Tristate Developers, Inc. v. US

• Decision Date: 26 January 1977
• Docket Number: No. 439-72.,439-72.
• Citation: 549 F.2d 190
• Parties: TRISTATE DEVELOPERS, INC. v. The UNITED STATES.
• Court: U.S. Claims Court

549 F.2d 190

TRISTATE DEVELOPERS, INC. v. The UNITED STATES.

No. 439-72.

United States Court of Claims.

January 26, 1977.

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

Fenton P. Wilkinson, Washington, D.C., with whom was Asst. Atty. Gen. Scott P. Crampton, Washington, D.C., for defendant. Theodore D. Peyser, Jr., and Robert S. Watkins, Washington, D. C., of counsel.

Before COWEN, Chief Judge, and DAVIS and KASHIWA, Judges.

OPINION

PER CURIAM:

This case comes before the court on defendant's exceptions to the recommended decision of Trial Judge Lloyd Fletcher, filed October 21, 1975, pursuant to Rule 134(h), having been submitted and considered on the briefs and oral argument of counsel.

Like the earlier "applicator" cases, this case is controlled by the whole of its particular facts. The trial judge properly points out the significant differences from William C. McCombs Co. v. United States, 436 F.2d 979, 193 Ct.Cl. 644 (1971). The present case is more like Rayhill v. United States, 364 F.2d 347, 176 Ct.Cl. 1120 (1966) and Powers v. United States, 424 F.2d 593, 191 Ct.Cl. 762 (1970), and falls within the area marked out by those decisions; the differences from those cases which defendant cites are not significant in the light of the totality of the circumstances.

Since the court agrees with the trial judge's recommended decision, as hereinafter set forth, it hereby adopts the same as the basis for its judgment in this case. Therefore, it is concluded the plaintiff is entitled to recover and judgment is entered for plaintiff with the amount of recovery to be determined pursuant to Rule 131(c) in accordance with this opinion. Defendant's counterclaim is dismissed.

OPINION OF TRIAL JUDGE

FLETCHER, Trial Judge:

The issue in this case must bring to the court a resigned feeling of deja vu. Once again, it is necessary to wrestle with the familiar common law distinction between an employee and an independent contractor, as the courts have done so many times before. Not that the legal principle is esoteric; far from it. In Illinois Tri-Seal Products, Inc. v. United States, 353 F.2d 216, 173 Ct.Cl. 499 (1965), the court has succinctly put the distinction, as follows, at 353 F.2d 223, 173 Ct.Cl. 510:

* * * It is, of course, fundamental that under the common-law test, the relationship of employer and employee exists where the principal has the right to direct the manner and method in which the work shall be done, as well as the result to be accomplished, while an independent contractor relationship exists where the individual who performs work for another does so according to his own manner and method, free from direction or right of direction in matters relating to the performance of the work save as to the result.

For all employment tax purposes, the Internal Revenue Code and the Treasury Regulations promulgated thereunder have specifically adopted this 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, 8 L.Ed.2d 292 (1962), and the regulations rightly conclude that:

(3) Whether the relationship of employer and employee exists under the usual common law rules will in doubtful cases be determined upon an examination of the particular facts of each case. Treas.Reg. § 31.3121(d)-1.

Since the problem for the court, therefore, is basically factual, it is necessary to proceed with an elaboration of the facts adduced at the trial,¹ bearing in mind that the sole issue for decision is whether certain home siding and roofing "applicators" performing such work under contracts with plaintiff were its employees or were independent contractors.² If these several applicators were independent subcontractors for plaintiff (sometimes "Tristate"), then plaintiff is entitled to recover herein. On the other hand, if these persons were Tristate's employees, defendant is entitled to prevail on its counterclaim under the provisions of Sections 3101 et seq., 3301 et seq., and 3401 et seq. of the Internal Revenue Code of 1954. Upon the facts now to be described, I have concluded that the applicators who performed jobs for Tristate were not its employees but were independent contractors during the periods involved. Accordingly, judgment should be entered for plaintiff and the counterclaim dismissed.

The court is no stranger to the concept of "applicator" (sometimes also referred to as "installer" or "mechanic") as that term is used in the home improvement business and has dealt with it on no less than seven prior occasions. Ralls, Inc. v. United States, 470 F.2d 579, 200 Ct.Cl. 240 (1972); William C. McCombs Co. v. United States, 436 F.2d 979, 193 Ct.Cl. 644 (1971); Powers v. United States, 424 F.2d 593, 191 Ct.Cl. 762 (1970); Rayhill v. United States, 364 F.2d 347, 176 Ct.Cl. 1120 (1966); Illinois Tri-Seal Prods. Inc. v. United States, 353 F.2d 216, 173 Ct.Cl. 499 (1965); Edwards v. United States, 168 F.Supp. 955, 144 Ct.Cl. 158 (1958); and Ben Construction Corp. v. United States, 312 F.2d 781, 160 Ct.Cl. 604 (1963). Nor has judicial consideration of applicators' employment status been confined to the Court of Claims. See, for example, Alsco Storm Windows, Inc. v. United States, 311 F.2d 341 (9th Cir., 1962); Ben v. United States, 139 F.Supp. 883, aff'd. 241 F.2d 127 (2d Cir., 1957); Hoosier Home Improvement Co. v. United States, 350 F.2d 640 (7th Cir., 1965); Consolidated Housecraft, Inc. v. United States, 170 F.Supp. 842 (E.D., N.Y., 1959); Jagolinzer v. United States, 150 F.Supp. 489 (D.R.I., 1957); Security Roofing and Const. Co. v. United States, 163 F.Supp. 794 (D.Mass., 1958); Fleeman v. United States, 175 F.Supp. 336 (N.D.Ohio, 1959); Zipley v. United States, 156 F.Supp. 141 (E.D., Pa., 1957); and Drake v. United States, 75-1 USTC ¶ 9475 (N.D.Tex., 1975). Despite generally similar fact patterns there has not been unanimity of result in these many cases.³ They have been referred to, however, because in McCombs, supra, the court has observed that:

* * * We do not subscribe to the idea that these cases do not bear on one another because they involve purely factual issues. Of necessity, the selection or rejection of underlying facts for use in arriving at ultimate conclusions of fact, must involve criteria which have precedential value and in effect are conclusions of law. 436 F.2d 983, 193 Ct.Cl. 652-53.

Following a factual pattern generally similar to all these cases, the record here shows that Tristate is a home improvement contractor, a substantial part of whose business is the installation of new siding or roofing to the homes of its customers. During the periods at issue, this business was conducted under the supervision of Tristate's general manager, Ben Abramson, who utilized the services of commissioned salesmen to obtain contracts from customers and applicators to do the labor (and sometimes furnish the materials) necessary to the performance of those contracts. He acquired the services of these applicators in several ways. Their names were sometimes obtained by plaintiff from wholesale materials supply houses where applicators customarily made known their availability to the trade generally. From previous experience with them plaintiff also kept a list of names of several qualified applicators whom it would call when needed. Others came to plaintiff's office by word of mouth from other applicators who had worked for plaintiff. Also, plaintiff inserted advertisements in the classified sections of newspapers for applicators, stating: "Wanted experienced siding applicators. Steady work. Good pay." Also, a few applicators advertised in the "yellow pages" of the telephone directory.

As customer contracts were obtained, the specifications therein were transferred to a work order which authorized not only the work to be done and the materials to be used but also the price to be paid by any applicator who accepted the work order. Occasionally, starting and completion dates might also be stated, but generally the timing of work performance was left to the applicator subject to overall concern for customer satisfaction.

There was no competitive bidding, and any applicator deemed by plaintiff to be sufficiently experienced was free to accept any particular work order.⁴ Some amount of bargaining as to price for the work took place, particularly where the job was unusual or fairly complex. Tristate's general position was that it should have to pay no more than prevailing area rates and it maintained a price list reflecting them which list price generally prevailed. However, in negotiating prices, Abramson took a more flexible attitude when applicators were in short supply or when, because of prior experience, he wanted the services of a particular applicator who had done good work for plaintiff in the past. The end result of this procedure was that some applicators received one price and others received a different price for the same type of work.

The applicators were free to accept work orders of a similar kind offered by plaintiff's competitors and they would do so except in the case of a few applicators who preferred to work exclusively for Tristate. All applicators, in addition to experience requirements, had to furnish all necessary tools and equipment for the performance of the job, and each had his own truck or other form of transportation which was maintained without reimbursement or other payment by Tristate.⁵ Some occasionally furnished the necessary materials but most of the time the materials were supplied and delivered to the job by Tristate. Some of the applicators were independent licensed contractors. They employed and paid their own helpers. Final payment by Tristate to an applicator for a particular job was made only upon completion of the job and the furnishing by the applicator of a completion certificate signed by the home owner. Tristate, however, would make various advance...