiff. However, in the event the additional work desired by the customer was of a major nature and was of a kind...