SOCIAL SECURITY REVISION FRIDAY, MARCH 17, 1950 UNITED STATES SENATE, The committee met at 10 a. m., pursuant to recess, in room 312, Senate Office Building, Hon. Walter F. George, Chairman, presiding. Present: Senators George, Connally, Millikin, and Martin. Also present. Mrs. Elizabeth B. Springer, chief clerk, and F. F. Fauri, Legislative Reference Service, Library of Congress. The CHAIRMAN. The committee will come to order, please. Mr. Reporter, please insert in the record two letters addressed to me, as chairman of the committee, but in the nature of supplemental statements by Mrs. Nola E. Patterson, editor and representative of the Life Insurance Field Force of America. Mrs. Patterson appeared at an earlier date in the hearing, but she wished to extend her remarks to this extent. (The letters are as follows:) LIFE INSURANCE FIELD FORCE OF AMERICA, Re H. R. 6000 Hon. WALTER F. GEORGE, Chairman, Senate Finance Committee, Washington, D. C. DEAR SIR: Pursuant to my presentation before your committee on February 6, 1950, in behalf of life insurance salesmen compensated solely by commission, it will be greatly appreciated if you will enter the following remarks in the record. As predicted in my first presentation, certain life insurance companies are making a desperate attempt to have the fourth definition of the term "employee" eliminated from H. R. 6000. If they succeed in that, we firmly believe they will immediately claim that commission compensated life insurance salesmen are not "full time" salesmen as described in the third definition and thus continue to deprive these people and their families of their coverage. Mr. Willam E. Jones, assistant general counsel of the Northwestern Mutual Life Insurance Co., even proposes a ridiculous amendment under which these salesmen would be included as "full-time independent contractors" for whom the companies would be willing to pay half the tax. The purpose here is twofold. Not only can the companies then claim that the salesmen are not "full time" salesmen, but it would bolster their defense against negotiating with them in regard to their working conditions if they are classed as "independent contractors." In regard to Mr. Jones' preposterous suggestion, we add the following evidence of employee status, particularly in connection with the salesmen of the Northwestern Mutual Life Insurance Co.: 1. Would any company dare appropriate the premium money of policyowners to pay social-security taxes for people who were not employed by the company? 2. The Northwestern Mutual has provided a company pension for its salesmen to which the company contributes. Again, would the company dare use premium money of policyowners to buy pensions for people who were not employed by the company? 3. Like many other life-insurance companies, the Northwestern Mutual inserted a disavowal of employee-employer status in its salesmen's compensation contracts upon the advent of social security. However, they contain much evidence of employee status even yet. For instance, a rule is laid down in the contract as to how the salesman must conduct himself. It provides financial penalties for salesmen who do not produce a certain amount of business within a given time. 4. Salesmen of the Northwestern Mutual and other life-insurance companies cannot sell anything. They can only persuade people to make application to the company for the issuance of a policy. It is the company which accepts, rejects, postpones, or rates the risk. These salesmen cannot close any transaction. A reinstatement of a lapsed policy, a change of beneficiary or settlement agreement, and so forth, is not binding until approved by the company. 5. The evidence of employee status set forth in my presentation of February 6, 1950, applies with full force to the salesmen of the Northwestern Mutual. Mr. Jones pretends that the wages-and-hours and unemployment compensation laws might apply if these salesmen were included as employees. Although this is not a good argument for excluding anyone from coverage, these salesmen as outside salesmen are exempt from wages-and-hours laws and in most States are exempt from unemployment compensation if they are compensated solely by commission. (See p. 51 of the enclosed Georgia law.) Mr. Jones also deplores the administrative difficulties which would be involved. Again this is not good argument for depriving the salesmen of their benefits. Other business concerns, all industrial-life-insurance companies and the following 10 ordinary-life-insurance companies have fuond it possible to administer the law without undue difficulty. The 10 ordinary-life-insurance companies listed below recognized the employee status of their commission-compensated salesmen and included them into coverage, thus proving that other such companies can do likewise: Acacia Mutual Life Insurance Co. of Washington, D. C. Monarch Life Insurance Co. New World Life Insurance Co. North Carolina Mutual Life Insurance Co. Provident Life Insurance Co. of North Dakota. Security Mutual Life Insurance Co. of New York. State Farm Life Insurance Co. Sun Life Assurance Co. of Canada. Connecticut General Life Insurance Co. The above-listed life-insurance companies have proven that commissioncompensated life-insurance salesmen can be included into coverage and the law can be administered. Mr. Jones says that as independent contractors the business expenses of these salesmen are deductible under the income-tax law. The business expenses of employees are likewise deductible under “Miscellaneous" in the self-same incometax law. Mr. Jones referred to the rulings of the Internal Revenue Bureau in regard to the coverage of life-insurance salesmen. The Internal Revenue Bureau did not have access to information from the employees. It had only the biased and incomplete information which was furnished it by the life-insurance companies which were determined to exclude their field forces from the benefits of socialsecurity coverage. We implore you to retain the fourth definition of the term "employee" in H. R. 6000. It is the only definition which will assure the coverage of life-insurance salesmen who are compensated solely by commission as the employees which they are and have always been. Respectfully yours, (Mrs.) NOLA E. PATTERSON, Editor and Representative of the Life Insurance Field Force of America. LIFE INSURANCE FIELD FORCE OF AMERICA, Re H. R. 6000 Hon. WALTER F. GEORGE, Chairman, Senate Finance Committee, Washington, D. C. DEAR SIR: Pursuant to my presentation before your committee on February 6, 1950, and my subsequent letter of March 14, 1950, it will be greatly appreciated if you will enter this letter in the record. Following printed reports that the Equitable Life Assurance Society made representations to your committee to the effect that its life-insurance salesmen are "independent contractors," one of the Equitable's salesmen sent me the following evidence of employer-employee relationship between the Equitable and its salesmen. He requested that I forward it to you to be considered by your committee: "It would be difficult for an unbiased inquirer to adjudge the full-time agents of the Equitable Life Assurance Society anything but 'employees' in fact and in law. Not self-employed.' Not independent contractors.' Not 'operating their own business.' "Some cogent reasons, briefly stated: "1. Under New York and other States' laws and under Equitable regulations, 'group life insurance' can be purchased only by an 'employer' who has the right to make premium-deductions from his employees.' Absolutely forbidden is group life insurance for 'independent contractors' or 'associates' of any category. But, all Equitable agents enjoy full group life insurance.' Lawfully so. "2. Agents fill out an 'application for employment.' They must pay an annual fee for an 'employee's fidelity bond.' "5. Until a few years ago the agency-contracts were replete with such phrases as the employer,' 'the employee,' 'employment,' etc. These were called in and a new printed form substituted. 4. Agents are subject to book Rules for Agents. No discretions. Rigid. "5. All independent contractors' buy their own occupational licenses. Equitable buys all such occupational licenses for its agents. "6. Equitable can and does change compensation at will. In some cases it pays its 'actual independent contractors' ('brokers' and 'one-case agents') more compensation than it pays its own agents. 7. Equitable charges against an agent's previously earned compensation a cash penalty for terminating his employment under some cases. "S. Legal papers served on Equitable agents are binding; the society has to accept and respond to such service. 9. By its printed unilateral contract of employment, Equitable holds the right to intrude and defend its agent against all claims and suits for any cause whatsoever. And to deduct from his compensation and otherwise to recover whatever it deems to be expense in connsction with any such claim. Hardly independent actions. 10. Whoever heard of a firm's purchasing for its independent contractors' a 'retirement pension plan'? Such is unlawful, forbidden by law and by regulations of all companies. Yet, Equitable has purchased a pension plan for its agents." This is copied verbatim from this Equitable agent's letter. His use of the word "agent" refers to life-insurance salesman, both terms being erroneous. These people are neither agents nor salesman. They are employees who are paid according to the result accomplished rather than by the hour. Sincerely yours, (Mrs.) NOLA E. PATTERSON, Editor and Representative of the Life Insurance Field Force of America. The CHAIRMAN. The committee will begin its work this morning. We hope that there will be other members of the committe present within a short time. We will proceed without delay since we have matters coming up on the floor of the Senate today that make it necessary for us to conclude around 12 o'clock, or shortly after 12. Mr. Mosher, I believe that you are first on this list. Mr. Mosher, you may be seated, if you wish. STATEMENT OF IRA MOSHER, CHAIRMAN OF THE NATIONAL ASSOCIATION OF MANUFACTURERS EMPLOYEE BENEFITS COMMITTEE, AND DIRECTOR, RUSSELL HARRINGTON CUTLERY CO. Mr. MOSHER. Thank you, Mr. Chairman. For the record, my name is Ira Mosher. I appear before you as chairman of the NAM Employee Benefits Committee, which deals with the entire field of employee-benefit programs, including employee pension programs and Federal Social Security. With your permission, I am not going to read the brief which we have presented to you, which is pretty lengthy and goes into considerable detail. Again, with your permission, I would like the privilege of high lighting the more important points in that brief. The CHAIRMAN. Do you wish to have the brief entered in the record? Mr. MOSHER. Yes, sir. The CHAIRMAN. The brief will be entered in full in the record, and you may then proceed. (The brief is as follows:) STATEMENT OF IRA MOSHER, DIRECTOR, RUSSELL HARRINGTON CUTLERY CO., AND FORMER PRESIDENT, NATIONAL ASSOCIATION OF, MANUFACTURERS My name is Ira Mosher. I am a director of the Russell Harrington Cutlery Co. I am a former president of the NAM and appear before you today as chairman of the NAM employee benefits committee, which deals with such matters as employee-pension programs, other employee-benefit programs, and social security. INDUSTRY'S CONCERN ABOUT THE OLDER WORKER To us the question of retirement security for the older worker is both a human and economic problem. While manufacturing industry provides employment for only approximately 25 percent of all those gainfully employed, nevertheless, as a representative of companies that produce something like 80 percent of the country's manufactured products, we are in intimate contact at all times with the employee in industry and with his problems. That includes employees of all ages, and in many cases the retired employee as well. Our concern about the older employee and his problems is not of recent origin, The record shows that in 1929, in 1938, and in the past few years we have undertaken programs looking toward more equitable utilization of the older worker in industry. Repeatedly we have urged that arbitrary age limits be disregarded and that employees be hired and utilized on the basis of their capacity, experience, and ability rather than age or other arbitrary factors. In 1947 the NAM board urged industrialists to see that their employment policies gave full recognition to individual qualifications without discrimination of any kind. Not only have companies taken pains to hire and retain older employees; they have also, in many cases, made voluntary provision for employee retirement benefits, without waiting for either Government or union to force the issue. On the other hand, society must reckon with the fact that whereas today the ratio of aged to those in their productive years (age 20 to 64) is about 1 to 8, 10 years from now that ratio will become 1 to 5. Both from the viewpoint of the employee himself and from the viewpoint of society, we may have to change our views concerning the wisdom of retiring employees at age 65 and may want to encourage their being continually employed as long as they are able and willing to continue in useful employment. It has been loosely stated that industry is reluctant to employ older workers. I think it only fair to point out the facts. 1. Nearly 42 million workers over 45 years of age have been added to the Nation's pay rolls during the past 8 years. 2. Whereas the proportion of people over 45 years old in productive employment in December 1941 was 31.9 percent, at the beginning of this year, the over45-year-old group constituted 35.7 percent of the Nation's labor force. Our intimate knowledge of the problem of the aged, together with our concern for the preservation and strengthening of our economic system makes us approach the problem of Federal old-age retirement security with a deep sense of responsibility. Recognizing that the Federal program of protection for the aged has now been in operation for a period of over 12 years, we have given careful consideration to the proposals before this committee, with the purpose of making a constructive contribution to the improvement and strengthening of the Federal program of old-age and survivors insurance. |