1

Pub.L. No. 95-600, 92 Stat. 2763, 2885-86 (as amended and

codified at 26 U.S.C. § 3401 note (1982)). 

United States Court of Appeals,

Eleventh Circuit.

No. 94-8924.

HOSPITAL RESOURCE PERSONNEL, INC., Plaintiff-Appellee,

v.

UNITED STATES of America, Defendant-Appellant.

Nov. 3, 1995.

Appeal from the United States District Court for the Southern

District of Georgia. (No. CV194-053), Dudley H. Bowen, Jr., Judge.

Before BIRCH and BARKETT, Circuit Judges, and HENDERSON, Senior

Circuit Judge.

BARKETT, Circuit Judge:

In this tax refund action, the United States appeals from a

final summary judgment in favor of plaintiff-appellee Hospital

Resource Personnel, Inc. ("HRP"). The United States, through the

Internal Revenue Service ("IRS"), assessed HRP in excess of

$1,144,000 for failing to withhold and pay certain federal

employment taxes on behalf of its workers. HRP filed suit in

district court against the United States, seeking a refund of

partial payments of federal employment taxes, and a permanent

injunction enjoining and restraining the United States from

enforcing a lien and collecting the unpaid portion of the assessed

taxes. HRP moved for summary judgment on the ground that it was

exempt from a duty to withhold and pay such taxes by the "safe

haven" protection of § 530 of the Revenue Act of 1978.1

The district court granted summary judgment, ordering the
United States to refund the taxes paid; entered a permanent

injunction, ordering the United States to cease its efforts to

collect employment taxes assessed against HRP; and annulled the

tax lien on HRP's assets. 860 F.Supp. 1557. Because we conclude

that HRP was exempt from the duty to withhold federal employment

taxes, but find that the district court was without jurisdiction to

enjoin the United States, we affirm the district court's ruling in

part and vacate it in part.

Facts & Procedural History

HRP, a Georgia corporation which began operating in 1987, is

a business which provides specialized nurses to hospitals in need

of temporary additional staffing. HRP contracts with approximately

fifteen hospitals in Georgia and South Carolina. The evidence is

undisputed that HRP does not prescribe the work that the nurses are

to perform at the hospitals, nor does it furnish the nurses with

uniforms, transportation, journals, sick pay, vacation pay,

pensions, bonuses, medical insurance, or licenses. In addition,

HRP permits the nurses to be employed directly by the hospitals or

to register with other similar nursing agencies or registries. The

nurses may choose when, where, and how often they work. HRP pays

the nurses according to the number of hours worked at the client

hospitals, making the payments on a regular basis, daily or weekly,

as the nurses complete a particular job or project.

HRP has never withheld federal income or social security taxes

from the compensation it pays to the nurses on its registry.

Instead, it has always treated the nurses as independent

contractors who are not subject to withholding, and at the end of
 2

Section 7422 states in relevant part:

No suit or proceeding shall be maintained in any court

for the recovery of any internal revenue tax alleged to

have been erroneously or illegally assessed or

collected, or of any penalty claimed to have been

collected without authority, or of any sum alleged to

have been excessive or in any manner wrongfully

collected, until a claim for refund or credit has been

duly filed with the Secretary....

26 U.S.C. § 7422(a). 

 3The Anti-Injunction Act states in pertinent part:

each year has furnished them with information returns on Form 1099,

listing all payments made during the year.

Following an audit, the IRS assessed employment taxes, plus

penalties and interest, in excess of $1,144,000, against HRP for

all quarters of the years 1988, 1989, and 1990. The IRS disagreed

with HRP's characterization of the nurses as independent

contractors, declaring instead that they were employees subject to

withholding. In response, HRP paid the income withholding tax and

both portions of the social security tax due for one employee for

the fourth quarter of 1990, and filed an administrative claim as

well as this refund action under 26 U.S.C. § 7422.2

Thereafter, the IRS filed a tax lien against HRP and served a

collection summons calling for financial data in order to collect

on its lien. Consequently, HRP added an amendment to its complaint

and filed a motion seeking a permanent injunction restraining the

IRS from collecting the balance of the assessment. The government

opposed the motion, arguing that the Anti-Injunction Act, 26 U.S.C.

§ 7421, precluded the court from exercising jurisdiction over any

action or motion to enjoin the collection of taxes.3 Although the
Prohibition of suits to restrain assessment or

collection (a) Tax.—Except as provided ... no suit for

the purpose of restraining the assessment or collection

of any tax shall be maintained in any court by any

person, whether or not such person is the person

against whom such tax was assessed.

26 U.S.C. § 7421. 

 4

The court found that the evidence the United States

proffered in opposition to the motion for summary judgment, a

single IRS report, was inadmissible because it was "replete with

hearsay, opinions, and legal conclusions." 

government acknowledged that the Supreme Court has recognized an

exception to the Act, see Enochs v. Williams Packing & Navigation

Co., 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962), it argued

that HRP had failed to satisfy its strict requirements.

The district court entered summary judgment for HRP, finding

that it had established a reasonable basis for treating the nurses

as independent contractors under three separate provisions of § 530

of the Revenue Act.4 The court also entered a permanent injunction

against the United States, concluding that HRP had established that

the action did indeed fall within the exception to the AntiInjunction Act: in addition to establishing its entitlement to

success on the merits, HRP had demonstrated that it would suffer

irreparable injury if it were to attempt to bring a full refund

action at law.

Discussion

1. Employees versus Independent Contractors

 Employers must withhold federal income tax as well as social

security tax from the wages they pay to their employees. 26 U.S.C.

§§ 3101 et seq. & 3401 et seq. In addition, employers must pay
 5

Congress has imposed social security taxes on the employer

and the employee under the Federal Insurance Contributions Act

("FICA"). 26 U.S.C. § 3101 et seq. It has imposed unemployment

taxes on the employer under the Federal Unemployment Tax Act

("FUTA"). 26 U.S.C. § 3301 et seq. 

 626 C.F.R. § 1.6041-1(a). 

 7See, e.g., General Investment Corp. v. United States, 823

F.2d 337, 341-42 (9th Cir.1987). Both the FICA and FUTA statutes

define an employee as "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) & 3306(i). 

social security and unemployment taxes on behalf of their

employees.5 These taxes are known collectively as "employment

taxes." Employers are only required to withhold and pay these

employment taxes, however, in regard to payments to "employees,"

not to "independent contractors." In connection with payments to

"independent contractors," employers only have to send annual

information returns, on Form 1099 to the workers and on Forms 1096

& 1099 to the IRS, indicating the income paid during the year.6

Traditionally, common law rules served as the basis for the

classification of particular workers or classes of workers as

employees or independent contractors.7

 Section 530 of the Revenue

Act addresses the distinction specifically within the tax context.

In addition to providing generally that workers are not employees

if the taxpayer has a reasonable basis for not treating them as

employees, it affords three statutory "safe haven" provisions

allowing taxpayers to treat workers as independent contractors,

even though under the common law they might be considered

employees. Institute for Resource Management, Inc. v. United

States, 22 Cl.Ct. 114, 115-16 (1990).
Section 530 of the Revenue Act provides in pertinent part:

CONTROVERSIES INVOLVING WHETHER INDIVIDUALS ARE EMPLOYEES FOR

PURPOSES OF THE EMPLOYMENT TAXES.

(a) TERMINATION OF CERTAIN EMPLOYMENT TAX LIABILITY.—

(1) IN GENERAL.—If—

(A) for purposes of employment taxes, the taxpayer

did not treat an individual as an employee ..., and

(B) ... all Federal tax returns (including

information returns) required to be filed by the

taxpayer ... are filed on a basis consistent with

the taxpayer's treatment of such individual as not

being an employee, then ... the individual shall be

deemed not to be an employee unless the taxpayer

had no reasonable basis for not treating such

individual as an employee.

§ 530(a)(1) (emphasis added). Section 530(a)(2) provides the

additional three statutory safe havens, two of which are relevant

to the present case:

(2) STATUTORY STANDARDS PROVIDING ONE METHOD OF SATISFYING THE

REQUIREMENTS OF PARAGRAPH (1).—For purposes of paragraph (1),

a taxpayer shall in any case be treated as having a

reasonable basis for not treating an individual as an

employee ... if the taxpayer's treatment of such

individual ... was in reasonable reliance on any of the

following:

(A) judicial precedent, published rulings,

technical advice with respect to the taxpayer, or a

letter ruling to the taxpayer;

 . . . . .

(C) long-standing recognized practice of a

significant segment of the industry in which such

individual was engaged.

§ 530(a)(2) (emphasis added).

Thus, § 530 provides several means through which a taxpayer

may prove that it had a reasonable basis for not treating a worker

as an employee: the taxpayer may rely on common law rules under §
 8

For a detailed analysis of congressional intent, common

law, and "reasonable basis" under § 530(a)(1), see Critical Care

Register Nursing, Inc. v. United States, 776 F.Supp. 1025, 1027-

28 (E.D.Pa.1991). 

530(a)(1),8 or on any of the explicit statutory exceptions of §

530(a)(2). Moreover, a taxpayer need satisfy only one of the

available safe havens.

HRP relies on not one but three of the safe havens to support

its characterization of the nurses as non-employees: (1) judicial

precedent, published rulings, and technical advice (§

530(a)(2)(A)); (2) long-standing recognized practice of a

significant segment of the industry in which the taxpayer is

engaged (§ 530(a)(2)(C)); and (3) common law (§ 530(a)(1)(B)).

a. Judicial Precedent, Published Rulings, & Technical Advice

 HRP argues that its situation falls within the safe haven

provision of § 530(a)(2)(A) in three respects. First, a published

ruling, Revenue Ruling 61-196, 1961-2 CB 155, held in part that

"private duty nurses" are generally independent contractors, not

employees, except when engaged on a full-time basis on a salary in

the regular employ of individuals or institutions with prescribed

routines during fixed hours. Revenue Ruling 61-196 states in part:

Registered nurses, by reason of their professional status,

generally are independent contractors in the performance of

private duty nursing services. They hold themselves out to

the public as exercising an independent calling requiring

specialized skills. Ordinarily, they have full discretion in

administering their professional services and are not subject

to sufficient direction or control to warrant the finding of

an employment relationship, even though they may be subject to

the supervision of the attending physician. Under such

circumstances they are independent contractors and not

employees for Federal employment tax purposes.

HRP provided undisputed evidence that, like private duty
 9

Just as in this action, Critical Care involved a business

which provided registered nurses to hospitals in need of

temporary additional staffing. Critical Care contracted with

nurses, its nurses do not work routine fixed hours or full time,

but rather exercise full discretion in making schedules and

administering their professional services, accepting and declining

HRP assignments at-will. Nor do HRP nurses receive a salary, but

rather receive compensation from HRP on an hourly basis. Moreover,

like private duty nurses, HRP nurses may hold themselves out to the

public for direct employment with hospitals, other agencies, or

private parties.

Although the government argues that the status of "private

duty nurses" differs from that of HRP's nurses, we can find no

authority to support such a distinction. The only significant

difference we discern is that HRP's nurses essentially use HRP as

an employment agency. The government suggests that because HRP's

nurses do not work in private settings their status is not

comparable, and thus HRP's reliance on the Revenue Ruling was

unreasonable. We find this rationale unpersuasive. There is

nothing in the record to suggest that HRP could not also send its

nurses to work in a private setting; nor does there appear to be

a difference in status between private duty and HRP nurses working

subject to the supervision of attending physicians.

Second, HRP cites Critical Care Register Nursing, Inc. v.

United States, 776 F.Supp. 1025 (E.D.Pa.1991), as judicial

precedent under § 530(a)(2)(A) to support its position that the

nurses are independent contractors. In Critical Care, a case

practically indistinguishable from the one before us,9 the district
hospitals to supply nurses according to the hospitals' requests

for particular shifts, and contracted with nurses to work those

shifts. Critical Care did not prescribe for the nurses the work

they were to perform, nor did it furnish uniforms,

transportation, or vacation pay. In addition, Critical Care

permitted its nurses to be employed directly by hospitals and to

register with other agencies. Id. at 1026. 

 10Cf. Overeen v. United States, No. 90-1920-W, 1991 WL

338327 (W.D.Okla. Sept. 4, 1991) (court denied plaintiff's

summary judgment motion, concluding in part that the home care

placement agency failed to provide sufficient facts to establish

that its reliance on industry practice and an accountant's advice

was reasonable such that, even if its workers were employees

under the common law, it would be exempt from employment taxes

under the statutory safe havens of § 530). 

court for the Eastern District of Pennsylvania concluded that

because the taxpayer had established a reasonable basis for not

treating its workers as employees under traditional common law

rules, it had satisfied the dictates of the general safe haven

provision, § 530(a)(1), and was thus exempt from employment tax

liability. Id. at 1028-29.

Although the government mentions Critical Care in its

appellate brief, it does not disagree with or distinguish it. It

simply argues that whether workers are employees or independent

contractors, and whether HRP had a reasonable basis to treat its

workers as independent contractors, are factual questions for a

jury to decide. This response is inapposite to HRP's claim that

judicial precedent supports its classification of its workers as

independent contractors. Moreover, the record in this case does

not disclose any disputed factual issues for a jury to decide. The

facts here are undisputed. The issue is whether the undisputed

facts support the conclusion that HRP had a reasonable basis to

classify the nurses as independent contractors.10
Finally, in an affidavit, the vice-president and co-founder of

HRP stated that when he and his wife started HRP, they relied in

part on the technical advice of several attorneys and a certified

public accountant in classifying the nurses as independent

contractors. He stated that the attorneys suggested that HRP

should model itself after its chief competitor, noting that the IRS

had audited the competitor and made no adverse ruling concerning

the competitor's characterization of its nurses as independent

contractors.

The government argues that Congress did not intend for

taxpayers to rely on the technical advice of their own consultants,

but rather on advice from the IRS. Because we conclude that HRP

satisfied the "published ruling" and "judicial precedent" portions

of § 530(a)(2)(A), we need not, and do not, address the meaning and

congressional intent behind the term "technical advice."

b. Long-Standing Industry Practice

 With respect to the safe haven provision of § 530(a)(2)(C),

HRP argues that in treating the nurses as independent contractors

in the same manner as its chief competitor, it is following the

"long-standing recognized practice of a significant segment of the

industry in which [it] [i]s engaged." While we recognize that

under some circumstances one or two businesses may constitute a

significant segment of an industry, we are reluctant to so hold

under the facts present in this case. Even though HRP offered

undisputed evidence that its only significant competitor in

Augusta, Georgia, also treats its workers as independent

contractors, HRP did not provide any evidence as to other
competitors in the geographic region in which it operates, namely

Georgia and parts of South Carolina. Accordingly, we find that the

evidence on which the district court relied was insufficient to

establish that HRP was exempt from employment taxes as a matter of

law under § 530(a)(2)(C).

c. Common Law

 Finally, the district court placed significant reliance on

the common law factors and the general safe haven provision of §

530(a)(1)(B) in reaching its conclusion that HRP had a reasonable

basis for treating the nurses as independent contractors.

The IRS has compiled a non-exclusive list of twenty factors to

aid in analyzing the status of workers. Those indicative of

employee status include: (1) instructions from the employer; (2)

training; (3) integration of worker's services into employer's

business; (4) worker's services rendered personally; (5) a

continuing relationship between worker and employer; (6) set hours

of work; (7) mandatory full-time employment; (8) work on

employer's premises; (9) set order of tasks; (10) oral or written

reports; (11) payment by the hour, week, or month; and (12) right

to discharge for reasons other than nonperformance. Those

indicative of independent contractor status include: (13) worker's

right to hire, supervise, and pay assistants; (14) payment of own

business and/or travel expenses; (15) furnishing own tools and

materials; (16) significant investment; (17) realization of

profit or loss; (18) right to work for more than one firm at a

time; (19) right to make service available to the general public;

and (20) right to terminate without incurring liability. See
 11We note, by way of analogy, that generally physicians,

dentists, and others who follow an independent trade, business,

or profession in which they offer their services to the public

are not common law employees. In addition, although the IRS has

ruled that physicians who work under contract with a corporation

are employees rather than independent contractors, contrary to

the situation here, those physicians worked solely for the

Rev.Rul. 87-41, 1987-1 CB 296.

 Although no one factor is definitive on its own, collectively

the factors define the extent of an employer's control over the

time and manner in which a worker performs. This control test is

fundamental in establishing a worker's status. General Inv. Corp.

v. United States, 823 F.2d 337, 341 (9th Cir.1987); REAG, Inc. v.

United States, 801 F.Supp. 494, 501 (W.D.Okla.1992); Critical Care

Register Nursing, Inc. v. United States, 776 F.Supp. 1025, 1028-29

(E.D.Pa.1991); see Rick A. Pacynski, Legal Challenges in Using

Independent Contractors, 72 Mich.B.J. 671 (1993); 13 Jacob

Mertens, Jr., Mertens Law of Federal Income Taxation § 47A.09 (July

1995).

HRP presented undisputed evidence that it does not control the

manner and means of the nurses' work: HRP does not instruct or

train the nurses; it does not mandate full-time employment; it

neither schedules the tasks nor sets the number of hours the nurses

must work; and it is the nurses themselves who provide

transportation, incidental expenses, uniforms, tools, and

materials. In addition, while HRP does require the nurses to

provide their services personally and pays them on set time

intervals (hourly), the nurses do not work on HRP's premises, and

they are free to provide their services directly to hospitals and

to register with other similar nursing agencies.11
corporation and had set hours of work. 13 Mertens § 47A.09

(citing Reg. § 31.3401(c)-1(c); TAM 9149001). 

The government concedes that HRP would be entitled to prevail

if the common law supported its assertion that the nurses were

independent contractors. Under the common law, however, whether

the nurses are independent contractors depends on whether or not

HRP controls the manner in which they work, which, the government

argues, is a disputed issue of fact. In support of its argument,

the government refers this Court to In re Critical Care Support

Services, Inc., 138 B.R. 378 (Bankr.E.D.N.Y.1992), a case involving

a nurse placement agency in which the bankruptcy court determined

that the nurses were employees under the control of the agency.

However, the bankruptcy court in In re Critical Care did not act as

a factfinder, but instead drew conclusions based upon undisputed

facts, as did the district court here. Moreover, three important

factual differences exist between In re Critical Care and our

situation: (1) the placement agency, Critical Care, told its

nurses which shifts and hours to work; (2) Critical Care's

predecessor had treated the same nurses as employees; and (3)

after two years of treating its nurses as independent contractors,

Critical Care reassigned them the title of "employee" and reported

taxes accordingly.

We agree with the district court's conclusion that the

undisputed facts satisfy many of the twenty factors set forth by

the IRS, and therefore that HRP, as a matter of law, did not

control the manner in which the nurses performed their work.

Accordingly, we hold that HRP was exempt from employment taxes
under §§ 530(a)(2)(A) & (1)(B) because of its reasonable reliance

on Revenue Ruling 61-196, judicial precedent, and common law in

treating the nurses as independent contractors.

2. Permanent Injunction

 We turn now to consideration of whether the district court,

upon determining that HRP succeeded on the merits, had jurisdiction

to enjoin the government from collecting the remaining employment

taxes assessed against HRP. An employer may bring an action at law

against the government for recovery of erroneously assessed

internal revenue taxes under 28 U.S.C. §§ 1340 & 1346. An employer

may bring an action in equity to enjoin the government from

collecting taxes, however, only upon a showing that the court has

jurisdiction despite the Anti-Injunction Act, 26 U.S.C. § 7421,

supra note 3. HRP argues that while a literal reading of the AntiInjunction Act would appear to deprive a court of the power to

grant injunctions against tax collection, the Supreme Court has

held that exceptions to the Anti-Injunction Act exist in certain

limited circumstances. See Enochs v. Williams Packing & Navigation

Co., 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962); Miller v.

Standard Nut Margarine Co., 284 U.S. 498, 52 S.Ct. 260, 76 L.Ed.

422 (1932). Few taxpayers, however, have been able to meet these

strict requirements.

In Williams Packing, a corporation sought to enjoin collection

of certain past due withholding taxes, claiming that an assessment

of the taxes would force it into bankruptcy, thus causing

irreparable injury. Williams Packing, 370 U.S. at 5, 82 S.Ct. at

1128. The Court overturned the grant of a permanent injunction,
stating that a court may not grant such an injunction merely

because collection of a tax would cause irreparable harm to the

taxpayer's enterprise. Id. at 5-6, 82 S.Ct. at 1128. It held

instead that a suit for an injunction may be maintained only when,

"under the most liberal view of the law and the facts," the

government cannot establish its claim at the time of the suit. Id.

at 7, 82 S.Ct. at 1129. The Court explained,

[t]he manifest purpose of § 7421(a) [the Anti-Injunction Act]

is to permit the United States to assess and collect taxes

alleged to be due without judicial intervention, and to

require that the legal right to the disputed sums be

determined in a suit for refund.... Nevertheless, if it is

clear that under no circumstances could the Government

ultimately prevail, the central purpose of the Act is

inapplicable and, under the Nut Margarine case, the attempted

collection may be enjoined if equity jurisdiction otherwise

exists.

Williams Packing, 370 U.S. at 7, 82 S.Ct. at 1129 (footnote

omitted).

In Nut Margarine, a manufacturer of "Southern Nut Product"

brought an action to restrain the government from collecting

federal oleomargarine taxes on its product. Prior to the

assessment, however, three lower federal court cases had held that

similar products were nontaxable and, by letter, the tax collector

had informed the manufacturer that its product was not subject to

the tax. As the Court made clear, the government had no chance of

prevailing:

This is not a case in which the injunction is sought upon the

mere ground of illegality because of error in the amount of

the tax. The article is not covered by the [Oleomargarine]

act. A valid oleomargarine tax could by no legal possibility

have been assessed against [the manufacturer], and therefore

the reasons underlying [the Anti-Injunction Act] apply, if at

all, with little force.

Nut Margarine, 284 U.S. at 510, 52 S.Ct. at 263 (emphasis added).
 12We note that this determination will have little

significance on the outcome of this action. As the government

conceded at oral argument, if the Court determined that HRP's

nurses were independent contractors, it would be impracticable

for the government to pursue collection of the remaining taxes. 

As in Williams Packing, but unlike in Nut Margarine, at the

time HRP initiated this suit—judicial hindsight notwithstanding—the

government had at least the legal possibility of prevailing. As

the Court stated in Williams Packing: "the question of whether the

Government has a chance of ultimately prevailing is to be

determined on the basis of the information available to it at the

time of suit." Id. at 7, 82 S.Ct. at 1129 (emphasis added).

Because the circumstances necessary to escape the Anti-Injunction

Act's proscription against a court's power to grant injunctions are

not present in this case, we conclude that the district court was

without jurisdiction to enjoin the government.12

Conclusion

Because we find that HRP established a reasonable basis for

treating the nurses as independent contractors under two provisions

of § 530 of the Revenue Act, we AFFIRM the district court's ruling

granting summary judgment to HRP in its action at law for an

employment tax refund. Because we conclude that the AntiInjunction Act precluded the district court from exercising

jurisdiction to enjoin the government from collecting the unpaid

portion of the taxes it assessed against HRP, we VACATE the

injunction. We REMAND this case to the district court for further

proceedings consistent with this opinion.

AFFIRMED in part; VACATED in part; and REMANDED.