Source: https://caselaw.findlaw.com/us-supreme-court/397/179.html
Timestamp: 2019-04-20 01:17:08+00:00

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UNITED STATES v. WEBB, INC.
Respondents owned commercial fishing boats, the fishing being done through oral contractual arrangements with boat captains who staffed and provisioned the boats and managed their day-to-day operation. The captains, without an earnings guarantee if they failed to catch fish, agreed to make fishing trips for the season and to return the catches to plants designated by respondents. The plants paid respondents according to the volume of the catch and respondents paid the captains and crews on the same basis according to previously negotiated terms. Respondents filed tax returns as employers under the Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act (FUTA), and paid the employer's share of the taxes due on the earnings of the captains and crews. Those statutes define "employee" as any individual who has employee status under "the usual common law rules" applicable to a determination of the master-servant relationship. Respondents, after making refund claims, sued for refunds in the District Court, which determined that the captains and crews were not respondents' employees under those statutes, holding that the statutes' prescription of "common law rules" barred application of maritime standards. The Court of Appeals affirmed. Held: The status of the captains and crews under the FICA and FUTA must, in this instance, be determined under the standards of maritime law, which is the common law of seafaring men. Pp. 182-194.
Solicitor General Griswold argued the cause for the United States. With him on the briefs were Assistant Attorney General Walters, Harris Weinstein, Matthew J. Zinn, Louis M. Kauder, and Robert I. Waxman.
The respondents in this case, which was consolidated below, own boats that are used in commercial fishing in the Atlantic Ocean and the Gulf of Mexico. Their fishing is carried out through contractual arrangements, shaped by established custom, with boat captains, who man the boats and manage their day-to-day operation. The question before the Court is whether the captains and crewmen of the boats are the "employees" of the respondents within the provisions of the Federal Insurance Contributions Act (FICA) 1 and the Federal Unemployment Tax Act (FUTA), 2 which impose taxes on employers to finance government benefits for employees.
The vessels were operated from docking facilities owned by fish-processing plants, and discharged their catch at these plants upon the completion of each trip. The plants paid respondents for the fish according to the volume of the catch, and respondents paid the captains and crews on the same basis, following terms that had been negotiated in advance. Neither captains nor crews were guaranteed any earnings if they failed to catch fish. While respondents determined the plant to which the vessels would report and generally where and when the fishing would take place, the captains managed the details of the operation of the boats and the manner of fishing.
Respondents filed tax returns as employers under the FICA and the FUTA, and paid the employer's share of the taxes due on the earnings of the captains and crews. After making the appropriate claims for refunds, they sued for refunds in the District Court for the Eastern District of Louisiana. The District Court, sitting without a jury, determined after trial that the captains and crews were not respondents' employees for the purposes of these tax statutes. The trial court noted that both the FICA and the FUTA define "employee" as any individual who has employee status under "the usual common law rules" applicable to a determination of the master-servant relationship. It found "without merit" the Government's contention "that the common-law governing the relationship of the taxpayer and the fishermen in pursuing fishing ventures in the Gulf of Mexico and the Atlantic Ocean is the general maritime law." 271 F. Supp. 249, 257 (1967). The court found further that the degree of control exercised by respondents over these fishing activities was not sufficient, under the common-law standards governing land-based occupations, [397 U.S. 179, 182] to create the relationship of employer and employee between respondents and the captains and crews. Respondents were thus held entitled to their refunds.
On appeal, the Court of Appeals for the Fifth Circuit affirmed. It reviewed the facts and observed that "it is clear that under maritime law the captain is the agent of the owner . . . and the crew hands are employees," and that "[i]f we were free to apply maritime law as a test of the employer-employee relationship, we would reverse the decision of the district court." 402 F.2d 956, 959 (1968). 4 However, the Court of Appeals agreed with the District Court that the statutes' prescription of "common law rules" barred application of maritime standards.
This conclusion conflicts with the approach of the Court of Claims in Cape Shore Fish Co. v. United States, 165 Ct. Cl. 630, 330 F.2d 961 (1964). In that decision the court found scallop fishermen, operating under arrangements similar to those here, to be employees of the shipowner for the purposes of these statutes. It reached this conclusion by applying to the facts the standards of maritime law. We granted certiorari in this case, 394 U.S. 996 (1969), to resolve this conflict, and to clarify the application to maritime workers of these important federal statutes.
The parties agree that both the FICA and the FUTA impose taxes on employers measured by the compensation paid to employees, and that in terms of this case the two statutes define "employee" identically. In the FICA "employee" is defined to include "any individual [397 U.S. 179, 183] who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee," and the language of the FUTA is to the same effect. 5 These definitions were not included in the original Social Security Act as it was adopted in 1935, which defined "employee" merely by specifying that it "includes an officer of a corporation," 6 but were added by amendment in 1948. We must consider the events that prompted the amendment.
In 1935 the draftsmen of the Social Security Act apparently thought it unnecessary to elucidate the meaning of "employee" because they assumed that the term, as it was applied to varying factual situations, would be given the "usual" meaning it bore at common law. See S. Rep. No. 1255, 80th Cong., 2d Sess., 3-4 (1948). However, over the years of applying the Act to a myriad of work relationships, the lower federal courts developed [397 U.S. 179, 184] somewhat varying approaches, certain courts relying more heavily on common-law precedents and others attempting to discern a special meaning for the term from the purposes of the legislation. 7 In addition, the courts tended to look to local precedents to determine the common-law standards, producing different results for similar factual situations in various parts of the country. 8 This divergence of views led this Court, in 1947, to render two decisions in an attempt to clarify the governing standards. United States v. Silk, 331 U.S. 704 ; Bartels v. Birmingham, 332 U.S. 126 .
In Silk, the Court upheld the lower courts' determination that certain truck drivers were, under the circumstances, independent contractors rather than employees, but it upset a similar ruling with respect to a group of men who unloaded coal from railroad cars. In Bartels the Court, reversing the Court of Appeals, held that the members of certain dance bands were not employees of the owners of the dance halls at which they were engaged, despite contractual provisions characterizing them as employees. While the Court's opinions in these cases stressed many of the factors that had been important in common-law determinations of employee status, they also contained language that could be read to detach the question [397 U.S. 179, 185] of statutory coverage from the common-law tests. 9 The Court stated, in Bartels, that "in the application of social legislation employees are those who as a matter of economic reality are dependent upon the business to which they render service." 332 U.S., at 130 .
"The proposed regulation discards the common-law rules for distinguishing the employer-employee relationship distilled from many decisions by many courts out of many insights of real situations, for a new rule of nebulous character.
"The rule, obviously, will not serve to make the necessary distinctions. Who, in this whole world [397 U.S. 179, 188] engaged in any sort of service relationship, is not dependent as a matter of economic reality on some other person? . . .
"[T]he proposed regulation concerns itself mainly, as was stated to your committee by a witness at the hearings: `. . . with making it abundantly clear that on virtually no state of facts may anyone be certain whether or not he has a tax liability until the Commissioner has made up his mind about it.'" Id., at 7, 10, 11.
"Every individual is an employee if the relationship between him and the person for whom he performs services is the legal relationship of employer and employee.
"Generally such relationship exists when the person for whom services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished. That is, an employee is subject to the will and control of the employer not only as to what shall be done but how it shall be done." S. Rep. No. 1255, supra, at 3.
Respondents argue that this language indicates a congressional intent that, where the maritime nature of a [397 U.S. 179, 190] vocation makes impracticable the degree of control generally exercised by land-based employers over their employees, the land-based standards must nevertheless be applied, with the result that no "employment" exists for the purposes of those statutes.
[ Footnote 1 ] 26 U.S.C. 3101 et seq.
[ Footnote 2 ] 26 U.S.C. 3301 et seq.
[ Footnote 3 ] The District Court found that the periods were, for different respondents, January 1, 1956, through December 31, 1956, and July 1, 1957, through December 1, 1958.
[ Footnote 4 ] We are not called upon to, and do not, intimate any view on the correctness of the Court of Appeals' statement on this score.
[ Footnote 5 ] The definitions provide: "For purposes of [the FICA], 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; or (3) [any member of several specific occupations, not including fishing, when certain conditions are satisfied]." 26 U.S.C. 3121 (d). "For purposes of [the FUTA], 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." 26 U.S.C. 3306 (i).
[ Footnote 6 ] Social Security Act 1101 (a) (6), 49 Stat. 647. The language of 1101 (a) (6) was carried over to 1426 (c) and 1607 (h) of the Internal Revenue Code of 1939, the predecessors of present 3121 (d) and 3306 (i) of Title 26, respectively. See 53 Stat. 178, 188.
[ Footnote 7 ] Compare, e. g., Jones v. Goodson, 121 F.2d 176 (C. A. 10th Cir. 1941); Radio City Music Hall Corp. v. United States, 135 F.2d 715 (C. A. 2d Cir. 1943); United States v. Mutual Trucking Co., 141 F.2d 655 (C. A. 6th Cir. 1944); McGowan v. Lazeroff, 148 F.2d 512 (C. A. 2d Cir. 1945); United States v. Wholesale Oil Co., 154 F.2d 745 (C. A. 10th Cir. 1946), with United States v. Vogue, Inc., 145 F.2d 609 (C. A. 4th Cir. 1944); United States v. Aberdeen Aerie, 148 F.2d 655 (C. A. 9th Cir. 1945); Grace v. Magruder, 80 U.S. App. D.C. 53, 148 F.2d 679 (1945).
[ Footnote 8 ] See S. Rep. No. 1255, supra, at 6.
[ Footnote 9 ] In Silk, the Court said: "As the federal social security legislation is an attack on recognized evils in our national economy, a constricted interpretation of the phrasing by the courts would not comport with its purpose. . . . . . . . . ". . . When [the problem of differentiating between employee and independent contractor] arose in the administration of the National Labor Relations Act, we pointed out that the legal standards to fix responsibility for acts of servants, employees or agents had not been reduced to such certainty that it could be said there was `some simple, uniform and easily applicable test.' The word `employee,' we said, was not there used as a word of art, and its content in its context was a federal problem to be construed `in the light of the mischief to be corrected and the end to be attained.' We concluded that, since that end was the elimination of labor disputes and industrial strife, `employees' included workers who were such as a matter of economic reality. . . . We rejected the test of the `technical concepts pertinent to an employer's legal responsibility to third persons for acts of his servants.'. . . Labor Board v. Hearst Publications, 322 U.S. 111, 120 , 123, 124, 128, 129, 131. "Application of the social security legislation should follow the same rule that we applied to the National Labor Relations Act in the Hearst case." 331 U.S., at 712 -714.
[ Footnote 10 ] 1 Fed. Reg., pt. 2, at 1764 (1936), promulgated November 9, 1936 (Treasury Department); 2 Fed. Reg., pt. 1, at 1276 (1937), promulgated July 20, 1937 (Social Security Board).
[ Footnote 11 ] 12 Fed. Reg. 7966 (1947).
[ Footnote 12 ] H. J. Res. 296, 62 Stat. 438; see H. R. Doc. No. 711, 80th Cong., 2d Sess. (veto message of President Truman). This 1948 amendment put the definitions in both statutes in the negative form now found in 26 U.S.C. 3306 (i), see n. 5, supra. The Social Security Act Amendments of 1950 restyled the predecessor of 3121 (d), giving it the form now possessed by that provision, without changing the applicable principles except to extend coverage to specified classes of workers irrespective of their common-law status. 205, 64 Stat. 536; see H. R. Rep. No. 2771, 81st Cong., 2d Sess., 104 (1950); cf. S. Rep. No. 1669, 81st Cong., 2d Sess., 17-18 (1950); H. R. Rep. No. 1300, 81st Cong., 1st Sess., 80-91, 189-207 (1949).
[ Footnote 13 ] In a report published just two weeks before the enactment of the resolution (commenting on H. R. 6777, a bill that contained the same amendment ultimately accomplished by the resolution), the House Committee on Ways and Means stated: "Our failure to act may be further construed as conferring upon the administrative agencies and the courts an unbridled license to say, at will, whether an individual is an employee or an independent contractor . . . . . . . . . "[T]he basic, controlling factor is whether the policy of the Congress shall be to cover as employees only those who are employees under the common-law rule, or to cover a broader class of individuals under some nebulous hypothesis with no bounds to its application." H. R. Rep. No. 2168, 80th Cong., 2d Sess., 9 (1948).
[ Footnote 14 ] 26 CFR 31.3121 (d)-1-(c).
[ Footnote 15 ] Subsequent amendments to the social security laws make it now even clearer that classification of some maritime workers as employees will not threaten the social security fund. The Social Security Act Amendments of 1950 extended benefits coverage to the self-employed for the first time. 64 Stat. 502, 540; see H. R. Rep. No. 1300, 81st Cong., 1st Sess., 9-10 (1949). Benefits for the self-employed are financed by taxes paid by them under the Self-Employment Contributions Act, 26 U.S.C. 1401 et seq.; see H. R. Rep. No. 1300, supra, at 135-145; S. Rep. No. 1669, 81st Cong., 2d Sess., 153-166 (1950). Therefore, the captains and crewmen are eligible for social security benefits whether they are considered employees or self-employed.
[ Footnote 16 ] A conclusion that maritime standards could not be applied might frustrate Congress' evident expectation that the FICA and [397 U.S. 179, 192] FUTA legislation would apply to seamen, and specifically to fishermen. As noted above, the 1939 amendments extended the statutes to cover maritime employees. Additionally, 26 U.S.C. 3121 (b) (4) provides an exemption for service by aliens on foreign vessels, and 3306 (c) (17) exempts fishermen on vessels that do not exceed 10 tons in displacement. These provisions raise the inference that fishermen on larger vessels were expected to be covered, under the general "common law rules" provision. However, if shipowners were relieved of the employers' tax liabilities unless their relationship with the captains and crews were of the sort that would constitute an employer-employee relationship in a land-based activity, application of the statutes to fishermen might be seriously limited.
[ Footnote 17 ] See, e. g., Cape Shore Fish Co. v. United States, 165 Ct. Cl. 630, 637-641, 330 F.2d 961, 965-968 (1964); G. Gilmore & C. Black, The Law of Admiralty 4-21 (1957).
[ Footnote 18 ] See, e. g., Radio City Music Hall Corp. v. United States, 135 F.2d 715, 717-718 (C. A. 2d Cir. 1943).
[ Footnote 19 ] See H. R. Rep. No. 2168, supra, n. 13, at 9-10: "Ample flexibility is possible under [the common-law] rule to accommodate peculiar or unusual employment relationships so frequently found in our complex economic system. . . . . . "The common-law concept of master and servant, of course, is no more fixed and immutable than the common law itself. Hence it will produce in practice varying results under varying circumstances and in different jurisdictions. But such variations will not offend the common-law rule itself. . . . ". . . There is nothing to fear from differences in the application of the common-law tests, but there is much to fear from the abandonment of recognized common-law principles in resolving such questions of fact. Such abandonment would simply amount to reliance upon no recognized body of legal principles."
[ Footnote 20 ] Other factors that may have significance are discussed in United States v. Silk, 331 U.S. 704 (1947); Enochs v. Williams Packing Co., [397 U.S. 179, 194] 370 U.S. 1 (1962); Kirkconnell v. United States, 171 Ct. Cl. 43, 347 F.2d 260 (1965); Illinois Tri-Seal Products, Inc. v. United States, 173 Ct. Cl. 499, 353 F.2d 216 (1965).

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