Zipley v. United States, Civ. A. No. 16426.

• Decision Date: 01 November 1957
• Docket Number: Civ. A. No. 16426.
• Parties: Henry T. ZIPLEY, t/a Glenside Roofing and Siding Co., Plaintiff, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

156 F. Supp. 141

Henry T. ZIPLEY, t/a Glenside Roofing and Siding Co., Plaintiff, v. UNITED STATES of America, Defendant.

Civ. A. No. 16426.

United States District Court E. D. Pennsylvania.

November 1, 1957.

Jules Bell, Glenside, Pa., Joseph J. Lyman, Washington, D. C., for plaintiff.

G. Clinton Fogwell, Jr., Asst. U. S. Atty., Norman Kron, Asst. U. S. Atty., Philadelphia, Pa., for defendant.

WATSON, District Judge.

Plaintiff brought this action to recover taxes which, he alleges, were paid erroneously on the earnings of various workers under the Federal Insurance Contributions Act, Title 26 U.S.C.A. § 1400 et seq., and the Federal Unemployment Tax Act, Title 26 U.S.C.A. § 1600 et seq. Plaintiff contends that the taxes were paid because he believed, at the time of payment, that various workmen were "employees" within the definitions contained in the above-mentioned Acts.¹

The case was heard by the Court sitting without a jury.

Findings of Fact

1. Plaintiff is an individual doing business at Glenside, Pennsylvania, and was such at the time the taxes in question were paid.

2. During the periods from September 30, 1948, to June 30, 1952, plaintiff was engaged in the business of home repairs which, in the main, consisted of selling and applying various types of roofing and siding materials.

3. Sales of plaintiff's materials and services were procured by salesmen who were recruited generally through newspaper advertisements.

4. Plaintiff provided office space and other facilities for the salesmen including stationery, telephones and secretarial service.

5. The compensation of the salesmen consisted wholly of commissions which were based upon a percentage of their sales. The salesmen were permitted to draw against anticipated commissions and the amount of the draw was deducted from their commissions.

6. There were no written contracts of employment between plaintiff and salesmen and plaintiff could discharge them at will.

7. Salesmen were supplied with price lists of labor and materials and, when necessary to meet competition, were allowed to vary these prices within limits fixed by plaintiff.

8. Plaintiff approved each agreement of sale before construction or repairs commenced.

9. Salesmen were allowed to arrange their own work schedules without interference from plaintiff.

10. Plaintiff was primarily concerned with the procurement of sales and he allowed the salesmen to exercise their discretion as to the manner in which sales might best be made.

11. The actual construction work was performed by applicators who were paid by plaintiff on a "per square" basis. Each square consisted of 100 square feet of applied material.

12. There were no written contracts of employment between plaintiff and the applicators.

13. Where additional skill or time was necessary, the applicator was free to reject the job offered if plaintiff refused to compensate the applicator for such.

14. Applicators usually furnished their own tools and equipment but when necessary they could rent such from plaintiff.

15. Applicators furnished their own transportation to and from their places of work.

16. Applicators' helpers were paid by check by the plaintiff and the amount so paid was deducted from the sum due the applicator who had employed the helper.

17. Applicators were not obliged to accept the work offered by plaintiff and they were free to accept jobs offered by other contractors operating in plaintiff's field.

18. There was no continuity of employment between plaintiff and applicators: each project was a separate and distinct undertaking on the part of each.

19. The employee-employer relationship did not exist between plaintiff and the salesmen.

20. The employee-employer relationship did not exist between plaintiff and the applicators.

21. Facts found in the discussion which follows herein.

Discussion

This action was brought to recover taxes paid on the earnings of certain workers who, plaintiff alleges, were independent contractors and not employees. Should the workers be independent contractors, it is clear that they are without the contemplation of the Acts under which these taxes were paid, and plaintiff would be entitled to a refund of these taxes.

The distinction between an independent contractor and an employee, for the purpose of these Acts, has not always been clear. However, in United States v. Silk, 331 U.S. 704, 67 S.Ct. 1463, 91 L.Ed. 1757, and Harrison v. Greyvan Lines, Inc., 331 U.S. 704, 67 S.Ct. 1463, 91 L.Ed. 1757, the United States Supreme Court removed much of the confusion which had existed in the law relating to this problem. Following these decisions came a Senate Report which, after adoption, further clarified the issue and, thereafter, the common law rules were used to determine whether an individual was an employee or an independent contractor for purposes of applying the Social Security Act, 42 U.S.C.A. § 301 et seq.

The common law rule provided that when the...