Opinion
No. 33522.
April 10, 1939.
1. MASTER AND SERVANT. Taxation.
Where contracts between oil company and consignees for distribution of petroleum products did not create master-servant relation, and many of the consignees were firms or corporations and most of them were engaged in other businesses, the arrangement was not a "contract of hire" within statutory definition of "employment," and company was not required to contribute to unemployment compensation fund (Laws 1936, chap. 176, as amended).
2. STATUTES.
Every doubt concerning application of unemployment compensation act to an alleged employer must be resolved in favor of employer and against the taxing power, since the act imposes an excise tax (Laws 1936, chap. 176, as amended; Federal Social Security Act, sec. 901, 42 U.S.C.A., sec. 1101).
ETHRIDGE, J., dissenting.
APPEAL from the chancery court of Hinds county; HON. V.J. STRICKER, Chancellor.
Hannah Simrall, of Hattiesburg, for appellant.
The question of whether or not the contract creates the relation of employer and employee between the American Oil Company and its distributors, or whether it creates the relation of independent contractor is to be determined by the ordinary meanings of these words unaffected by the Mississippi unemployment Compensation statutes.
Chapter 176, Laws of 1936; Article 205 of Regulation 90 of United States Act of Congress approved June 6, 1933; Prentice-Hall Unemployment Insurance Service, secs. 37-196, note .03; Metcalf v. Mitchell, 269 U.S. 514, 46 S.Ct. 172, 70 L.Ed. 384.
Each case involving the question of whether a person is an independent contractor or an employee must be determined according to the particular facts of that particular case.
The contract does not vest in the American Oil Company the right to control the distributors in the performance of their duties; but purposely avoids doing so in order to preclude the American Oil Company from being held liable for acts of the distributors.
Gulf Refining Co. v. Nations, 167 Miss. 315, 145 So. 327; Texas Co. v. Mills, 171 Miss. 231, 156 So. 866; Shell Petroleum Corp. v. Linham, 163 So. 839; Texas Co. v. Jackson, 165 So. 546; Cook v. Wright, 177 Miss. 644, 171 So. 686; Crosby Lbr. Mfg. Co. v. Durham, 179 So. 285.
Greek L. Rice, Attorney-General, J.A. Lauderdale, Assistant Attorney-General, and Harry M. Bryan, of Jackson, for appellees.
All basic constitutional questions affecting the act have been put at rest by this Honorable Court in Tatum v. Wheeless, 180 Miss. 900, 178 So. 95.
See, also, Charles C. Steward Machine Co. v. Herwell G. Davis (1937), 301 U.S. 548, 57 S.Ct. 883, 81 L.Ed. 1279, 109 A.L.R. 1293, wherein Title IX of the Social Security Act (Federal Unemployment Compensation Law), was upheld by the United States Supreme Court, and Carmichael v. Southern Coal Coke Co. (1937), 301 U.S. 495, 57 S.Ct. 868, 81 L.Ed. 1243, 109 A.L.R. 1327, wherein the same court upheld the constitutionality of the Alabama Unemployment Compensation Law.
The written agreement controls in determining the status of the parties, the relationship between appellant and its distributors (and their helpers) thereunder is that of employer-employee.
Benjamin v. Davidson-Gulfport Fertilizer Co., 159 Miss. 162, 152 So. 839; Buchholz v. Standard Oil Co., 244 S.W. 973; Callahan v. Rayburn, 110 Miss. 107, 69 So. 667; Caver v. Eggerton, 157 Miss. 88, 127 So. 727; Crosby Lbr. Mfg. Co. v. Durham, 179 So. 285; Fischer v. Havelock, 25 P.2d 864; Gibson v. Texas Co., 20 S.W. 349; Goff v. Sinclair Refining Co., 162 So. 452; Gulf Refining Co. v. Nations, 167 Miss. 315, 145 So. 327; Gulf Coast Motor Express Co. v. Diggs, 174 Miss. 650, 165 So. 292; Gulf Refining Co. v. Brown, 93 F.2d 870, 116 A.L.R. 449; Hinton Walker v. Pearson, 142 Miss. 50, 107 So. 275; Johnson v. Steele, 59 P.2d 237; Kisner v. Jackson, 159 Miss. 424, 132 So. 90; Life and Casualty Ins. Co. v. Curtis, 174 Miss. 768, 165 So. 435; Louisiana Oil Co. v. Renno, 173 Miss. 609, 157 So. 705; Magnolia Petroleum Co. v. Pierce, 269 P. 1076; Mallinger v. Webster City Oil Co., 228 N.W. 41; Nesseth v. Skelly Oil Co., 223 N.W. 608; Pan-American Petroleum Corp. v. Pate, 157 Miss. 822, 126 So. 480; 1 Restatement, Agency, 490; Rogers v. Lewis, 144 So. 373; Sawmill Construction Co. v. Bright, 116 Miss. 491, 77 So. 316; Sec. 19 (g), Unemployment Compensation Law; Tatum v. Wheeless, 180 Miss. 800, 178 So. 95; Texas Co. v. Mills, 171 Miss. 231, 156 So. 866; Texas Co. v. Jackson, 174 Miss. 737, 165 So. 546.
We believe that brief reference should be made to the question of status of distributors and their helpers as the same has arisen under workmen's compensation acts. In those states having such laws, contracts of distributorship have been construed to determine whether the relation of employer-employee existed, and, therefore, whether claimants should recover as "employees." The cases under the workmen's compensation acts referred to are of interest and highly persuasive, in that the courts were not dealing with tort questions per se; they were determining status in order to decide whether or not claimants were entitled, as "employees," to the benefits of such acts.
Maryland Casualty Co. v. Kent, 3 S.W.2d 414; Angell v. Eagle Oil Refining Co., 169 Minn. 183, 210 N.W. 1004; U.S.F. G. Co. v. Ind. Com., 42 Ariz. 422, 26 P.2d 1012; Roberts v. U.S.F. G. Co., 42 Ga. App. 668, 157 S.E. 537; Heisey v. Tide Water Oil Co., 92 S.W.2d 922; Crowder v. State Compensation Comr., 115 W. Va. 12, 174 S.E. 480; Shell Petroleum Corp. v. Garnett, 228 Mo. App. 256, 65 S.W.2d 1052.
On July 5, 1938, the commissioner of internal revenue passed upon the form of contract in existence between the American Oil Company and its distributors to determine whether or not the latter and their helpers were employees of the company and therefore, whether the company was liable for the taxes paid upon employers under Titles VIII and IX of the Social Security Act. The federal authorities held such distributors and their helpers to be employees, under the status of employer-employee, not only as between the Petroleum Company and its distributors, but as between it and the latter's helpers. This ruling we deem important here, not only because of the fact that it is in accord with the holdings of this Honorable Court cited hereinabove but because of its effect generally upon the question of status under the federal act and unemployment compensation laws of the state.
This Honorable Court has laid emphasis upon the value of departmental and administrative construction in the following cases:
State v. Wheatley, 113 Miss. 55, 74 So. 427; I.C.R.R. Co. v. Middleton, 109 Miss. 199, 68 So. 146; State v. Grenada Compress Co., 123 Miss. 191, 85 So. 137; Robertson v. Texas Oil Co., 141 Miss. 356, 106 So. 449; Furniture Co. v. Tax Com., 160 Miss. 185, 133 So. 652.
In the Wheatley case, supra, the court said in part: ". . . the construction which a department of government has placed upon the very law under which it was created and which it is sworn to enforce should be both suggestive and persuasive with the court."
Argued orally by T.C. Hannah, for appellant, and by Harry M. Bryan, for appellee.
The question presented for decision on this appeal involves the consideration of numerous features of the contract between the oil company and its distributors of petroleum products which was in issue in the case of Texas Company v. Leon L. Wheeless et al. (Miss.), 187 So. 880, this day decided; and wherefore, the opinion in that case should be read in connection herewith, since in each case the determination of the relation of the oil company to its distributors, and to the assistants or employees of the latter, within the meaning of chapter 176 of the General Laws of 1936, as supplemented by chapter 3 of the Laws of the First Extraordinary Session of 1936, and as amended by chapter 147 of the General Laws of 1938, known as the Unemployment Compensation Act, is the legal inquiry with which the Court is dealing. Likewise, the proceedings in the court below, as well as the relief sought and decree rendered, in each case, were the same in all material particulars. We shall therefore refrain from repeating what we have said in Texas Company v. Wheeless et al., supra, regarding the objects and purposes of the Act, the construction of its provisions, and the authorities governing the decision as to whether the relation of employer and employee is created within the meaning of said Unemployment Compensation Act by such provisions of the contract there discussed, as are present in the contract in the instant case. In other words, in this opinion we shall be content to call attention only to those features of the contract in the case at bar not found in the other contract; and which are asserted to be sufficient to distinguish the two cases.
Those provisions are: (1) The appellant oil company owns and agrees to maintain the bulk station plant and its equipment. (2) The restrictive covenant as to the distributor not engaging in the business of selling other petroleum products is confined to the life of the contract in question, whereas in the case of Texas Company v. Wheeless et al., supra, the covenant extended beyond the termination of the contract. (3) All contracts with retail customers relating to the equipment furnished them by the oil company and installed by the distributor must be in the name of the oil company. (4) The oil company reserves the right to select certain persons in the territory served by distributor to whom the distributor may sell on credit without responsibility or risk to himself, except that he is to assist the oil company to make collection of these accounts, if called upon to do so, in consideration of the commission which he receives in the making of such sales on the oil company's account. (5) The distributor is expressly required to keep his trucks and other equipment, used in the distribution of the consigned product, in first class workable condition. (6) Distributor has discretion to make adjustments of customer's complaints as to shortage in quantity of products delivered, while the oil company is to make adjustments as to quality, unless the distributor has failed to deliver the quality ordered by customer after the product of such quality has been furnished to distributor on consignment by the oil company. (7) The distributor is required to pay the expense of any litigation between a customer and the oil company growing out of the transactions had between the distributor and his customers. (8) The oil company agrees to keep the books relating to the accounts of customers, while the distributor is also required to keep complete records in the manner required by the oil company, and the oil company agrees to assist the distributor in the collection of the accounts by sending out statements therefor in its own name, and to otherwise cooperate with him in that behalf; and also the books in regard thereto are to be turned over to the oil company as its property at the termination of the contract. (9) The contract requires the distributor to pay for the products delivered him by the oil company at its prices, but does not undertake by any language to control the price at which the distributor shall sell to his retail customers. (10) The contract expressly provides that the oil company shall have no direction or control of the distributor in the employing and discharging of such assistants as the distributor may employ in the distribution and sale of the products; "nor any right to in any manner direct or control said employees of the distributor in and about the performance of their work." (11) The distributor agrees "to use his very best efforts to sell and distribute . . . said commodities;" whereas under the contract in Texas Company v. Wheeless et al., supra, it is stipulated that the "Consignee shall diligently market and distribute the petroleum products" — a distinction not material here, unless the use of the words "his best efforts" as used in the present contract gives these provisions a different meaning. The question of whether the fact that the contract contemplates that the consignee, factor, independent contractor, commission merchant, or other contracting party, shall give his personal attention and services to its performance is discussed in the case, supra.
While we are of the opinion that this case is near the line of demarcation between liability and non-liability under the Unemployment Compensation Act here under consideration, we have concluded that since the contributions imposed upon employers under the Act, for the benefit of their employees when they may become unemployed, have been held to constitute an excise tax, and that under the authorities cited in the other case hereinbefore referred to the statute must be construed so as to resolve any doubt as to its application in favor of the taxpayer and against the taxing power, we would not be justified in holding that a different conclusion should be reached in these two cases. Several of the stipulations mentioned as appearing in the contract now before us and as not being found in the contract under review in Texas Company v. Wheeless et al., supra, are discussed in the cases of Texas Company v. Jackson, 174 Miss. 737, 165 So. 546; Cook v. Wright, 177 Miss. 644, 171 So. 686; and Casement v. Brown, 148 U.S. 615, 13 S.Ct. 672, 37 L.Ed. 582, cited in the case of Texas Company v. Wheeless et al., supra; and the application of which cases to those particular stipulations of this contract we deem it unnecessary to further discuss. It is sufficient to say that we are unable to hold that the two cases now being decided are fundamentally different in their essential particulars so as to render the decision in Texas Company v. Wheeless et al., supra, not to be controlling in the case at bar. The distributor is a capitalist and employer in each instance, instead of a hired man.
Reversed and remanded.
I am unable to agree that this case should be reversed, and I think that the contract, in material particulars, is different from that in the case of Texas Company v. Wheeless (Miss.), 187 So. 880, this day decided by the Court in banc. Both contracts are long and complicated, and it would unduly prolong the opinion to set out its terms in full. But I think that when we give effect to all that it is possible for the American Oil Company to do in the way of control, under the terms of the contract, that it amounts to its being the owner of the business in all of its essential particulars, and with power to control all of its details through the application of rights conferred on it in the contract; consequently, that the persons called distributees in the contract are, in fact, employes, although their compensation will depend upon the commission from which certain operating charges are deducted.
I am of the opinion that when this contract is construed so as to give it full effect, not only in the actual verbiage, but in the necessary implications from that verbiage, that the American Oil Company is subject to the charges sought to be imposed upon it in this suit.
It follows that I am of the opinion that the judgment should be affirmed.