Case Name: ILLINOIS TRI-SEAL PRODUCTS, INC. v. THE UNITED STATES; JOHN D. BUCHANAN, HOWARD BROWN AND EDWARD MARCUS, D/B/A TRI-SEAL INSTALLATION CO. v. THE UNITED STATES; JOHN D. BUCHANAN & FRANK COMMISO D/B/A TRI-STATE INSTALLATION CO. v. THE UNITED STATES
Court: United States Court of Claims
Jurisdiction: United States
Decision Date: 1965-11-12
Citations: 173 Ct. Cl. 499
Docket Number: No. 429-61; No. 430-61; No. 431-61
Parties: ILLINOIS TRI-SEAL PRODUCTS, INC. v. THE UNITED STATES JOHN D. BUCHANAN, HOWARD BROWN AND EDWARD MARCUS, D/B/A TRI-SEAL INSTALLATION CO. v. THE UNITED STATES JOHN D. BUCHANAN & FRANK COMMISO D/B/A TRI-STATE INSTALLATION CO. v. THE UNITED STATES
Judges: Before Cowen, Chief Judge, Laramore, Dureee, Davis, and Collins, Judges.
Reporter: United States Court of Claims Reports
Volume: 173
Pages: 499–541

Head Matter:
353 F. 2d 216
ILLINOIS TRI-SEAL PRODUCTS, INC. v. THE UNITED STATES JOHN D. BUCHANAN, HOWARD BROWN AND EDWARD MARCUS, D/B/A TRI-SEAL INSTALLATION CO. v. THE UNITED STATES JOHN D. BUCHANAN & FRANK COMMISO D/B/A TRI-STATE INSTALLATION CO. v. THE UNITED STATES
No. 429-61
No. 430-61
No. 431-61
[Decided November 12, 1965]
Joseph J. Lyman, attorney of record, for plaintiff.
Philip B. Miller, with whom was Acting Assistcmt Attorney General Richard M. Roberts, for defendant. G. Moxley Featherston, Lyle M. Turner, and Mitchell Barrmelson, of counsel.
Before Cowen, Chief Judge, Laramore, Dureee, Davis, and Collins, Judges.

Opinion:
Per Curiam :
These related cases — testing whether certain '"installers" were plaintiffs' employees for the purposes of the Peder al Insurance Contributions Act and the Federal Unemployment Tax Act — were referred pursuant to former Pule 45(a) (now Hule 57 (a)) to Trial Commissioner Herbert N. Maletz, with directions to make findings of fact and recommendations for a conclusion of law. The commissioner has done so in an opinion and report filed on April 29,1964. He has concluded that these installers were not the taxpayers' employees under the two taxing statutes, that the plaintiffs are entitled to recover the taxes assessed against and paid by them, and that defendant's counterclaims for unpaid taxes must be rejected. The defendant accepts the trial commissioner's findings (with one exception) but urges that his legal conclusions are erroneous. The plaintiffs ask the court to .adopt both the commissioner's findings and bis •conclusions. The parties have filed 'briefs and the cases have been argued orally.
The court agrees with Commissioner Maletz's findings, .'.opinion (with a slight modification), and recommended conclusions .of law. Without minimizing the other factors and circumstances discussed by the commissioner, the court lays particular stress in these cases on the fact that the installers themselves considered that they had their own business and were self-employed (finding 52), as well as on the correlative fact that they themselves paid self-employment taxes based on the sums paid them by plaintiffs, but that plaintiffs did not assume any liability for employment taxes (findings 54, 56). In close cases, such as these, the view of their own relationship which is taken and acted upon by the parties— particularly with respect to the payment of employment taxes — is very significant. See Restatement of the Law, Agency 2d, § 220, pp. 486, 492.
The court adopts the trial commissioner's findings and his opinion (with a slight change), as supplemented by this opinion, as the basis for its judgment. Plaintiffs are entitled to recover and judgment is entered to that effect. The amount of recovery will be determined under Eule 47(c). The defendant is not entitled to recover on its counterclaims which are dismissed.
The opinion of Commissioner Maletz, with a small modification by the court, is as follows:
The Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act (FUTA) impose a tax on every employer with respect to individuals in his employ based on the wages paid. Section 3121(d)(2) of the Internal Eevenue Code of 1954 defines an "employee" under FICA as "any individual who under the usual common-law rules applicable in determining the employer-employee relationship has the status of an employee." A similar definition is contained in section 3306 (i) dealing with FUTA.
In 1961 the Government assessed deficiencies, penalties and interest against plaintiffs in these three actions for FICA, FUTA and withholding taxes. Such assessments were computed on the earnings of persons known as "in stallers" who performed services for plaintiffs by installing aluminum storm doors and windows in homes and buildings of plaintiffs' customers. The Commissioner of Internal Revenue determined that the installers were employees of the plaintiffs for Federal tax purposes and that plaintiffs should, therefore, have withheld income taxes from their earnings and contributed and paid FICA and FUTA taxes, thereon. In each case, $200 of the deficiency assessment was paid and suit brought here for recovery. The Government,, in turn, has filed counterclaims totaling $202,149.18 for the unpaid deficiencies. The three cases have been consolidated and present a single issue: whether the installers were,, during the period from January 1, 1954 through March 31, 1958, employees of plaintiffs within the meaning of sections; 3121(d) (2), 3306 (i) and 3401 (c) of the Code.
Plaintiff Illinois Tri-Seal Products, Inc. (Illinois TriSeal) was engaged in the manufacture and sale of aluminum storm doors and windows. Its salesmen (who were independent contractors) would obtain written contracts from home owners under which the company agreed to sell and to install the doors and windows in the customers' homes» Installation of Illinois Tri-Seal's products was handled initially through the plaintiff-partnership known as TriSeal Installation Co., and later through the plaintiff-partnership known as Tri-State Installation Co. Also-during part of the period installation was handled directly by Illinois Tri-Seal.
After a sales contract was entered into between Illinois; Tri-Seal and a customer, the company's measuring man (a regular salaried worker) went to the customer's home to measure the size of the doors and windows: he then filled out a work sheet setting forth the name and address of the customer; the number, location and measurement of the windows and/or doors to be installed; and in some instances the promised completion date. When the installation was a normal one, no special instructions were generally set forth in the work sheet; special instructions were, however, included in the work sheet when extra or carpentry work was required. From the information contained in the work sheet, the doors and windows were manufactured by Illinois Tri-Seal; thereafter plaintiffs' "expediter" gave the work sheet to an installer who affixed the doors and windows to the home of Illinois Tri-Seal's customer in accordance with the specifications contained in the work sheet.
Installers did not maintain an office, nor did they advertise in the newspapers or the yellow pages of the telephone directory. Some however, had their own business cards. Installers would come to plaintiffs' office looking for installation work which they usually learned about through word "of mouth. On occasion, if work was not available, they were told to come back at a certain time. Plaintiffs also maintained a list of installers who had performed work for them in the past and from time to time called them to advise -that work was available. Plaintiffs dealt only with long-experienced installers and relied on their experience for satisfactory work, all of which was performed away from plaintiffs' premises. There was no written contract between the installers and plaintiffs concerning their arrangement. With the exception of the work sheet, the arrangement was entirely oral.
The installers furnished their own tools and equipment -which generally had a value of $200-$300 and consisted mainly of carpentry items such as hammers, screw drivers, "hacksaws, power tools, caulking guns and ladders. The installers also provided their own trucks for transportation of their tools and equipment to and from the various job sites, and they paid all the expenses for the upkeep and maintenance of their equipment and trucks.
Plaintiffs furnished the windows, doors and other materials to be installed. The installers picked these up at plaintiffs' plant, loaded them in their own trucks and delivered •them to the job sites. Some installers stored doors and windows for assigned jobs at their own expense until they •could arrange with the customer to do the work. In the event lumber and other materials required for the installation were not available in plaintiffs' shop, the installers themselves, in their own discretion, purchased these materials and were later reimbursed by plaintiffs. If an installer broke a window in the process of installing it, plaintiffs replaced it without charge to the installer.
The installers had no specified working hours; rather, each determined for himself his own hours, the length of time he would work, and the amount of time that he would take off. The installers hired their own helpers and determined their pay, hours and working conditions. On occasion, when an installer had an extra large window he could not handle alone, he, in his own discretion, hired someone in the area to assist him and was later reimbursed by the plaintiffs for the additional expenditure. Alternatively in such a situation, he would request plaintiffs to send one of their employees to assist him; however, in no instance was he required to accept any of plaintiffs' employees as a helper. From time to time, installers joined together in doing a job and usually one check for the work would be issued by plaintiffs with the installers deciding among themselves how the proceeds were to be divided. In some instances, plaintiffs paid each of such installers individually according to the division the installers had agreed upon.
As a general rule an installer's compensation was based on a piecework rate for each door or window that was installed. On occasion an installation job under plaintiffs' contract with the customer required extra work and in that event the installer was paid a flat rate therefor based on a table established by plaintiffs covering common items of extra work. If, however, the nature of the extra work was such that it was not covered by the table, plaintiffs and the installer generally negotiated a flat rate for doing it, though in exceptional instances, particularly where the time required for the extra work could not be determined, the installer would specify an hourly rate therefor. Where the job site was beyond a 40-mile radius, the installer received additional compensation from plaintiffs for mileage on the basis of a fixed amount per unit installed. In the event the installer went to a customer's home to perform the work only to find that the customer had canceled his contract with plaintiffs, he received compensation from plaintiffs for "lost time" in an amoirnt agreed to by the parties.
Oil various occasions plaintiffs were asked by their customers to enclose porches in their homes and in such instances plaintiffs would request the installers to submit bids; or estimates for doing the work.
Under the arrangement an installer was not required to-accept all jobs that were made available to him by plaintiffs'' expediter, and there were occasions when an installer rejected a proffered job. Despite rejection of a job, an installer was given other installation work by plaintiffs.
Generally when an installer completed one or more jobs-for the plaintiffs, he returned to plaintiffs' office for further work sheets if they were available and this usually occurred, once or twice a week. The installers were free to accept and perform similar work for competitors of plaintiffs and would, after having done such work, return to plaintiffs'' office and be given work sheets by plaintiffs. Some installers performed services for competitors of plaintiffs on-the same day they installed plaintiffs' products, and it was; a common occurrence for an installer to have in his truck at the same time not only plaintiffs' doors and windows but those of another company as well.
There was no understanding that the installers would work regularly for the plaintiffs, nor did the plaintiffs agree to-give the installers additional jobs for any specific time. Instead, all installation work was on a job-to-job basis. The work was seasonal and at the peak periods plaintiffs had as many as 20 or 21 installers performing services; at other-times there were as few as 3 or 4. There were about 3 or 4 "regulars" who could be looked to by plaintiffs in assigning-work sheets throughout the year, but none of these "regulars" guaranteed or promised that he would do a certain number of jobs for plaintiffs. Nor did plaintiffs promise-any "regular" that he would get any work or that he would get continuous work. In actual practice, however, the "regulars" spent a major portion of their time in doing installation-work for plaintiffs. In the intervals between doing installation jobs for plaintiffs, the "regulars" did similar work for other companies which took from 10%-25% of their time. When a "regular" was performing work for another company and was told by plaintiffs that a job was available-,. lie would not drop what he was doing but would rather inform plaintiffs that he would get to their work as soon as he could. When the plaintiff-partnership Tri-State Installation Co. was set up to handle the installation work for Illinois Tri-Seal, all installers who had previously been performing work for Illinois Tri-Seal accepted a partner's invitation to perform installation jobs for the partnership; they also attended occasional meetings called by a partner to discuss various problems.
It was the practice for the installer to communicate -directly with plaintiffs' customer to arrange for a mutually convenient time to do the work. The installer determined the order in which the jobs should be done and routed his work sheets on a geographic basis in order to avoid unnecessary travel between jobs. In the event a work sheet indicated a customer's preference as to when the work should be done, the installer tried to comply as best he could. On a few occasions, because of the location of job sites, an installer would swap work sheets with another installer.
In some instances, a customer of plaintiffs would indicate that he would cancel the contract unless an installation job was completed within a short time. This was referred to as a "hot job" and the installer to whom the work sheet was assigned was requested by plaintiffs to give it priority. If the installer advised plaintiffs that he could not fit the job into his schedule, plaintiffs would ask another installer to do the work.
Occasionally a prospective customer approached an installer while he was on a job for plaintiffs to inquire about purchasing storm windows. The installer tried to interest him in the plaintiffs' product and if he were interested, the installer turned the lead in to plaintiffs and received a bonus in the event a sale were made. On the other hand, if the prospective customer was not interested in plaintiffs', product, the installer was free under his arrangement with plaintiffs either to sell him windows on his own account or to turn the lead in to another company. Where the installer sold the windows on his own account, he would purchase the windows himself, perform the installation work and be paid directly by the customer.
While performing an installation job for plaintiffs, a customer would from time to time request extra work not called for by the contract. When this involved minor work, the installer did this on his own without notifying the plaintiffs and would be paid directly by the customer. Otherwise the installer notified the plaintiffs and a further contract was arranged between the plaintiffs and the customer and a work sheet was issued for the installer for this additional work.
Plaintiffs had no foremen or supervisors who directed the manner of doing the work and there was no express agreement spelling out the extent to which the plaintiffs had control over the work. If upon completion of the job the installer's work were found to be faulty, plaintiffs' expediter' ordered it to be corrected and the installer was expected to correct it without additional compensation. Plowever, if the installer was not available, the plaintiffs would have the work repaired by one of their regular salaried servicemen employed by plaintiffs for that purpose.
Since the installers were experienced, they did not need detailed instructions about how to do the jobs. Special instructions and problems were noted on the work sheets and also brought to the attention of the installers by plaintiffs' expediter. The installers were expected to follow such instructions so that the job would be accomplished in accordance with the specifications contained therein. Plaintiffs' expediter did not visit jobs in progress except in rare in-' stances, as, for example, when the installer requested more money for doing a job or a misunderstanding arose with a customer as to the scope of the contract. Plaintiffs' expediter had the responsibility of seeing to it that the completed job conformed with plaintiffs' contract with the customer.
Other than the information contained in the work sheet, plaintiffs gave no directions or instructions concerning the manner or method of accomplishing the work. In the event an installer encountered an unusual problem on the job, he generally called plaintiffs' expediter and asked for suggestions which he was free to follow or not, as he saw fit. Thus, if an installer considered that the expediter's suggestion was unsatisfactory, he did not follow it but used his own discretion in solving the problem.
During the period involved no installer was discharged while the work was in progress. If an installer did unsatisfactory work, the plaintiffs would refuse to offer him further work sheets. Installers could terminate their relationship-with plaintiffs by not requesting or accepting further work sheets. Some of the installers believed plaintiffs could terminate their work before completion but in such event would be obligated to pay the installer for the full amount of the' job as shown on the work sheet.
Under the arrangement it was understood that the installer' would do the job in a workmanlike manner and that he would-clean up the work-site after the job was completed. A completed job was indicated by the installer's signature on the-work sheet, or by a completion certificate signed by the customer indicating that he was satisfied with the work and the material. When a completion certificate was secured, the installer was paid a bonus by plaintiffs.
Installers were usually paid on Friday for work completed in the week but they could and did draw advances on work' completed. Installers never drew the same amount on succeeding Fridays; instead, their earnings varied according" to the volume of work or their own availability.
During the period in question, plaintiffs entered into an agreement with Blue Cross-Blue Shield to provide group-insurance coverage for plaintiffs' "employees".. Plaintiffs' gave the installers opportunity to enroll in the plan and the-premiums therefor were withheld from the compensation due those of the installers who elected to enroll. To be" eligible to enroll in the plan one was not required to be an" "employee" under the common-law test of master and servant ; it was only necessary that the enrollee have some "rapport" with plaintiffs and that there be a common mechanism for collecting and forwarding the premiums to Blue Cross-Blue Shield. Thus, plaintiffs' salesmen, who were concededly independent contractors, were likewise eligible for enrollment.
The installers considered they had their own business and' that they were self-employed. They were not members of. a labor union and dealt with plaintiffs on an individual basis. Plaintiffs carried no workmen's compensation policy ^covering the installers nor did plaintiffs pay State unemployment insurancé on the earnings of installers. Installers carried their own personal and property liability insurance while performing services for plaintiffs and were required to deposit with plaintiffs a certificate showing they had such insurance coverage before being given any installation job. In addition, plaintiff Tri-State Installation Co. carried a general contractor's liability policy.
The installers paid self-employment and income taxes based upon earnings reported by plaintiffs on Forms 1099. Plaintiffs did not withhold taxes or assume liability for employment taxes on the earnings of installers. All installers were issued copies of Forms 1099 at the.end of each year disclosing the entire amount of compensation paid for the taxable year.
The problem here is to determine, on the basis of the above facts, whether or not the installers were employees within the meaning of sections 3121(d) (2) and 3306 (i) of the 1954 'Code, both of which "specifically adopt the common-law test for ascertaining the existence of the employer-employee relationship." Enochs v. Williams Packing Co., 370 U.S. 1, 3 (1962). 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. New Orleans, M. & C. Railroad Co. v. Hanning, 15 Wall. (82 U.S.) 649, 656 (1872); Singer Mfg. Co. v. Rahn, 132 U.S. 518, 523 (1889); Jones v. Goodson, 121 F. 2d 176, 179 (10th Cir., 1941). Thus the applicable Treasury Begulations under FICA (1954 Code) — which are an authoritative elaboration of the distinction under the common-law test between an "employee" and an "independent contractor" — provide in part:
§ 31.3121 (d)-l. Who Are Employees.
(a)
(c) Common Law Employees. (1) Every individual' is an employee if under the usual common law rules the relationship between him and the person for whom he performs services is the legal relationship of employer and employee.
(2) 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. In this connection, it is not necessary that the employer actually direct or control the manner in which the services are performed; it is sufficient if he has the right to do so. The right to discharge is also an important factor indicating that the person possessing that right is an employer. Other factors characteristic of an employer, but. not necessarily present in every case, are the furnishing of tools and the furnishing of a place to work, to the individual who performs the services. In general, if an individual is subject to the control or direction of another merely as to the result to be accomplished by the work and not as to the means and methods for accomplishing the result, he is an independent contractor. An individual performing services . as an independent contractor is not as to such services an employee under the usual common law rules. Individuals such as physicians, lawyers, dentists, veterinarians, construction contractors, public stenographers, and auctioneers, engaged in the pursuit of an independent trade, business, or profession, in which they offer their services to the public, are independent contractors and not employees.
(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.
Defendant contends, however, that the common-law rules for determining the relationship must be realistically applied and that this requires use of the so-called "economic reality test" under which a person is considered to be an employee "if he is dependent upon the business for which he renders service. Consideration of this contention makes necessary an examination of the legislative history of the statutes in question.
When the Social Security Act was originally adopted in 1935, it set forth no definition of the term "employee"; section 1101(a) (6) merely specified that it "includes an officer of a corporation." Soon afterward, though, the Treasury Department promulgated regulations (which were substantially the same as the present regulations) interpreting the statutory term "employee" on the basis of the common-law control test. The Federal courts, however, applied varying standards in determining who were employees: A majority Feld that the term was to be given its common-law meaning; a few ignored the common-law test and looked instead to the purpose of the legislation for guidance; and still others looked to both the purpose of the legislation and the common-law rules for guidance. See generally Broden, Emyloyment Relations Under Social Security, 38 Temple L.Q. 307, 312-16 (1960). It was in this setting that the Supreme Court in 1947 handed down two opinions in United States v. Silk and Harrison v. Greyvan Lines, 331 U.S. 704 (1947), and Bartels v. Birmingham, 332 U.S. 126 (1947). In Silk and Grey van taxpayers sued to recover unemployment taxes contending that the persons for whose benefit the taxes were paid were independent contractors, not employees. In Silk the status of two groups — coal unloaders and coal truck drivers — was in question, while in Greyvan the dispute involved the status of moving van drivers. The Court upheld the Commissioner's determination that the unloaders were employees, but concluded that the truck and moving van drivers were independent contractors. As to the coal unloaders the Court noted that they provided only picks and ¡shovels; they had no opportunity to gain or lose except from the work of their hands and these simple tools; that while they did not work regularly, they worked in the course of the employer's trade or business and this brought them under the coverage of the Act as being within the group the legislation was intended to aid. The taxpayer, the Court 'observed, "was in a position to exercise all necessary supervision over their simple tasks. Unloaders have often been held to be employees in tort cases." (331 U.S. at 718.)
As to the truck and moving van drivers, the Court agreed with the decisions below that where the arrangements left the driver-owners so much responsibility for investment and 'management, they must be held to be independent contractors. The Court pointed out that the driver-owners were small 'businessmen; they owned their own trucks; they hired their own helpers; and though in one instance they hauled for a single business and in the other for any customer, such distinction, though important, was not controlling: it was the total situation, including the risk undertaken, the control exercised, the opportunity for profit from sound management, that marked the driver-owners as independent contractors.
While these holdings were obviously consistent with established common-law principles of control, the Court also made it plain that the control test should be a factor — but not the sole criterion — in the determination of the employment relationship. Eather, the Court declared that the term "employee" should be construed to accomplish the purpose of the social security legislation and that a constricted interpretation would not comport with such purpose. A week later in Bartels v. Birmingham, 332 U.S. 126 (1947), the Court reiterated that the test of the relationship was not to be ascertained solely by the control factor: in the application of social legislation (the Court said) employees included those who as a matter of economic reality were dependent upon the business to which they rendered service.
As a consequence of these decisions, the Treasury Department in November 1947 proposed a new regulation defining the employer-employee relationship on the basis of the economic reality test. The proposed regulation caused considerable criticism in Congress and led to enactment in June 1948 of H.J. Res. 296 (62 Stat. 438) over President Truman's veto. That resolution (known as the Gearhart resolution "to maintain the status quo in respect of certain employment taxes and social security benefits pending action by Congress on extended social security coverage") amended sections. 1426(d) and 1607(1) of the 1989 Code to provide that the term "employee"—
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.
The legislative history of the Gearhart resolution makes it clear that the Congressional intent underlying its passage was principally to override the economic reality test proposed by the Treasury Department and to require that the usual common-law rules realistically applied be used to determine whether a person is an "employee" for purpose of applying the Social Security Act. See e.g. Edwards v. United States, 144 Ct. Cl. 158, 163, 168 F. Supp. 955, 957 (1958); United States v. Crawford Packing Co., 330 F. 2d 194, 195 (5th Cir. 1964); United States v. Thorson, 282 F. 2d 157, 159 (1st Cir., 1960). Thus, the Senate Finance Committee Report on the resolution commented: that the usual common-law rules were well stated in the existing Treasury regulations (as contrasted with the proposed regulation) and that the existing regulations might be considered a valid extension of Congressional intent; that the "economic reality" concept was basic to the proposed regulation and that the proposed regulation would, therefore, discard the common-law rules for a new rule of "nebulous" and "dimensionless" character; that the proposed regulation would bring within the coverage of the Act many persons (including subcontractors) whose activities were largely or wholly free from direction as to how, and in frequent cases, as to when or whether they pursued them; and that when such services were performed without any direction or right of direction over the persons who performed them, and the persons who performed them were not in the least accountable for what they did, then properly under existing Treasury regulations such persons were recognized as independent contractors or self-employed in a class with independent contractors.
The legislative history further indicates that the Congress did not intend to upset the actual holdings in Silk, Greyvan and Bartels. The Senate Finance Committee report, for example, said that the decisions affirmed that the usual common-law rules "realistically applied" must be used to determine whether a person is an "employee" and that the Court applied the common-law control test realistically in deciding that the truck and moving van drivers were independent contractors and the loaders employees. In the words of the report (p. 1769) :
The doctrine of the Supreme Court in Silk, Greyvan, and Bartels as reflected by its disposition of the specific situations presented in those cases, is an applied expression of the following statement of congressional intent in the legislative history :
The tests for determining the (employer-employee) relationship laid down in cases relating to tort liability, and other common-law concepts of master and servant, should not be narrowly applied (H. Rept. No. 728, 76th Cong., 1st Sess., p. 61).

A sound reading of these cases requires that the prefatory and random remarks of the Court which have been seized upon to supply a spurious gloss of validity to the proposed Treasury regulation shall be harmoniously related to the facts involved, the decisions, and to their moving rules; and if this cannot be done they must be regarded as surplusage.
If we were compelled to interpret these remarks of' the Court we would say, in untechnical and summary fashion and without aiming at complete exposition, that the lower courts and administrative agencies were told r Don't be fooled or unduly influenced by the form of the-arrangement to which you must apply the Social Security Act. Look to the real substance. Illuminate the-usual common-law control tests by regard for all the pertinent facts. This requires that all of the realities-that will lead you to the truth must be consulted and' weighed along with all other significant indicators of the real substance of the arrangement.
But this again should be said: If we have misinterpreted these decisions of the Supreme Court, if we have incorrectly called the real moving principles of these-cases, if the Treasury's interpretations and the proposed regulation based upon them are correct, then by this-, resolution we propose to restore the usual common-law-rules, realistically applied.
Several years later Congress enacted the Social Security Act amendments of 1950 (64 Stat. 477) expanding coverage to include not only "any individual who, under the usual common-law rules applicable in determining the employer-employee relationship, has the status of an employee" but also specific classes of workers irrespective of the common-law test. With respect to the classes of workers not specifically listed as employees, the definition remained unchanged and the conference report reiterated that the usual common-law rules realistically interpreted were to continue to apply. H. Rept. 2771 (81st Cong., 2d Sess.) p. 104.
The conclusion to be drawn from the foregoing is that the existence or absence of an employment relationship is to be ascertained not by use of the economic reality test but by applying the common-law rules realistically. That is to say, the end-point determination — whether the person for whom the services are performed is an "employer" within the common-law meaning of that term — must be made on the basis of actual reality by looking to the substance of the arrangement and giving weight to all relevant factors. Pertinent in making the determination are such factors as degrees or extent of control which the principal may exercise over the details of the work; whether or not the principal has the right to discharge the individual; opportunity of the individual for profit and loss; investment by the individual in the tools and facilities for work; whether the individual or the principal supplies the tools and places to work; the degree of skill required in the particular occupation; the permanency and length of time the individual is engaged; the method of payment (whether by time or job); whether the work is part of the employer's regular business; and whether the parties believe they are creating an employer-employee relationship or a principal-independent contractor relationship. United States v. Silk, 331 U.S. 704, 716 (1947); Enochs v. Williams Packing Co., 370 U.S. 1, 3 (1962); Cape Shore Fish Co. v. United States, 165 Ct. Cl. 630, 635, 636, 330 F. 2d 961, 965 (1964); Crossett Lumber Co. v. United States, 79 F. Supp. 20, 25 (D. Ark., 1948). See also Treasury Regulations under FICA (1954 Code) § 31.3121(d)-1(c); The Restatement of the Lato, Agency ltd §220. "[N]o one factor is controlling nor are these factors exclusive. The relationship is to be ascertained by an over-all view of the entire situation, not by any rule of thumb, or by the presence or absence of a single factor. The result in each case must be governed by the special facts and circumstances of the case itself." Cape Shore Fish Co. v. United States, supra, pp. 636-37, and cases there cited.
Against this background the record here shows the following: The installers determined for themselves when they would work and their hours of work. They prepared their own work schedule. They provided their own trucks for transportation of themselves and the materials to the job site; furnished their own tools and equipment for performance of the work; paid all expenses for upkeep and maintenance of their trucks and equipment; and stored doors and windows for assigned jobs at their own expense.
The installers were free to work alone or with partners or associates of their own choosing and the compensation paid them was decided among themselves without interference by plaintiffs. They were also free to hire helpers of their own choice and to determine their pay, hours and working conditions.
The installers performed their work on a job-to-job basis and could reject jobs they deemed unsuitable without recrimination. "[PJermanency of relationship can hardly be said to exist or be a weighty element where each obligation was of comparatively short duration and the worker was free to accept or reject the offer of a new or similar obligation." Silver v. United States, 131 F. Supp. 209, 212 (N.D., N.Y., 1954).
The installers were not members of a labor union and they dealt with plaintiffs on an individual basis. Normally they received payment for the job as a whole rather than on a time basis; for porch enclosure work such payment was on the basis of plaintiffs' acceptance of an installer's bid. The installers themselves could and did, in effect, compete with plaintiffs in some instances; further they often performed services for competitors of plaintiffs on the same day they installed plaintiffs' products, and it was a common occurrence for installers to have on their trucks at the same time products both of plaintiffs and plaintiffs' competitors.
In no instance was the work of an installer terminated during progress of the work. If not satisfied with the installer's work, plaintiffs simply would not offer them further work sheets while the installer, if dissatisfied, refused the next job offered by plaintiffs. "This, of course, is not the equivalent of a right to fire an [installer] from a job once he had begun to work on it. It is only evidence of the right not to enter into another contract." United States v. Thorson, 282 F. 2d 157, 164 (1st Cir., 1960). See also Party Cab Co. v. United States, 172 F. 2d 87, 93 (7th Cir., 1949). Any right of plaintiffs to terminate an installer's work in progress was subject to an obligation on plaintiffs' part to pay the installer in full for the entire amount of the job. A right of termination on this basis is available to any general contractor who engages a subcontractor. See American Homes of N.E. v. United States, 173 F. Supp. 857, 859 (D. Mass. 1959); Silver v. United States, 131 F. Supp. 209, 212 (N.D. N.Y. 1954); Jagolinzer v. United States, 150 F. Supp. 489, 492 (D. R.I., 1957).
All work was done away from plaintiffs' premises and plaintiffs never attempted to control or direct the manner in which tlie installers did the work. Plaintiffs had no foremen or supervisors to direct the installers in the manner of doing the work and other than instructions contained in the worksheets — which the installers were expected to follow so that the work would be accomplished in accordance with the specifications contained therein — plaintiffs gave no directions or instructions to the installers concerning the manner or method of accomplishing the work. The installers called the plaintiffs for suggestions when unusual problems arose but this would not seem of particular significance. For even if a principal does intervene to some degree "so does the general contractor intervene in the work of his subcontractors. Some supervision is inherent in any joint undertaking and does not make the contributing contractors employees." Radio City Music Hall Corp. v. United States, 135 F. 2d 715, 717-18 (2d Cir., 1943). "An employer has a right to exercise such control over an independent contractor as is necessary to secure the performance of the contract according to its terms, in order to accomplish the results contemplated by the parties in making the contract, without thereby creating such contractor an employee." N.L.R.B. v. Steinberg, 182 F. 2d 850, 856-57 (5th Cir., 1950). Further, it is important to distinguish "between authoritative direction and control, and mere suggestions as to details" of the work, Standard Oil Co. v. Anderson, 212 U.S. 215, 222 (1909); H. E. Wolfe Const. Co. v. Fersner, 58 F. 2d 27, 28 (4th Cir., 1932); indeed the fact that installers had the right to accept or reject plaintiffs' suggestions, as they saw fit, is an indication of the parties' understanding that the installers were free to perform the details of the work independently of and in opposition to the wishes of the principal. United States v. Wholesale Oil Co., 154 F. 2d 745, 748 (10th Cir., 1946); Beckwith v. United States, 67 F. Supp. 902, 904 (D. Mass., 1946); Millard's Inc. v. United States, 146 F. Supp. 385, 388 (D. N.J., 1956).
Nor is it significant that plaintiffs' customers might be able to sue plaintiffs for the negligent acts of the installers. Assuming this to be so, such "liability would be predicated upon the doctrine of estoppel, or a holding out to the public [and] these considerations are in n,o way deter minative of tlie actual relationship between [plaintiffs and the installers]; for the nature of that relationship stems from the contract [or arrangement] between the parties." Magruder v. Yellow Cab of D.C., 141 F. 2d 324, 325 (4th Cir., 1944).
A further factor here is that the parties believed that they were creating a principal-independent contractor relationship and not an employer-employee relationship. The installers considered that they had their own business and that they were self-employed; they paid self-employment taxes; some had their own business cards; they carried personal and property liability insurance and were required to deposit with plaintiffs a certificate showing they had such coverage before being given any installation work. Plaintiffs did not carry any workmens compensation policy covering installers; did not pay State unemployment insurance on the earnings of installers; and did not withhold income taxes or assume liability for unemployment taxes on installers' earnings. Cf. Cape Shore Fish Co. v. United States, supra, pp. 641-42. While installers were eligible to enroll in plaintiffs' Blue Cross-Blue Shield plan for their employees, this would not seem decisive as to how the parties viewed their relationship. Por the test of eligibility for enrollment was based not on whether the enrollee was an employee in the common-law sense but on whether he had a "rapport" with plaintiffs and there was a common mechanism for collecting and forwarding premiums to Blue Cross. So long as these criteria were met, independent contractors — such as plaintiffs' salesmen — were eligible. See Thor Co. v. United States, 173 F. Supp. 65, 68-9 (D. Mass., 1959), aff'd United States v. Thorson, 282 F. 2d 157, 163 (1st Cir., 1960).
The factors here in their totality establish that plaintiffs did not have the right under the arrangement to control the manner and method in which the installers performed the work. They also establish that "plaintiffs' only concern was that the [installers] accomplish a result in conformity with the terms of the contract with the owner of the structure to which the [material] was being applied." Edwards v. United States, 144 Ct. Cl. 158, 163, 168 F. Supp. 955, 957-58 (1958). Plaintiffs had no "more power of control over the [installers] than a house owner would exercise over the independent contractor who undertook the painting of his home." Silver v. United States, 131 F. Supp. 209, 212 (N.D. N.Y., 1954); Id., Edwards v. United States, supra; Jagolinzer v. United States, 150 F. Supp. 489, 492 (D. R.I., 1957). It is concluded, therefore, that the installers were, during the period involved, independent contractors and not employees within the meaning of the social security and unemployment tax statutes.
This conclusion is in harmony with that reached by this court and a number of other courts in cases involving applicators in the home-improvement industry who (except that they applied roofing and siding to homes of a contractor's customers rather than doors and windows) worked under arrangements generally similar to those described here. Thus, in the following reported decisions applicators were found to be independent contractors rather than employees for social security and unemployment tax purposes: Edwards v. United States, 144 Ct. Cl. 158, 168 F. Supp. 955 (1958); United States v. Thorson, 282 F. 2d 157 (1st Cir., 1960), affirming Thor Co. v. United States, 173 F. Supp. 65 (D. Mass. 1959); Levin v. Manning, 124 F. Supp. 192 (D. N.J., 1952); Metropolitan Roofing & Modernizing Co. v. United States, 125 F. Supp. 670 (D. Mass., 1954); Silver v. United States, 131 F. Supp. 209 (N.D. N.Y., 1954); Farm & Home Modernization Corp. v. United States, 138 F. Supp. 423 (N.D. N.Y. 1956); Millard's Inc. v. United States, 146 F. Supp. 385 (D. N.J., 1956); Jagolinzer v. United States, 150 F. Supp. 489 (D. R.I., 1957); Zipley v. United States, 156 F. Supp. 141 (E.D. Pa., 1957); Consolidated Housecraft v. United States, 170 F. Supp. 842 (E.D. N.Y., 1959); American Homes of N.E. v. United States, 173 F. Supp. 857 (D. Mass., 1959); Fleeman v. United States, 175 F. Supp. 336 (N.D. Ohio, 1959); Mervis v. United States, 187 F. Supp. 248 (E.D. La., 1960); Loeb v. United States, 209 F. Supp. 22 (E.D. La., 1962).
Three reported decisions reached a contrary result finding that applicators were employees: E. F. Williams Co. v. United States, 139 F. Supp. 875 (N.D. N.Y., 1956); Security Roofing & Const. Co. v. United States, 163 F. Supp. 794 (D. Mass., 1958); Ben v. United States, 139 F. Supp. 883 (N.D. N.Y., 1956), aff'd per curiam 241 F. 2d 127 (2d Cir., 1957). But each of these cases is clearly distinguishable on its facts from the case here. Thus in Williams the scaffolding and equipment for performance of the work belonged to the taxpayer; each of the roofers had worked steadily for the taxpayer for a period of from 24 to 27 years; the taxpayer furnished all the helpers and fixed their pay at hourly rates; the applicator had no control over the helper; on at least 50% of the jobs extra work was required for which the applicators were paid at hourly rates agreed upon at the opening of the season; the larger jobs were applications of hot tar on flat roofs compensated at hourly rates; an indiscriminate right of discharge was reserved in the management. In Security Roofing the applicators were required to avoid doing any additional work of any kind for a customer and could not resolve any problem without notifying the taxpayer; the taxpayer engaged a number of inexperienced men and checked on them from time to time; if the applicator needed any instructions in how to conserve material or how to apply new material, he received it; the taxpayer could take an applicator off one job and move him to another; on occasion the taxpayer split a team working on one job and sent one of the men to take care of some of the others. In Ben an applicator who declined a work sheet would not be offered further work; it was expected that the applicator would take each job offered; the applicator was restricted from the performance of any outside work that would place him in a position of competition to the taxpayer's business; there was evidence of long-continued employment by the applicators over a period of years and approximately no evidence of any affirmative act on the part of the applicators in offering their services to the public ; a broad right of discharge was asserted by the taxpayer, and the taxpayer on one occasion dismissed an applicator from a particular job because his action offended the homeowner.
In view of the conclusion reached here that the installers were independent contractors and not employeesj the deficiency assessments made by the Commissioner of Internal Revenue were beyond his statutory power. Plaintiffs are, therefore, entitled to recover and defendant's counterclaims must be dismissed.
Findings of Fact
1. The plaintiff Illinois Tri-Seal Products, Inc. (Illinois Tri-Seal) was incorporated in the State of Illinois in 1953 and was primarily engaged in the manufacture and sale of aluminum storm doors and windows throughout the period January 1, 1954 through March 31, 1958. The principal stockholders and officers of the corporation were Howard L. Brown and Edward Marcus. Illinois Tri-Seal was dissolved on December 18,1959.
2. (a) From January 1, 1954 through June 30, 1955, installation of the products sold by plaintiff Illinois Tri-Seal was performed through the plaintiff partnership known as Tri-Seal Installation Co. The partners of Tri-Seal Installation Co. were John D. Buchanan, Howard L. Brown and Edward Marcus. The partners engaged the services of workers called "installers" who performed the actual installation of the products. The partners also installed the products themselves. The partnership was dissolved on June 30, 1955.
(b) From June 30, 1955 through March 31, 1958, installation of the products sold by Illinois Tri-Seal was performed in part by "installers" engaged directly by the corporation.
(c) From October 1, 1956 through June 30, 1957, installation of a substantial portion of the products sold by Illinois Tri-Seal was performed through the plaintiff partnership known as Tri-State Installation Co. The partners of Tri-State Installation Co. were John D. Buchanan and Frank Commiso. The partners engaged the services of "installers" who performed the actual installation of the products. The partners also installed the products themselves. The partnership was dissolved on June 30, 1957.
3. The working conditions and the relationship of the installers to each of the three plaintiffs concerned were the same.
4. (a) Plaintiffs bring these actions to recover from defendant Federal Insurance Contributions Act (FICA) taxes, income withholding taxes and Federal Unemployment Tax Act (FUTA) taxes collected from plaintiffs, covering the period from January 1, 1954 through March 31, 1958. The issue is whether individuals performing services for the plaintiffs principally by installing aluminum storm doors and windows in homes and other buildings were, during the period in question, employees of the plaintiffs.
(b) These cases were consolidated for trial since they involve common questions of law and fact.
5. Plaintiffs in conducting their business employed office help, factory workers, measuring men and servicemen who were paid regular salaries and kept regular hours, and performed their services without a choice of jobs. The status of these individuals is not in issue.
6. Contracts for the performance of the installation work were obtained by salesmen on behalf of Illinois Tri-Seal from property owners. The salesmen were independent contractors. These contracts were written on a form prepared by Illinois Tri-Seal and fixed a price to the owner for the completed job, which price included the furnishing of both labor and material.
7. After a sales contract was entered into between Illinois Tri-Seal and a customer, the company's measuring man was sent to the customer's property for the purpose of measuring the size of the windows and doors. He prepared a work sheet based on these measurements and the contract that had been negotiated with the customer. From the information contained therein, Illinois Tri-Seal manufactured the doors and windows. The work sheet was later given to an installer.
8. The installers were the persons who performed the labor of affixing the products of Illinois Tri-Seal to homes and buildings. They also, in some instances, performed the work of applying siding to customers' homes and performed the carpenter work in making porch enclosures to customers' properties.
9. The installers did not maintain an office, did not advertise in any newspapers for installation work, and did not list themselves in the yellow pages of the telephone book in any capacity. They made their services known to various customers by word of mouth or by shopping around looking for installation jobs. Some installers had their own business cards which contained the installer's name, home address, telephone number and a notation such as the following: "Installation of aluminum storm doors, combination windows and awnings."
10. The plaintiffs engaged the services only of installers who had long experience in the work involved, and plaintiffs relied upon their experience for satisfactory work. The average installer who performed work for plaintiffs had five years' experience. All work was performed away from the plaintiffs' premises.
11. The installers would come to plaintiffs' offices looking for installation jobs. On occasion, if work was not available, they were told to come back at a certain time. Usually installers learned of plaintiffs' installation work by word of mouth. Plaintiffs also maintained a list of installers who had performed work for them in the past and, on occasion, plaintiffs would call them to advise that work was available.
12.' Plaintiffs' expediter engaged the services of the installers for all three companies. The expediter received the •work sheets before they, were given to the installers and attempted to group the work on a geographical basis. In the event only- one job was available and two installers sought the work, the expediter would give it to the installer who had the most experience in doing work for plaintiffs. In addition, the expediter distributed the work sheets on the basis of whether the installer's expertise was in installing doors, windows or siding. The expediter knew how many jobs an installer had outstanding and took this into consideration in giving him new work.
13. Each work sheet contained the name, address and telephone number of the customer; the name of the salesman; and the number, location and measurement of the size of the windows and/or doors to be installed. Some work sheets also set forth the promised completion date. If the installation was a normal one, no special instructions were ordinarily contained on the work sheet. On occasion, the work sheets contained special instructions covering, for example, extra work or carpenter work to be done. In this connection the work sheets contained such special instructions as these: "Door openings very small, Ealph to check with Vic"; "Have to frame with 1" stock, grille and address"; and "Cut lip exact size."
14. The purpose in giving installers work sheets was to see to it that the job was accomplished in accordance with the specifications contained therein.
15. No written contract was executed between the installers and plaintiffs concerning their arrangement. With the exception of the work sheet, the arrangement was entirely oral.
16. The installers furnished their own tools and equipment necessary for the performance of the work. Such tools and equipment were carpentry items for the most part, and included hammers, screw drivers, hacksaws, power tools, caulking guns and ladders, which had a total value of $200-$300. The installers also provided their own trucks for transportation of their tools and equipment to and from the various job sites. The installers paid all expenses for upkeep and maintenance of their equipment and.trucks without reimbursement by plaintiffs. " '
17. Plaintiffs furnished the materials to be installed, including the doors, windows, caulking for the windows, and the necessary catches and hardware. The installers generally picked up the doors and/or windows and other materials, at plaintiffs' factory, loaded them in their own trucks and delivered them to the job sites. Some installers stored doors and windows for assigned jobs at their own expense until they could arrange with the customer to do the work. In the event lumber and other materials required for the installation were not available in plaintiffs' shop, the installers' themselves, in their own discretion, purchased these materials and were later reimbursed by plaintiffs. If an installer broke a window in the process of installing it, plaintiffs replaced it without charge to the installer.
18. The installers had no specified working hours. Each installer determined his own hours of work, the length of time that he worked, and the amount of time that he would take off.
19. The installers, if they chose, hired thir own helpers and determined their pay, hours and working conditions without interference by plaintiffs.
20. On occasion, when an installer had an extra large picture window which he could not handle alone, he was free to engage the services of anyone in the area to help him. The installer paid the helper for these services and then was reimbursed by plaintiffs for this amount on the basis of its being a charge for extra work. In lieu of engaging the services of a helper for the job, the installer could request plaintiffs to send one of their employees to the job site to assist him. In no case did plaintiffs require an installer to accept one of their employees as a helper.
21. In some instances installers would join together in doing a particular job. Normally one check for the work would be issued by the plaintiffs and the installers decided among themselves how the proceeds were to be divided. On occasion plaintiffs paid each installer individually according to the division that the installers had agreed on.
22. As a general rule, an installer's compensation was based on a piece-work rate for each door or window that was installed, and not on a weekly or hourly basis.
23. Some installation jobs required extra work, such as extra carpentry work, due, in some instances, to the peculiarity of the job. Also, in some instances the customer advised the installer that certain extra work not set forth in the work sheet was included in his contract with plaintiffs, in which event the installer usually called plaintiffs to inquire as to whether it was included in the contract. Plaintiffs had a scale of flat, fixed rates for certain common items of extra work and installers were paid for such work on that basis. At times the installer would find that the extra work was more difficult than usual and would ask plaintiffs for an amount higher than set forth in the scale. If the additional amount requested were nominal, plaintiffs generally would agree to pay it. On the other hand, if the additional amount were substantial, another installer would be sought out by plaintiffs to do the job. On occasion the nature of the extra work was such that it was not covered by plaintiffs' scale of fixed rates, in which event the installers and plaintiffs usually negotiated a flat rate for the work. In exceptional instances, particularly where the amount of time required for the extra work could not be determined, the installer advised plaintiffs that he would do the work for.an hourly rate which was usually the generally prevailing rate accepted throughout the area for work of this kind.
24. When an installer was required to travel beyond a forty-mile radius in order to perform an installation job, he received additional compensation for mileage from plaintiffs that was on the basis of a fixed amount per. unit installed.
25. In the event an installer went to a customer's home to. perform the installation work but was informed that the customer had canceled his contract with plaintiffs, plaintiffs generally paid the installer for his "lost time" in an amount agreed to by the parties.
26. On occasion plaintiffs were requested by their customers to enclose porches in their homes. In such instances, plaintiffs would ask several installers to examine the premises and submit bids or estimates indicating what they would charge plaintiffs for doing the work. Installers were compensated for such work on the basis of bids or estimates offered to plaintiffs.
27. An installer was not required to accept all the jobs that were made available to him by plaintiffs' expediter and on occasion installers did refuse jobs. When an installer refused a job, he usually but not always' gave plaintiffs' expediter a reason therefor. Thus installers refused jobs for such reasons as the following: the job was too far away; it required a third-floor installation which could not be reached by a ladder; the job required installation of large windows and didn't pay enough money; the job was "especially rough." After an installer rejected a job, he still continued to be given other installation work by plaintiffs.
28. Ordinarily when an installer completed one or more jobs for the plaintiffs, he returned to plaintiffs' office for further work sheets if they were available, and this usually occurred once or twice a week. The installers could and did do similar work for competitors of plaintiffs and would, after having done such work, return to plaintiffs' office and be given work sheets by plaintiffs. Some installers performed services for competitors of plaintiffs on the same day they installed plaintiffs' products, and it was a common occurrence for an installer to have in his truck at the same time plaintiffs' doors and windows, as well as those of another company.
29. There was no understanding in the arrangement between the installers and plaintiffs that they would work regularly for the plaintiffs, nor did the plaintiffs agree to give the installers additional jobs for any specific time. All installation work was on a job-to-job basis. The work was seasonal and at the peak periods plaintiffs had as many as 20 or 21 installers performing services; at other times there were as few as 3 or 4. There were about 3 or 4 "regulars" who could be looked to by plaintiffs in assigning work sheets throughout the year. However, none of these "regulars" guaranteed or promised that he would do a certain nmnber of jobs for plaintiffs. Nor did plaintiffs in their arrangement with any "regular" promise that he would get any work or that he would get'continuous work. In actual practice the "regulars" spent a major part of their time in perfqrming jobs.for plaintiffs. In the intervals between doing installation work for plaintiffs, the "regulars" did similar work for .other companies and spent about 10 to 25 per cent of their time in. performing such work. 'When a "regular" was performing work for another company and was called by plaintiffs and told a job was available, he would not drop what he was doing but rather would inform plaintiffs that he would get to their work as soon as he could.
30. As previously set forth in finding 2 (c), from October 1, 1956 through June 30,1957 installation of a substantial portion of the products sold by Illinois Tri-Seal was performed through the plaintiff partnership known as Tri-State Installation Co. When this partnership was formed, one of the partners, John D. Buchanan, who was expediter for Illinois Tri-Séal, had a meeting with installers who had been performing work for Illinois Tri-Seal and invited them to work with him since Illinois Tri-Seal was giving up the installation phase of the business, as such. All the installers who had been doing work for Illinois Tri-Seal began performing work for Tri-State Installation Co. Thereafter Buchanan had occasional meetings with installers to discuss problems they had. Most of the installers attended those meetings.
31. It was the practice for the installer to communicate directly with plaintiffs' customer to arrange for a mutually convenient time to do the installation work. In these calls he identified himself as the installer for plaintiffs. The installer determined the order in which the jobs should be done and routed the work sheets on a geographic basis so that the jobs to be done in a day would be as close together as possible. If a work sheet specified the customer's preference for a time when the work should be done, plaintiffs requested the installer to comply with the request and the installer tried to comply as best he could. On a few occasions, because of the locations of job sites, an installer would swap work sheets with another installer.
32. On occasion a customer of plaintiffs would insist upon an installation job being completed within a short time, otherwise he would cancel the contract. This was referred to as a "hot 'Job", and the installer to whom the work, was to be given was requested by plaintiffs to give it priority. If the installer advised plaintiffs that he could not fit the job in his schedule, plaintiffs would ask another installer to do the work. In some cases an installer had already been given á work sheet and had placed the doors or windows in his truck when the job became "hot". In such instances, plaintiffs requested the installer to complete the job within the time prescribed by the customer so as to prevent him from canceling the contract. If the installer indicated that hé could not fit this in his schedule, plaintiffs would transfer the work to another installer.
33. On a few occasions an installer, who had been given work sheets and had already picked up the windows to be installed, notified plaintiffs that he was unable to perform the work because of illness. Plaintiffs then engaged the services of another installer to pick up the materials and do the job.
34. Occasionally prospective customers approached installers while they were on the job for plaintiffs and inquired about the purchase of storm windows for themselves. The installers tried to interest these prospective customers in plaintiffs' products. They referred these "leads" to the plaintiffs and, if sales were made, they received a bonus of $1.00 per unit. If the plaintiffs successfully sold the prospective customer, they did not necessarily assign the work sheet to the installer who supplied the lead. If a prospective customer advised an installer that he was not interested in plaintiffs' product, the installer, as he was free to do under the arrangement, either sought to sell the customer windows on his own account or turned the lead in to another company. In those instances where the installer sold the windows on his own account, he purchased windows, performed the installation work and was paid directly by his customer.
35. On some occasions the installers would perform extra work not called for by plaintiffs' contract with the customer. When this involved minor work (such as caulking, glazing or installing ropes in windows, wiring up switches, etc.), the installer did this on his own without notifying the plaintiffs and would be paid directly by the owner, in an amount mutually agreeable to the installer and the owner. Otherwise he notified the plaintiffs and a further contract was arranged between the plaintiffs and the owner and a work sheet was issued to the installer for this additional work.
36. Plaintiffs had no foremen or supervisors who directed the manner of doing the work. If upon completion of a job the installer's work was found to be faulty, plaintiffs' expediter ordered it to be corrected and the installer was expected to correct it without additional compensation. However, if the installer was not available, the plaintiffs would have the work repaired by one of their regular, salaried servicemen employed by plaintiffs for that purpose.
37. There was no express agreement spelling out the extent to which plaintiffs had control over the work.
38. The installers were experienced and did not need detailed instructions about how to do the jobs. Special instructions and problems were noted on the work sheets and brought to the attention of the installers by plaintiffs' expediter. See findings 10 and 13. The plaintiffs expected the installers to follow the special instructions contained in the work sheets so that the job would be accomplished in accordance with the specifications contained therein. See finding 14.
. 39. Plaintiffs' expediter did not visit jobs in progress except in rare instances. Such instances would occur when, for example, an installer requested more money for doing the job, a customer refused to permit the installation, or a misunderstanding arose with the customer as to the scope of the contract. Plaintiffs' expediter had, in addition to his other duties, the responsibility of seeing to it that the completed jobs conformed with plaintiffs' contracts with the customers.
40. Other than the information contained in the work sheets, plaintiffs gave no directions or instructions concerning the manner or method of accomplishing the work. Sometimes an installer would discuss a job with a salesman who had sold it, but there was no effort on the part of a salesman, who was an independent contractor, to direct the manner or method of the installation. In the event an installer encountered an unusual problem on the job, he generally called the plaintiffs' expediter and asked for suggestions which he was free to follow or not, as he saw fit. When an installer considered that the expediter's suggestion was unsatisfactory, he did not follow it but rather used his own discretion in solving the problem.
41. No installer was discharged while work was in progress. If an installer did unsatisfactory work, the plaintiffs would refuse to offer him further work sheets. Installers could terminate their relationship with plaintiffs by not requesting or accepting further work sheets. Although plaintiffs did not so indicate, some of the installers believed that plaintiffs could terminate their work before completion but that in such event would be obligated to pay the installer for the full amount of the job as shown in the work sheet.
42. Under the arrangement it was understood that the installers would do the job' in a workmanlike manner. It was also understood that they would clean up the job-site after the job was completed.
. 43. A completed job in accordance with plaintiffs' contract was indicated by the installer's signature on the work sheet or by a completion certificate signed by the customer indicating that he was satisfied with the work and the material. In the latter instance, when a signed completion certificate was secured, the installer was paid a bonus of 25 cents per unit by plaintiffs.
44. Installers were usually paid on Friday for work completed in the week but could and did draw advances on work completed. Installers never drew the same amount on succeeding Fridays. Their earnings varied according to the volume of work or their own availability.
45. On April 9, 1957, plaintiff Tri-State Installation Co. entered into a standard-form "Group Administration Agreement" with Blue Cross-Blue Shield effective May 15, 1957, to provide insurance coverage for persons Tri-State Installation Co. represented to be its employees. The agreement provided in part, as follows:
1. It is agreed that applications will be submitted through this group for only actively employed persons on our (Tri-State Installation Co.) payroll. In the area served by the BLUE CROSS PLAN FOR HOSPITAL CARE and BLUE SHIELD ILLINOIS MEDICAL SERVICE, we now,have on our payroll, the total number of full time and part-time employees, including officers or partners, as follows:

TOTAL. EMPLOYEES_22

2. We (Tri-State Installation Co.) will withhold, from the earnings of our employees, thé prevailing subscription, charges except the portion contributed by our firm, if any, and remit the total amount to BLUE CROSS-BLUE SHIELD on or before our monthly or quarterly effective date.
46. After entering into the agreement to provide Blue Cross-Blue Shield insurance, Tri-State Installation Co. sent the following letter to various installers and others:
You'll be glad to know—
You can now protect yourself and your family against the high costs of any unexpected hospital or doctor's bills. You can obtain this valuable security by joining the Blue Cross and Blue Shield Plans, and representative will be here to accept enrollment on April 9, 1957.
These benefits are available only to groups of employees. However, you receive individual certificates, so you can continue your membership even if you should leave our employ. Those of you who have families may include your wives or husbands, as well as any unmarried children under 19 and have them enjoy the same wide protection.
During the enrollment period, these Plan representatives will explain the coverage to you personally, and help you prepare your applications. By subscribing at this time you can have your benefits begin May 15,1957.
The attached booklet gives a complete outline of both Blue Cross and Blue Shield protection, and the low rates charged for each. To make it easier for you, these dues are paid by monthly payroll deductions.
Of course, enrollment in these two Plans is voluntary. But as it is not known when membership will again be offered, you are urged to join immediately — and not miss this chance of providing such valuable security for yourself and your dependents.
47. (a) On April 12, 1957, Tri-State Installation Co. sent the following letter to Blue Cross-Blue Shield:
The following persons, included in our Payroll Deduction Agreement are no longer in our employ.
L. Evinger
The following employees are members of the Blue Cross Plan.
Wm. Brown Chicago Dist. Council of Carpenters
J. Eemsing " " " "
Wm. Brightenfield " - " " - " .
The following employees did not wish to enroll, for the coverage, indicated, at the time our enrollment-was conducted. We understand that applications from these people will not be accepted until our group is re-opeped.
Did not elect to enroll in: '
Blue Cross Hospital Plan and Blue Shield Medical-Surgical Plan.
A. Barro
J. Bailey
(b) Evinger, Bemsing and Bailey were installers.
48. The Tri-State Installation Co. Group Administration Agreement with Blue Cross-Blue Shield became effective May 15, 1957. Sixteen persons made application for membership and were covered by the group insurance. Of these 16, 14 were installers and 2 were measuring men.
49. Illinois Tri-Seal also had Blue Cross-Blue Shield insurance coverage for the installers who performed services for it until the installers became covered by the insurance provided by Tri-State Installation Co.
50. When Blue Cross-Blue Shield entered into the agreement to provide insurance coverage for Tri-State Installation Co. and Illinois Tri-Seal, it relied upon the representations of the companies that the installers were their employees and that the companies would remit the monies to Blue Cross-Blue Shield. The record does not establish that any of the installers' names appeared on plaintiffs' payroll records, and Blue Cross-Blue Shield representatives did not examine such payroll records to ascertain whether the installers' names were, in fact, included in such payroll records.
51. In order to enroll under plaintiff's Blue Cross-Blue Shield plan one was not required to be an "employee" under the common-law test of master and servant. Persons were permitted to enroll under the plaintiffs' plan who had the status of independent contractors so long as they had some "rapport" with plaintiffs and there was a common mechanism for collecting and forwarding the premiums to Blue Cross-Blue Shield. Thus, salesmen for plaintiffs who were independent contractors were eligible for enrollment in the plan.
52. The installers considered that they had their own business and that they were self-employed.
53. The installers were not members of a labor union and dealt with plaintiffs on an individual basis.
54. Plaintiffs carried no workmen's compensation policy on the installers, nor did plaintiffs pay State Unemployment Insurance on the earnings of installers.
55. The installers carried their own personal and property liability insurance while performing services for plaintiffs. Before performing any work for plaintiffs, the installers were required to deposit with the company a certificate showing they had such insurance coverage. In addition, Tri-State Installation Co. took out a general contractor's liability policy in order to get installation business from one of its large customers.
56. The installers paid self-employment and income taxes based upon earnings reported by plaintiffs in Forms 1099. Plaintiffs did not withhold taxes or assume liability for employment taxes on the earnings of installers. All installers were issued copies of Forms 1099 at the end of each year, disclosing the entire amount of compensation paid for the taxable year.
57. The plaintiffs filed quarterly and annual employment tax returns during the period involved herein.
58. On July 16, 1959, the District Director of Internal Revenue issued notices of deficiency against the plaintiffs for FICA taxes, income withholding taxes, FUTA taxes and penalties.
59. (a) On June 23, 1961, deficiencies in withholding taxes, FICA taxes and FUTA taxes, together with penalties and interest, were assessed against Illinois Tri-Seal Prod ucts, Inc. in the total amount of $58,117.49 for the period 1955 through the first quarter of 1958. Only $200.00 of this deficiency assessment has been paid.
(b) On March 7,1962, the United States asserted a counterclaim against Illinois Tri-Seal Products, Inc. claiming there is outstanding on the above-assessed taxes and deficiencies the sum of $96,152.20, plus interest.
60. (a) On June 23, 1961, deficiencies in withholding taxes, FICA taxes and FUTA taxes, together with penalties and interest, were assessed against John D. Buchanan, Howard Brown and Edward Marcus in the total amount of $72,085.86 for the years 1954 and 1955. Only $200.00 of this deficiency assessment has been paid.
(b) On March 7,1962, the United States asserted a counterclaim against John T>. Buchanan, Howard Brown and Edward Marcus, d/b/a Tri-Seal Installation Co., claiming there is outstanding on the above-assessed deficiency the sum. of $71,885.86, plus interest.
61. (a) On June 23, 1961, deficiencies in withholding taxes, FICA taxes and FUTA taxes, together with penalties and interest, were assessed against John D. Buchanan and Frank Commiso in the total amount of $7,170.26 for the period including the last quarter of 1956 and the first two quarters of 1957. Only $200.00 of this deficiency assessment has been paid.
. (b) On March 7, 1962, the United States asserted a counterclaim against John D. Buchanan and Frank Commiso, d/b/a Tri-State Installation Co., claiming there is. outstanding on the above-deficiency the sum of $6,970.26,- plus interest.
62. The Government's assessments were computed on the earnings of the installers who were determined by the Government to be employees for Federal tax purposes. The Government determined that the plaintiffs should have withheld income taxes from the earnings of these installers and should have contributed and paid FICA and FUTA taxes on such earnings.
63. Following the deficiency assessments made by the Government, plaintiffs paid a nominal sum of $200.00 in each of the cases to tlie Government for the purpose of contesting the assessments and acquiring jurisdiction to commence this suit.
64. The plaintiffs filed claims for refund of the $200.00 paid to the Government in each of the cases as required by the Internal Eevenue Code and executed waivers of statutory notice of claim disallowance by registered mail. The suits were timely filed.
65. (a) On November 5, 1962, the United States filed a First Amended Answer and Counterclaim in Buchanan, et al. v. United States, Ct. Cl. No. 430-61, in which it alleged, and plaintiffs by their reply admitted, that a penalty of $27,-500.45 was duly assessed against Edward Marcus, one of the plaintiffs, and Ralph D. Lavin for the period March 31, 1957 to March 31, 1958. It was also alleged and admitted that of the total'amount assessed only $350.49 has been paid and that a sum of $27,150.86, plus interest, remains outstanding.
,(b) On November 16, 1962, the commissioner allowed defendant's motion filed pursuant to rule 19 for an order directing that a third-party notice of the proceeding may' be served on Ralph D. Lavin. Subsequently service was obtained on Lavin by defendant and return of such service was filed with this court. Lavin's time for filing a responsive pleading expired without any answer or pleading having been filed by him.
66. By agreement, trial of the cases was limited to the issue of liability, reserving the determination of the amount of recovery and the amount of the counterclaims, if any, for further proceedings.
CONCLUSION OP LAW
Upon the foregoing findings of fact, which are made part of the judgment herein, the court concludes as a matter of law that plaintiffs are entitled to recover and judgment is entered to that effect. The defendant's counterclaims are dismissed. The amount of recovery will be determined pursuant to Rule 47(c) (2).
In accordance with the opinion of the court and stipulation of the parties, it was ordered on. February 7, 1966, that judgments be entered for the plaintiffs as follows:
Illinois Tri-Seal Products, Inc. $200.00;
John D. Buchanan, Howard Brown and Edward Marcus, d/b/a Tri-Seal Installation Co. $200.00;
John D. Buchanan and Frank Commiso, d/b/a TriStaté Installation Co. $200.00;
together with statutory interest.
Section 3402(a) of the Code requires every employer to withhold income tases from the wages which he pays to his employees. Section 3401(c) includes specified persons within the term "employee" but does not define the term itself. However, the court decisions' and the Treasury Regulations on Employment Tax (1954 Code), § 31.3401 (c)-1(b), treat the "usual common-law rules" test as applicable to the definition of an "employee" under the Income tax withholding provisions. See e.g., Titanium Ores Corp. v. United States, 205 F. Supp. 606 (D. Md., 1962).
Installers in some instances applied siding and built porch enclosures on customers' homes.
Radio City Music Hall Corp. v. United States, 135 F. 2d 715, 717 (2d Cir., 1943). See also Dimmitt-Rickhoff-Bayer Real Estate Co. v. Finnegan, 179 F. 2d 882, 884 (8th Cir., 1950); Anglim v. Empire Star Mines Co., 129 F. 2d 914, 917 (9th Cir., 1942).
The Treasury Regulations (1954 Co3e) promulgated un3er PUTA an3 the income -withhoMing statute contain the same tests for determining who are-employees. See 26 CFR § 31.3306(i)-1; 31.3401(c)-1.
49 Stat. 620, 647. The identical language contained in § H01 (a) (6) was carried oyer to § 1426 and 1607 of the Internal Revenue Code of 1939.
1 F.R. 1764 (1936). Tills regulation is reproduced in United States v. Silk, 331 U.S. 704, 714, fn. 8 (1947).
See e.g. Texas Co. v. Higgins, 118 F. 2d 636 (2d Cir., 1941); Radio City Music Hall Corp. v. United States, 135 F. 2d 715 (2d Cir., 1943); Jones v. Goodson, 121 F. 2d 176 (10th Cir., 1941); Glenn v. Beard, 141 F. 2d 376 (6th Cir., 1944), cert. den. 323 U.S. 724; United States v. Mutual Trucking Co., 141 F. 2d 655 (6th Cir., 1944); McGowan v. Lazcroff, 148 F. 2d 512 (2d Cir., 1945); United States v. Wholesale Oil Co., 154 F. 2d 745 (10th Cir., 1946).
See e.g. United States v. Vogue, 145 F. 2d 609 (4th Cir., 1944) where the court followed the principle enunciated in N.L.R.B. v. Hearst Publications, 322 U.S. 111 (1944), that the term "employee" under the National Labor Relations Act was to be construed not by reference to "technical common-law concepts", but rather by reference to the purpose of the Act and the facts involved in the economic relation.
United States v. Aberdeen Aerie, 148 F. 2d 655 (9th Cir., 1945); Grace v. Magruder, 148 F. 2d 679 (D.C. Cir., 1945), cert. den. 326 U.S. 720.
In this ease the Court upheld the taxpayer's contention that members of name-bands which played short-term engagements at public dance halls were for purpose of social security legislation employees of the bandleader and not of the operator of the dance hall. In reaching this result the Court pointed out that the leader organized, and trained the band and selected the members; that It waB his musical skill and showmanship that determined the success or failure of the organization; that the relationship between him and the other members was permanent; and that he bore the loss or gain after payment of the members' wages and other expenses. Not deemed decisive was the fact that under a standard-form contract between the musicians' union and the dance-hall operators, the latter were specified to be the employers of the musicians and their leader and "shall at all times have complete control of (their) services Such a. contractual shift, it was held, did not authorize the Commissioner to collect taxes from those not covered by the taxing statute.
12 F.R. 7966 (1947). Part (b) of the proposed regulation stated in part: "Whether the services performed by an individual constitute him an employee as a matter of economic reality is determined in the light of a number of factors The factors set forth included degree of control, permanency of relation, integration of the individual's work in the business to which he renders service, skill required by the individual, investment by the individual in facilities for work, and oportunities of the individual for profit or loss. The proposed regulation also provided that "although control is characteristically associated with the employer-employee relationship, determination of whether, as a matter of economic reality, an individual is an employee of the person for whom he is performing services, or is an independent contractor is not to be made solely on the basis of control which such person may or can exercise over the details of such service."
The President's veto message stated in part that "Despite representations to the contrary, sections X and 2 of this resolution would exclude from coverage up to 750,000 employees, consisting of a substantial portion of the persons working as commission salesmen, life-insurance salesmen, piece workers, truck drivers, taxicab drivers, miners, Journeymen tailors, and others. In June 1947, the Supreme Court held that these employees have been justly and legally entitled to social-security protection since the beginning of the program in 1935." 2 U.S. Code Cong. Service (1948) p. 2501.
The legislative history of the resolution -was considered in United States v. Thorson, supra; Ringling Bros. v. Higgins, 189 F. 2d 865, 867-69 (2d Cir., 1951); Dimmitt-Rickhoff-Bayer Real Estate Co. v. Finnegan, 179 F. 2d 882, 888 (8th Cir., 1950); Party Cab Co. v. United States, 172 F. 2d 87, 89-91 (7th Cir., 1949); Crossett Lumber Co. v. United States, 79 F. Supp. 20, 23-5 (W.D. Ark., 1948). See also Broden, Rmployment Relationships Under Social Security, 33 Temple L.Q. 381, 383 et seq. (1960).
S. Rep. 1255, 80th Cong., 2d Sess.; 2 U.S. Code Cong. Service (1948) p. 1752 et seq. All page references hereafter are from the latter pubUcation.
The report (p. 1757) observed that the lower Federal courts adopted the precedents of local law In determining the existence of an employer-employee relationship, and that since these varied among the States, conflicts in the court decisions followed even though the factual determinations were not unlilce. The report added (p. 1758) that properly interpreted the Supreme Court decisions "should resolve the conflict of lower court decisions and encourage nation-wide uniformity of application of the act." This would seem to indicate a Congressional purpose to establish "a standard, to be realistically applied, for the guidance of federal courts in reaching a conclusion on the problem, irrespective of the 'common law' rules of the several States." Crossett Lumber Co. v. United States, 79 F. Supp. 20, 25 (W.D. Ark., 1948).
The report commented (pp. 1762-63) that all of the following factors- and any others which are "pertinent to the end-point determination of whether there is common-law control, may and should be used"; integration of tbe individual's work in the business to which he renders service; investment in facilities ; opportunities for profit and loss; permanency of relation; and skill-required.
When the resolution was before the House on the motion to pass it over the President's veto, Representative Gearhart, who was in charge, made the» following statement concerning the Supreme Court decisions, the proposed; Treasury regulation, and Congressional purpose underlying the resolution. (94 Cong. Rec. 8189, June 14, 1948):
However, there crept into these decisions a little of what lawyers cal! obiter dicta; that is, some words which were quite unnecessary to the result. These words were to the effect that, for purposes of social security, the Social Security Administration was not necessarily bound in-, extending the social-security coverage, by the ancient common-law definition of master and servant, or employer and employee, as you may choose to call it, but that they could take into the system as employees-any persons who were dependent upon a business in the light of economic-realities, thereby throwing into the entire system a confusion which required immediate legislative attention.
The Social Security Administration and the Treasury proceeded immediately to prepare a departmental, regulation to carry that obiter dicta definition into effect. If this Congress had not interfered, tens of* thousands of people in America who never dreamed they were employed' by anybody and never for one moment thought they were covered by social security or subject to payroll taxes would have found that they-had been swept into the social-security system by bureaucratic ukase. In other words, they would suddenly have found that they had more employers than a dog had fleas. So, to end this confusion, this Congress-acted promptly, and, after thoroughgoing debate, and by a vote of nearly, 7 to 1, proceeded by legislation to put the matter in order once again by restoring the ancient doctrine of the common law defining the relation-of master and servant, employer and employee.
See also United States v. Thorson, 282 F. 2d 157, 161 (1st Cir., 1960); Party Cab Co. v. United States, 172 F. 2d 87, 90-1 (7th Cir., 1949).
Included under the coverage of the Act as employees were persons engaged in a variety of occupations (none of -which are relevant here), such as agents or commission drivers distributing specified products, full-time life insurance salesmen, certain home workers and traveling salesmen. Installers were not mentioned.
The Social Security Act Amendments of 1950 also brought self-employed persons within the program.
"The test lies in the degree to which the principal may intervene to control the details of the agent's performance; " The fact that a principal "did intervene to some degree" is not conclusive of the employment relationship; "so does a general building contractor intervene in the work of his subcontractors. He decides how the different parts of the work must be timed, and how they shall be fitted together; if he finds it desirable to cut out this or that from the specifications, he does so. Some such supervision is inherent in any joint undertaking, and does not make the contributing contractors employees." Radio City Music Hall Corp. v. United States, 135 F. 2d 715, 717-18 (2d Cir., 1943). In considering the.degree of control it is not necessary that the direction and control relate to every detail in order to establish an employee relationship ; it is enough that the principal retain such reasonable measure of direction and control over the method and means of performing the work that the individual is not free to perform the work independently of or in opposition to the-wishes of the principal. Jones v. Goodson, 121 F. 2d 170, 180 (10th Cir., 1941); United States v. Wholesale Oil Co., 154 F. 2d 745, 748 (10th Cir., 1946); Beckwith v. United States, 67 F. Supp. 902, 904 (D. Mass., 1946). See also Party Cab Co. v. United States, 172 F. 2d 87, 92 (7th Cir., 1940).
The factors in the present case tending to show an independent contractor relationship would seem to be stronger than those in Edwards. For example, here the installers sometimes submitted bids to plaintiffs for porch enclosures to customers' homes, a circumstance not present in Edwards. Also in Edwards, unlike the present case, plaintiff made delivery of materials to the job site; withheld social security taxes from the earnings of the applicators ; paid State unemployment taxes on the earnings of the applicators; and made contributions to the State industrial program on behalf of the applicators.
Judge Aldrich who wrote the opinion In Security Roofing was later elevated to the Court of Appeals and concurred In that court's opinion In United States v. Thorson, 282 F. 2d 157 (1st Cir., 1960), affirming the District Court's finding that applicators were independent contractors. The Court of Appeals in Thorson distinguished Security Roofing on the basis, among others, that the taxpayer in the latter case could take an applicator off one job and move him to another, and that on occasion the taxpayer split teams. (282 F. 2d 164-65)
Judge Brennan who wrote the opinions in Ben and WilUama had also written the opinions in Silver and Farm & Some Modernization Co. in which he concluded — on the basis of the particular facts — that the applicators were independent contractors. He indicated in Ben that the case differed factually from Silver "in several important aspects." (139 F. Supp. 886). The taxpayer in Ben subsequently brought suit in this court for refund of FICA and FUTA taxes paid in later years. This court dismissed the action on the principle of stare decisis since the taxpayer's business practices during the period in question were for all significant purposes identical with the years involved in the prior action. Ben Construction Corp. v. United States, 160 Ct. Cl. 604, 312 F. 2d 781 (1963).