come up more confused. I submit that it would take 40 Philadelphia lawyers to interpret that, and I think that each one would probably come up with a different answer.

It should be noted at the outset that the foregoing amendment would confer no added benefits or protection to the members of a name band. On the contrary its application may result in the loss of social-security benefits to such band members. The operator of a dance hall or ballroom, for instance, may often be a person of less financial responsibility than the leader of the band, who is the actual employer of the musicians. Many of these name bands are much sought after to play for such functions as college proms and other dances organized by school or college committees, classes, faternities, or sororities. A leading band such as that of Tommy Dorsey may play at as many as 25 colleges in a year. Under the amendment being considered, these college groups would be considered as employers and would be required to pay socialsecurity taxes for band members, covering frequently no more than one evening's work. There is a question, beyond that of financial responsibility, as to the business training of some such groups which would enable them to cope with the problems of figuring and paying social-security taxes. At the very least it would prove a nuisance.

The same problem would apply when such name bands, as they sometimes are, are contracted for to play for a social function such as a debut party. One suspects that in many such cases the social-security taxes would just not get paid. The sole effect of the amendment is to relieve the leader of the band-an entrepreneur who receives many thousands of dollars under his contracts for his band-from the customary burdens which are imposed upon employers by the Social Security Act. It would shift these burdens to the operators who do not see their alleged "employee" more than once for a limited period of a few days or a couple of weeks and who have not the slightest say as to whether he shall or shall not be employed.

Now, just to give you an idea of what big-time operators these name band leaders are: We recently paid a leader of a name band, at the local Capitol Theater, $12,500 for a single week, plus a percentage of the box office gross over a stated figure. This name-band leader had 16 musicians in his band, and as far as I can ascertain, he pays them about $125 per week per man, or some $2,000 in all. His gross profit is therefore in excess of $10,000 for a single week. This is the type of employer whom this bill would say is not an employer at all. I could multiply these examples many times. I could tell of some band leaders who are reputed to take in more than a million dollars a year from their various activities or engagements.

It is perhaps unnecessary to tell this committee of the terrific burden of record keeping which the Social Security Act imposes upon employers. The red tape and paper work is practically endless. It is not too much to ask, therefore, that no employer be permitted to shift the burden to a third party by such formalism as the present bill would adopt as fact.

It has proved difficult in the past to get accurate information from some of these band leaders as to how much they pay each employee. They do not wish the operators to know how much they pay the members of their band and in the past, when an effort was made by

the operators to comply with the formalism of the Form B contract, they found that they could not get sufficiently accurate information to do it. Moreover, these bands travel for the most part all over the United States. They are in one State today and in another tomorrow. The Social Security Act is correlated with the various State acts. The result of the present bill would be that a given member of the band, instead of having his compensation reported and his socialsecurity records kept in a single State which the band leader designates as his headquarters, would have his records kept in a dozen, two dozen, or three dozen States where the respective operators may have their places of business. It creates not only a problem for the operators, but also a serious problem for the musicians and for the administrators of the act. Moreover, the bill as now drawn would enable a responsible employer, by a fictitious recital in the contract, to shift his burden to an irresponsible or exempt third party with resultant complete loss of benefits by the employee. Consider, for example, a contractor who does an occasional job for a farmer. By wording his contract with the farmer so as to take advantage of this obvious loophole in the present bill, he would relieve himself of his social security obligation to his employee and shift it to the farmer who is an exempt employer or who, even if not exempt, might be financially irresponsible.

Suppose the contractor did a job for an exempt employer. There the contributions would not be paid either by the true employer or by the exempt employer. The contractor would contract himself out of the liability, while the exempt employer has unwittingly assumed a liability which obviously he will not pay.

We ask, therefore, that those provisions of the bill be eliminated and that the question as to who is the employer rest, where it has rested in the past on the facts rather than on a fiction. The courts over the years have built up a substantial body of law on these questions and it is usually easy to ascertain on the facts who the employer is. Congress should not permit the Social Security Act to be so amended when it (a) imposes unreasonable burdens on one who is not the employer; (b) relieves the highly paid band leader of the burdens imposed upon every other employer and (c) confuses the administration of the law and makes it more difficult to keep records and collect contributions for the benefit of those whom the act is designed to protect.

Gentlemen, we have prepared a technical brief, but the gentlemen who appeared before me, on behalf of the National Ballroom Operators' Association, did such a complete job from a technical standpoint that we will not burden your records by filing the technical briefs which we have with us.

The CHAIRMAN. Thank you very much, Mr. Barron.
Are there questions? Senator Taft? Senator Kerr?
Thank you very much for your appearance.

Mr. BARRON. Thank you, Senator.

Mr. CHAIRMAN. The next witness is Mr. William E. Jones, representing the Northwestern Mutual Life Insurance Co.

STATEMENT OF WILLIAM E. JONES, ASSISTANT GENERAL COUNSEL, ACCOMPANIED BY CLARENCE C. KLOCKSIN, LEGISLATIVE COUNSEL, THE NORTHWESTERN MUTUAL LIFE INSURANCE CO., MILWAUKEE, WIS.

Mr. JONES. I am William E. Jones, assistant general counsel of the Northwestern Mutual Life Insurance Co., and this is my associate, Mr. Clarence Klocksin, also an attorney of the Northwestern Mutual. Gentlemen, I have no prepared statement. I wish to talk from notes. The CHAIRMAN. Yes, sir.

Mr. JONES. I do have prepared, however, a suggested amendment, which is in prepared form, which I will hand to the committee in just a moment.

The CHAIRMAN. What is the point that you wish to cover, Mr. Jones? Mr. JONES. I wish to discuss the suggested coverage of life-insurance agents under House Resolution 6000.

The CHAIRMAN. The definition of "employee"?

Mr. JONES. Yes. There are two aspects of H. R. 6000 that I wish to discuss, both of them dealing directly with the status of life-insurance agents under that bill and, of course, under the act.

Now, in the first place, I would like to record a very emphatic protest against the proposed definition in the act, or definitions, which are intended to include full-time life-insurance salesmen as employees of the company. In the second place, I wish to urge coverage of fulltime life-insurance salesmen under the self-employment sections of the bill.

Senator KERR. Does it mean that you are opposed to the salesmen's getting under the act anyway?

Mr. JONES. No; we want him under the act, but we want him covered under the self-employment provision. We don't want him covered under the employer-employee definition.

Taking up first our objections or our protest to the definitions of the act, or the expansion of the definition of "employee," it seems necessary, here, as a sort of background, to state briefly some of the reasons which make this protest necessary.

In the first place, life-insurance agents generally, certainly Northwestern agents, are not employees in fact, and it would be necessary to make use of a fictitious arrangement or a fictitious definition if an attempt were made to cover them as employees.

Now, back in 1937, nearly 13 years ago, the Treasury Department, the Bureau of Internal Revenue, ruled that the salesmen of the Northwestern Mutual Life Insurance Co. were independent contractors and were not subject to the Social Security Act. That ruling was made after a very exhaustive investigation. There was a hearing here in Washington, witnesses were heard, and ample proof was submitted covering all phases of the matter. As a result, the Bureau of Internal Revenue made their official ruling that these life-insurance salesmen were independent contractors.

Immediately following that Northwestern ruling, which was issued in June 1937, the Bureau of Internal Revenue issued similar rulings for a large number of other companies. I do not remember the exact number of specific rulings that were made, but my recollection is that there were more than a score of them. That was also followed by a

blanket regulation by the Treasury Department, wherein they laid down the rules for coverage affecting life-insurance agents, and under that regulation it was generally held that life-insurance agents were not under the act, except perhaps in one or two instances, or in a few instances, let me say, where the facts, of course, justified it.

Now, so far as the Northwestern is concerned, and most of these other companies, that ruling has never been modified or revoked. It is still in force.

There is another thing I would like to point out to the committee, which is that the machinery of the Social Security Act is built entirely around the employer-employee relationship, or the master-servant relationship. The business of the life-insurance salesman is operated on a different basis. He is the owner of his own business, and he conducts his own business at his own expense, free from all control of the insurance company except as to the final result, of course, of the business. He has certain overhead expenses, such as office rent, telephone, stenographer, and a number of other items that might be mentioned, all of which are deductible items in income-tax returns as business expenses.

He is not on any pay roll, such as is contemplated by the Social Security Act. He doesn't receive any wages. All he receives are the commissions, which are in turn dependent upon his own time and effort. His business, the business of the life-insurance agent, is of a peculiar and special nature and needs specialized treatment. It certainly cannot be geared to the machinery of the Social Security Act. The imposition of the social-security tax alone, if these men were to be classed as employees, would be most difficult to administer, under the machinery of the act, which is not designed, as I say, to cover independent businesses. In fact, it could not be handled at all except, as I say, by artificial machinery.

The life-insurance agent is not paid by the company. He collects the premium, and he deducts the commission due him, and only the net reaches the insurance company while his contract is in force.

Also, I would just like to point this out, briefly: That if the lifeinsurance salesman were to be covered as an employee under the Social Security Act, there would be a number of problems arising which could be unfortunate and which could be dealt with only with difficulty. For instance, there would be an attempt made to apply rules pertaining to wages and hours. That would almost necessarily follow, it seems to me. Workmen's compensation, tax withholding, even certain aspects of tort liability for the acts of agents, and many other matters might be suggested if time permitted, but I think that is enough to illustrate what I have in mind.

Also the State unemployment laws can't be ignored entirely here. There isn't a State or a jurisdiction in the United States where Northwestern pays any State-employment-law tax. And we do business in some 43 States. And while probably 50 percent of the States have statutory exclusions applying to life-insurance agents, there are many States where the matter rests on administrative rulings. There are a number of court decisions. But anyhow there would be probably a complete overhauling and reconsideration of those State unemployment laws. And I have never been able to figure out any satisfactory way where the State unemployment laws could be administered satisfactorily in respect to a full-time life-insurance agent.

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Of course, also, if life-insurance salesmen were to be treated as employees under the act, there would be nothing to stop bringing in other independent businessmen of a similar status, and pretty soon I think the thing would get completely out of control, and certainly beyond the control of the machinery of the Social Security Act.

In H. R. 6000 there is a category set up of full-time life-insurance salesmen. There is no definition of what the full-time life-insurance salesman is. There is another provision or definition in H. R. 6000 which sets up the so-called economic reality tests along the lines announced by the Supreme Court. In my opinion those paragraphs and those parts of H. R. 6000 are simply unworkable in connection with the status of full-time life-insurance salesmen.

So much for the protest against the present definition.

As the second part of my remarks, I would like to suggest a method of handling the inclusion of full-time life-insurance salesmen under the self-employment sections of H. R. 6000. Now, in my opinion life-insurance salesmen are already under the self-employed provisions of the act. The very first section of those provisions-section 211, I believe it is, subparagraph (a)-defines the net earnings from self-employment. And that section of the present bill says that gross income, speaking now of self-employed individuals—

shall be computed as under chapter 1 of the Internal Revenue Code, less certain deductions allowed from any trade or business carried on by such individual, less the deductions allowed under such chapter which are attributable to such trade or business.

It is my belief that those sections of section 211 of H. R. 6000 are plenty broad enough to include life-insurance agents at the present time. However, it is still unworkable, because of the peculiar nature of the life-insurance salesman's occupation.

Senator KERR. Do you say that "it is," or "if it is found to be" still unworkable? I am trying to find the basis on which you propose this amendment, whether it is on the basis that the provisions you refer to are unworkable, or whether you are saying that if they are found to be unworkable, then you make this proposal.

Mr. JONES. Well, what I spoke of as unworkable were the sections of the act which purport to deal with the salesman as an employee. Senator KERR. But you just started another statement, and you said, I thought, "if these are still found to be unworkable."

Mr. JONES. What I meant to say was that in my opinion the provisions of the bill relating to self-employment are workable, and that they do now include full-time life insurance salesmen. What is needed here are certain implementing provisions which I shall discuss in a moment.

And I called attention, here, to the provision in section 211 (a), which is the self-employment provision. It starts out with a definition of net earnings from self-employment. It defines those asthe gross income less deductions allowed from any trade or business carried on by such individual, and less the deductions allowed under such chapter which are attributable to such trade or business.

Further on in the act there is a section, a page or two over, in the same section, 211 (a), which excludes certain callings, the physician, the dentist, certain engineers, chiropodists, and that class of individuals; but it does not exclude life-insurance agents. And it is my