Salazar v. Brown

• Decision Date: 30 August 1996
• Docket Number: No. 1:87cv961.,1:87cv961.
• Parties: Manuel SALAZAR, et al., Plaintiffs, v. Robert BROWN, Jr., et al., Defendants.
• Court: U.S. District Court — Western District of Michigan

940 F.Supp. 160

Manuel SALAZAR, et al., Plaintiffs, v. Robert BROWN, Jr., et al., Defendants.

No. 1:87cv961.

United States District Court, W.D. Michigan, Southern Division.

August 30, 1996.

Deborah L. McNabb, Gary N. Gershon, Michigan Migrant Legal Assistance Project, Inc., Grand Rapids, MI, John M. Lichtenberg, James Gavin O'Connor, Dickinson, Wright, Moon, Van Dusen, et al., Grand Rapids, MI, for plaintiffs.

Richard M. Van Orden, Gockerman, Wilson, Saylor & Hesslin, P.C., Grand Rapids, MI, for defendants.

OPINION

SCOVILLE, United States Magistrate Judge.

This is the final chapter in a complicated and protracted class action lawsuit brought by agricultural workers against their former employer. All claims, save one, have been disposed of by order of dismissal, summary judgment, trial, or stipulation of the parties. The only remaining claim is set forth in count III of the second amended complaint, in which plaintiffs seek a declaration that defendant Brown & Brown Farms violated the Federal Insurance Contributions Act (FICA) by failing to withhold, report, and pay FICA taxes. (Sec.Am.Comp., Prayer for Relief, ¶ I, docket # 84). Presently pending before the court is defendant's motion for summary judgment on this count. The matter has been fully briefed and argued by the parties. The parties have consented to the entry of final judgment by a magistrate judge. 28 U.S.C. § 636(c). For the reasons set forth below, defendants' motion will be granted and count III of the second amended complaint will be dismissed.

As the Sixth Circuit has noted, the federal courts have entered a "new era" in summary judgment practice. Cox v. Kentucky Dep't of Transportation, 53 F.3d 146, 150 (6th Cir. 1995); Street v. J.C. Bradford & Co., 886 F.2d 1472, 1478-81 (6th Cir.1989). Summary judgment is appropriate when the record reveals that there are no issues as to any material fact in dispute and the moving party is entitled to judgment as a matter of law. FED.R.CIV.P. 56(c). Sims v. Memphis Processors, Inc., 926 F.2d 524, 526 (6th Cir.1991) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986), and Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986)). The standard for determining whether summary judgment is appropriate is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." See Booker v. Brown & Williamson Tobacco Co., 879 F.2d 1304, 1310 (6th Cir. 1989) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. at 251-52, 106 S.Ct. at 2511-12). Summary judgment is particularly appropriate where the material facts are not disputed and the case turns upon an issue of law, such as the construction of a statute. Miller v. State Farm Mut. Auto Ins. Co., 87 F.3d 822, 824 (6th Cir.1996).

Facts and Previous Proceedings

The factual record now before the court is extensive. The facts relevant to the pending motion, however, are straightforward and not disputed by any party. Those facts are as follows.

The named plaintiffs were engaged as agricultural workers of Brown & Brown Farms during 1985, 1986, or 1987. Defendant Brown & Brown Farms treated all field workers during those years as independent contractors for purposes of the federal tax laws. In that connection, each field worker signed a one-page contract, written in both English and Spanish, acknowledging that the worker "is an independent contractor and not an employee of Brown & Brown Farms." (See Sec.Am.Comp., Ex. 1, ¶ 6, docket # 84). In the same agreement, the worker "agreed to comply with any applicable state & federal laws in reporting income of the independent contractor." (Id.). It is undisputed that, during the years in question, Brown & Brown did in fact treat field workers as independent contractors. Consequently, the workers were given 1099 forms and not W-2 forms, no federal taxes were withheld, and the employer did not withhold or pay FICA taxes.

Despite their execution of such agreements, plaintiffs filed suit in this court in 1987 seeking to compel compliance with the provisions of the Federal Insurance Contributions Act. In count III of their original complaint (docket # 1), plaintiffs alleged that they were employees, not independent contractors, and that defendant's failure to withhold, report, and pay FICA taxes violated the provisions of 26 U.S.C. § 3102(a). The original complaint requested a declaration that defendant violated FICA by failing to withhold, report, and pay taxes (Prayer For Relief, ¶ M) and an injunction directing defendant to file appropriate tax returns and to remit FICA taxes due on plaintiffs' earnings. (Id., at ¶ N). Defendant moved to dismiss count III, on the sole ground that the relief requested was barred by the provisions of the Tax Injunction Act, 26 U.S.C. § 7421. In an oral opinion, District Judge Douglas W. Hillman denied the motion to dismiss, finding that the Tax Injunction Act only bars suits seeking to restrain the assessment or collection of taxes. Judge Hillman found that suits, such as the present one, that seek to promote taxation do not fall within the purview of the Tax Injunction Act. (See Transcript of Oral Opinion, docket # 36, at 12-13). The court subsequently entered an order (docket # 32) denying the motion to dismiss the FICA claim.

Plaintiffs subsequently filed a first amended complaint, reiterating the FICA claim (docket #11). In response, defendant again moved for dismissal, raising the same issue decided by Judge Hillman as well as the question whether an employee has a private right of action under FICA. (Motion, docket # 63). Because the motion relied on matters outside the pleadings, the court elected to treat it as a motion for summary judgment pursuant to FED.R.CIV.P. 56, and so notified the parties. See FED.R.CIV.P. 12(b)(6). At a motion hearing, plaintiffs voluntarily withdrew all claims for injunctive relief in count III. (See Order, docket # 87). Plaintiffs filed a second amended complaint, repeating the FICA claim but deleting prayer for relief N, which had asked for an injunction ordering the payment of FICA taxes (docket # 84). Consequently, as amended, count III now seeks only a declaratory judgment concerning defendant's alleged violation of its duty to pay FICA taxes for the years in question. Defendant renewed its motion, and the matter is before the court for decision.

Discussion

Defendant's motion for summary judgment presents two essential arguments. First, defendant continues to assert that a grant of relief on count III would violate the Tax Injunction Act. As Judge Hillman has already decided this issue, I will not revisit it. Defendant has presented no new evidence or argument that would indicate that Judge Hillman's conclusion was incorrect. Defendant's arguments based upon the Tax Injunction Act, 28 U.S.C. § 7421, will therefore be overruled. Defendant's second argument is that an alleged employee has no private right of action under FICA against an employer arising from an employer's failure to withhold and remit FICA taxes. For the reasons set forth below, I find this argument to be meritorious.

A. Statutory Background

The Federal Insurance Contributions Act (FICA) is but one part of the immensely complicated and interrelated system of statutes and regulations that make up the federal social welfare program. The Social Security Act, 42 U.S.C. §§ 401, et seq., establishes a federal insurance scheme for the benefit of the aged, blind and disabled and their dependents. FICA is one of the taxing statutes designed to fund the program set up by the Social Security Act. Pursuant to the requirements of FICA, employees and their employers are liable for certain employment taxes to support the Social Security and the Medicare systems. For the year 1985, FICA imposed a tax at the rate of 7.05 percent upon the eligible wages of all employees. The rate for the years 1986 and 1987 was 7.15 percent. 26 U.S.C. § 3101(a), (b). Federal law requires the employer to collect from each employee the FICA tax on wages by withholding the taxes from the employee's paycheck and periodically remitting them to the Internal Revenue Service. See 26 C.F.R. § 31.3102-1(a). Federal law also imposes upon the employer itself a tax, generally in an amount equal to the employee's tax. 26 U.S.C. § 3111(a). This tax is specifically denominated as an "excise tax" in the Act. Id. Consequently, an employer is required to withhold and remit the employee tax and to remit an equal amount as an employer excise tax on the covered wages of all persons who qualify as "employees," as that term is defined by FICA. 26 U.S.C. § 3121(d).

Those workers who are self-employed are covered by different provisions. Self-employment income is subject to the self-employment tax. 26 U.S.C. §§ 1401, 1402(b). For the year 1985, the net rate was 11.80 percent. For 1986 and 1987, the net rate was 12.30 percent. 26 U.S.C. § 1401. The self-employed are responsible for remitting their own taxes to the IRS.

The obligations imposed by FICA are administered by the Internal Revenue Service and are subject to numerous regulations, revenue rulings, interpretive rulings, and other administrative pronouncements too extensive to summarize here. In general, however, employer returns are subject to examination and audit by the IRS with regard to compliance with FICA. If the IRS determines that the employer has underpaid FICA liability, the IRS will issue a tax assessment. 26 U.S.C. §§ 6201, 6205, 6211. If the employer does not agree with the assessment, the employer must nevertheless pay the assessed FICA tax and then litigate the matter in the U.S. District Court or the Court of Claims. 28 U.S.C. § 1346(a).

The courts have long recognized that a worker's entitlement to social security benefits does not depend upon the actual payment of FICA taxes by...