Our association has concurred in the resolution adopted by the western division of the American Mining Congress at its 1949 meeting in Spokane, Wash., on this subject. This resolution, in part, reads as follows:

We strongly oppose such changes in the definition of "employee" as are contained in H. R. 6000 of the Eighty-first Congress, or any departure from the common law criteria for determining employee-employer relationship.

The question, naturally, rises in your minds as to why we are so firmly convinced that the classification of leasers as "employees" would terminate the leasing system. During 1940 mine leasing virtually stopped in Utah. The interruption resulted in loss to all parties involved. The owner lost profits and their mines were impaired; the leasers and their families suffered loss of earnings; farmers lost a market for their products; and merchants lost customers. There was a loss of tonnage for railroads and processors of the ore; school, city, county, State, and Federal taxing units lost tax dollars; and finally the Nation lost production of vital metals necessary for its domestic economy and at that time-the war effort.

This interruption of mine leasing was due to certain rulings holding that a mine leaser was not an independent contractor but an employee of the mine owner. In May 1940 the Supreme Court of Utah in National Tunnel and Mines Company v. The Industrial Commission of Utah, et al (102 Pac. (2d) 508) held that a mine leaser was an employee and eligible for benefits under the Utah Unemployment Compensation Act. It followed that the mine owner was obligated to make unemployment tax payments on so-called wages of the leaser. In August 1940, the United States Department of Labor, Wage and Hour Division, issued an administrative ruling, citing the Utah unemployment case, indicating that the Division might find a mine leaser to be an employee and subject to the minimum wage and overtime provisions of the Wage and Hours Act. Finally, in November of 1940, the Bureau of Internal Revenue in Washington, D. C., ruled that operations under a mine lease created an employment relationship between the mine owner and leaser for Federal employment tax purposes. If a leaser was an employee, the mine owner was required to keep a record of his time worked, was obligated to pay him minimum wages and time and one-half his average rate of pay for overtime, notwithstanding there was no basis for determining the rate of pay; and the owner was obligated to pay taxes on the leaser's so-called wages under the Utah Unemployment Compensation Act, the Federal Insurance Contribution Act, and the Federal Unemployment Tax Act. Moreover, the creation of this relationship and these obligations destroyed the leaser's incentive which is the key to success of lease operations, since it assured him going wages irrespective of the economic success of his lease operations and imposed on the mine owner obligations with which it was impracticable and usually impossible for him to comply. The very basis of mine leasing is the ability of skilled leasers to conduct their operations free from the supervision and consequent overhead costs of owner operations.

Because of losses due to the interruption of mine leasing, previously referred to, and because of the need for additional production of critical metals for World War II, a concerted effort was made by governmental agencies, leasers and owners to effect changes in the

rulings which would permit normal resumption of the mine leasing system. This involved:

(1) Amendment of the Utah Unemployment Compensation Act, so as to exclude mine leasers from coverage under the act, unless the lease agreement or operations under it would constitute the leaser an employee of the mine owner at common law. In 1949 the Utah act was further amended to condition exemption upon the leaser being also exempt under the Federal Unemployment Tax Act;

(2) The drafting of a standard form of mine lease, which is now in common use in Utah;

(3) The issuance of a policy statement by the Wage and Hour Division to the effect that leases which followed the standard form created an independent contractor relationship and the leasers were not covered by the Wages and Hours Act;

(4) The issuance of a ruling by the Commissioner of Internal Revenue of the United States that operations under the standard form of lease, if carried out in keeping with the independent contractor character of the lease, would constitute a relationship of independent contractor between the mine owner and leaser, rather than an employment relationship for Federal Employment Tax purposes; and finally

(5) After the District Court of the United States for the District of Utah, in the case of Combined Metals Reduction Company v. The United States of America held that a mine leaser under a lease similar to the standard form of lease was not an employee, but an independent contractor, and that the mine owner was not obligated to pay social security taxes, the Federal Security Agency agreed that it would follow the Utah case and the Empire Star Mines Company, Limited. v. California Employment Commission (28 Cal. (2d) 33; 168 Pac (2d) 686) case in the ninth and tenth judicial circuits of the United States.

After a period of 4 years, during which time there had been virtually no leasing in Utah, in reliance on the rulings and decisions refered to, leasing operations in Utah were resumed on a substantial scale in 1944 and are now continuing.

Even though a leaser is an independent contractor at common law, he probably would be an "employee" under H. R. 6000. This would make the mine owner subject to the Federal Insurance Contributions Act, the Federal Unemployment Tax Act, and also the Employment Security Act of Utah-I have referred previously to that, sir, as the Utah Unemployment Compensation Act, but the new amendment that I referred to in 1949 gives that a new name since exclusion of leasers from coverage under the latter is conditioned upon their being exempt under the Federal Unemployment Tax Act. It also follows that mine leasing would find itself in the same situation that faced it in 1940. This, we believe, would inevitably result in killing of the mine leasing system.

Leasers are self-employed, independent businessmen. An accepted concept of an independent businessman embodies two criteria. (1) Freedom to hazard one's credit, capital, or capital goods on his knowl edge, judgment, and skills; and (2) the opportunity for profit or loss as a result of exercising this independent, individual, action. These criteria, in my humble opinion, are fundamental factors in the definition of a mine leaser.

Drawing upon my own personal experience as a miner and a mining engineer, I look back upon leasers and their stories which stirred my imagination and opened to me the door of economic opportunity. My personal failure to walk through these portals cannot be laid entirely to fear of the unknown, but rather to that love of payroll security which besets the vast majority of Americans. Fortunately for America this spirit, which I describe as my own, does not control all Americans. Within many there exists a spark of daringa gambler's instinct, if you please which spurs imaginative and daring men on to deeds and activities which, more often than not, are contrary to the attitudes and opinions of their fellowmen. It is these actions which have, cumulatively, made America a strong and progressive member of the family of nations.

Mine leasers, that I have known, have possessed this singular spark of independence and free thinking. They want no boss other than their own limitations. In most instances they have acquired skills within and outside of the mines wherein they lease. Perhaps, as an employee, they saw a vein of ore which they felt should be developed but which a supervisor, pressed for tonnage, felt was uneconomical to follow. The potential leaser saw, therein, an opportunity and sought a lease, on his own initiative, in order to pursue this will-o'-thewisp even as the legendary Jason sought the Golden Fleece. They were willing to pit their resources, their abilities, and their knowledge against the forces of nature. Often their search led them to the lush valley of success-often they were lured on to the abyss of failure where nature laughs at man's puny efforts. Despite the outcome these men knew that there is always a "next time" and that today's failure may be tomorrow's success.

I have attempted to convey to you my personal opinion that these mine leasers are not ordinary men. The vast majority of them could easily be supervisors in any mine in which they lease due to their imaginative and skillful abilities. Most of them have had a vast underground experience extending over many years under varied geological and mineralogical circumstances. Many leasers train their sons to follow in their footsteps-and train them far better than is possible in our own academic or industrial training programs. Fathers know that the ability to profitably follow a narrow lead to a hoped for bonanza means hand sorting of ore; judicious and skillfull drilling and blasting; and a practical knowledge of geology and mineralizing characteristics. Their fathers know, too, the pain of failure and the joys of success.

There is nothing mysterious or sinister about a mine lease. Ordinarily the potential leaser goes to a mine owner and seeks a lease to explore and mine in a specified area. More often than not these areas are isolated or abandoned. If the man is well and favorably known as a responsible and able individual, the owner may grant a lease if he does not contemplate further work in the area or mine. The owner has certain moral and legal responsibilities which cannot be abandoned and as a result must insist that the contemplated work be done in accordance with the mining safety codes of the State and in such a manner as not to endanger the balance of the mine workings. When several leaser groups seek the same area the owner must insist that

the successful applicant perform certain work minimums to maintain his lease and not merely hold for speculation.

The contention has been made that leasers are forced to ship their ores to designated mills or smelters. This is not so. The higher price a leaser gets for his ore means a better royalty to the owner. Mines A and B, whose lease production is indicated on exhibit C, which is attached to this report, are owned by a smelting company. Mr. Chairman, I would like to have those exhibits made a part of the record. I won't bother to read them in their entirety. The CHAIRMAN. Yes, sir. You may do so.

Mr. RICHARDSON. However, in 1948 only 53 percent of the total lease production went to their smelter and in 1949 only 41 percent went there. The balance, in each case, went to the smelting company offering the best price for that particular ore. Ordinarily, how ever, a leaser can get a better dollar return when his ores are shipped to a plant which treats the owner's ore. This is due to the over-all desirability of large lots for mill and smelter feeds when compared to the small tonnages ordinarily produced by the individual leaser. Senator MILLIKIN. Is it not true also that oftentimes the owner's mill is the only one that is available?

Mr. RICHARDSON. It is often the only one that is available. That is right, sir.

I might say, however, that in Utah we have this situation, which is the reason that I brought that out, sir: We do have three smelting companies in the Salt Lake Valley, and though the leasing operations were going on at these mines, the leasers' ores were not sent to the company smelter in their entirety. The contention is often made that the leasers are forced to ship their ores to a certain smelter. But I have two leasers here from different areas and I think they can bring out, better than I can, how independent they are in their selling actions.

The mine owner, in an effort to insure work performance must inquire into the available equipment the leaser owns or make arrangements to rent such to him. Services to the leaser such as hoisting. compressed air for drills, blacksmithing, assaying, transportation. timber, dynamite, and such similar items are charged for at or near cost. Often the leaser's workmen's compensation insurance is covered by the owner but the leaser pays for such coverage. These are all operating details contained in the lease. When the lease has been signed the leaser is in business-on his own.

Leasers' investment: Exhibit A, of the attached material, will give you a concrete idea as to the amount leasers have invested in capital goods in one Utah operation. These investments vary from $250 to $60,000. Where they have no equipment the owner or some other individual must "grubstake" them by extending credit or rent them sufficient equipment with which to work.

Many leasers have told me that they would purchase more equip ment if they knew that "the rules wouldn't be changed" by Govern ment agencies and they could rely on being recognized as independent, self-employed individuals. During the past 10 years they, like the mine owners, have been continually harassed by legislative and judi cial threats as well as administrative rulings relative to their status.

These leasers know from past experience that the owner cannot obtain from regular employees the same careful, industrious workmanship which a leaser, working for himself gives. This is illustrated by the experience of one Utah company owning a mine which, since 1935, has been regarded as "worked out," in the sense that company operations were no longer profitable. Leasers working in that same mine between 1935 and 1940 produced over 300,000 tons of ore. The owner stopped giving leases in 1940, as previously stated, but due to the success of this operation the same men who had been leasing from him were put on the pay roll at the going union wage. These men worked in the identical areas in which they had been leasing. While leasing they had used such care in mining and sorting of ore that shipments had averaged from $8 to $10 a ton in value. After they were put on the pay roll of the owner, shipments fell to an average value of $4 per ton, due to careless mining and sorting. The result was not only an adulteration of the ore, but also an increased smelting and railroad expense due to handling of waste. The owners have not forgotten, nor have the leasers, this experience. The leaser knows that had the mine owner been able to economically do leased work with "days' pay employees" he would have done so and thus never resorted to the leasing system.

The question, naturally, arises as to whether there truly exists an opportunity for profit or loss to such leasers or whether the system is merely a subterfuge to avoid existing wage scales. Exhibit B gives such details as are available at several operations on the profits or losses of leasers. At mine A we find variations from individual lease annual net profits of $28,675.83 in 1948 to losses of $3,506.26 in 1949. In this same mine we find that in 1948 the leasers' profits aggregated $106,685.01 while in 1949 (a period of low metal prices and high costs) they dropped to $33,836.51. The same type story is told by the data on mine B. Mine C, however, rents some equipment and provides certain services on a daily basis to leasers, and accordingly, keeps a record of the shifts worked. From their data we can look at the average earnings per shift worked. We find a high of $60.80 per shift worked in 1946 to a loss per shift worked of $3.88 in 1949. Incidentally the same individual was involved in these examples. The miners wage rate, at this same mine, was $8.93 per 8-hour shift during the 1946 period and $10.85 per day in the 1949 period.

A study of these exhibits will, I believe, conclusively show that the leaser is the owner of credit, capital, or capital goods and through hazarding them he is presented with an opportunity for profit or loss. I am firmly convinced, therefore, that the leaser meets an accepted concept of an independent businessman.

There is no question in my mind that leasing provides the most practical means of conserving, through use and production, our national mineral resources. As indicated earlier, the ores in the leased area would have been lost as they would never have been mined by the owner. Yet these same areas under leasing arrangements have gone on to yield substantial tonnages of vital nonferrous metals which could never have been produced had the openings been permitted to cave and the mines fill with water. These facts were equally true during the emergency war periods of the past and during industry's conversion to peacetime operations.