SOCIAL SECURITY REVISION FRIDAY, MARCH 10, 1950 UNITED STATES SENATE, The committee met at 10 a. m., pursuant to recess, in room 312, Senate Office Building, Senator Walter F. George, chairman, presiding. Present: Senators George, Connally, Byrd, Kerr, and Millikin. 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. Mr. Weiss, you are the first witness? You may be seated if you wish. Senator CONNALLY. Mr. Chairman, may I intervene for just a minute? The CHAIRMAN. Yes, Senator. Senator CONNALY. Mr. Weiss is a prominent citizen of Paris, Tex., a businessman, who has been personally known to me for many years. He is thoroughly reliable, and I commend him to the committee. STATEMENT OF SAM WEISS, WHOLESALE DISTRIBUTOR OF PETROLEUM PRODUCTS, PARIS, TEX., APPEARING ON HIS OWN BEHALF AND AS REPRESENTATIVE OF THE PETROLEUM MARKETERS' ASSOCIATION OF TEXAS Mr. WEISS. Thank you, Senator. The CHAIRMAN. We are very glad to have you, Mr. Weiss. We will be glad to hear you now on H. R. 6000. Mr. WEISS. My name is Sam Weiss. I am engaged as a wholesale distributor of petroleum products in Paris, Lamar County, Tex. I appear today as a representative of myself and of the recently organized Petroleum Marketers' Association of Texas. By the way, this association represents Gulf, Texas, Magnolia, St. Clair, Continental, Phillips, Skelly, Cosden, Cities Service, Humble, Standard of Texas, Panhandle, Independent, and several other oil companies operating in the State of Texas. A few weeks ago I heard that the House of Representatives had passed a bill to expand the coverage of social security and that the bill was so written that independent businessmen like myself would probably be included as employees of the company who supplied most of our products. I talked to several others who are in the same position as I am, and I learned that legal authorities believed that the definition of "employee" in the bill as it passed the House would make oil distributors and consignees, like myself, as well as perhaps service station operators, employees of the oil companies whose products they handle. Several independent businessmen engaged in the distribution of petroleum products met in Fort Worth, Tex., on February 24, 1950, at which time the Petroleum Marketers' Association of Texas was organized. Although that association is less than 1 month old, it already has a membership of approximately 400. We expect to have a membership of at least 2,000 within the next few months. At this meeting in Fort Worth the association discussed the definition of "employee" as contained in the bill H. R. 6000 and unanimously adopted the following resolution: That this association go on record as strongly opposing H. R. 6000 in its present form, and particularly that portion thereof wherein the definition of "employee" is so vague and uncertain that it is most likely to be construed that distributors such as we will be considered employees of our suppliers; that this bill be so amended that the definition of "employee" be so clear that there can be no question but that the distributors will not be included therein, but will be able to maintain his present status as an independent businessman. The members of our association have no objection to social-security benefits. As a matter of fact, we have and are now paying the socialsecurity tax on all of our employees. We are, however, very much opposed to that portion of the bill which attempts to define the term "employee," for the reason that we feel that the vague and uncertain language used in defining "employee" will be construed by those charged with the enforcement of the act to mean that we wholesale distributors of gasoline and oil are "employees" of our suppliers. We definitely do not want to be considered "employees" of our supplying companies for any purpose. If I may digress for a minute, Mr. Chairman: I worked for the Gulf Oil Corp. I started with them soon after I was discharged from World War I. I left their employ, and at that time I held an execu tive position with them. I left in '27, because I did not want to be an employee of the company. I wanted to be in business for myself. And I have been operating my business since then. I hope I can continue as such, and not as an employee of the corporation. Some of us have been distributors for oil suppliers for as long as 35 or 40 years. We have been able to use our own initiative, business judgment, and energies to build up a sound and substantial business for ourselves and our families. Many of us are engaged in other businesses separate and distinct from the distribution of petroleum products. Incidentally, I am in the bottling business in addition to being distributor for an oil company. We have in our association large, small, and medium-sized distributors, but each has the right and privilege of exercising his best efforts to increase his business, based on keen competition, which is as it should be under any free enterprise. I am representing a large group of individual businessmen who are not, in any sense of the word, "employees" of their suppliers. We are the bosses of our businesses. The people who work for us are chosen by us and we direct their activities. None of them has any responsibility, directly or indirectly, to our suppliers. Their salaries and hours of work are set by us. Their vacations, sick leaves, and other matters concerning their working conditions are agreed upon between us and them. Those of us who are engaged in other businesses devote whatever time we deem necessary for the efficient management of these other businesses and if and when we find it necessary we can and do use certain of our employees in these other businesses in which we are engaged. Some members of our association own their bulk plants. In most instances, however, the distributor leases his bulk plant from his supplier. The lease contract with the supplier is for a definite period and for a stated consideration. We have made considerable investment in our business. We pay all of the operating costs in connection with the distribution of our products. We are entirely responsible for the success or failure, the profit or the sale, that we make out of this business. I realize that all of the facts I have just mentioned which show that I am an independent businessman may cause one to wonder why we . in our association are fearful that we might be considerd as "employees" under this bill. In the first place, I remember that under the original social-security law oil consignees like myself were at first considered "employees" by the Administrator. After considerable litigation, the court finally ruled that we were not "employees." And, incidentally, while we paid throughout those years to social security, we finally received a refund for 4 years that we paid in, and lost the rest, because the Government claimed it was out of date. About 2 years ago the Government again tried to treat us distributors as employees, and it was necessary for Congress to pass a law to prevent that. It is clear to me that they are trying again by this bill to include bulk-oil distributors, like myself, as employees of the supplying company. I have read the definition of "employee" in the bill, but I am unable to understand it. I do understand, however, what the Ways and Means Committee, House Report No. 1300, says on page 206, which I quote: The proposed definition may result in defining employer-employee status to include a wide range of service relationships, in addition to those listed above, which have heretofore been considered independent contractor relationships. Among these are the following: (b) Bulk oil plant operators: Wholesale distributors of oil products may have quite extensive investments and may hire numerous employees, but they are subject to some regulation by the oil companies whose products they distribute. There is permanency in their relationship with the oil companies, and they are closely integrated in the business of the oil companies, since they perform the integral function of serving as outlets for oil-company products. There are several facts in the relationship between the supplying company and the oil distributor which have been developed through practices of the past which, as the above quotation from the report indicates, may cause the Government to rule that we should be called "employees" under this bill. I do not want to burden the members of the committee by going into details regarding these practices, but it seems sufficient to me to say that they are all based upon good business practices and have been followed for many years. I might add that, with knowledge of all of these practices, the Federal courts in numerous cases have ruled that we are nevertheless independent contractors and are not employees under the social-security law; that is, without the amendments that are contained in H. R. 6000. The desire of the association and myself is that Congress not write any new legislation which will disturb that situation. We have worked hard and devoted the best that we have in trying to develop these distributorships in sound businesses of which we can be justly proud. We feel that we should be able to continue in the pursuit of this business, which has been entirely satisfactory to all of us, under our present manner of operation. May I say, Mr. Chairman, that the bewildering thing to us, to me and to others, is that we constantly hear from all sources, including the Chief Executive of our Nation, that the small-business man in the Nation is the one that counts so much, that he needs all the protection he can get, and that he will be protected and given every aid. And yet certain bureaus and departments are constantly fostering legislation that, in this instance, for example, would wipe us out completely. Because if this law and other similar legislation that is being sponsored and is to come up would pass, our suppliers would find it profitable to handle these distributorships on a straight salary basis instead of the commission basis on which we are operating today. We therefore urge your honorable committee to amend the present bill so that the term "employee" shall be defined so clearly that I, as a citizen, can read and understand whether it covers me, without having to consult a lawyer or go through litigation and get the Federal courts to decide if I am covered by that law. The CHAIRMAN. Thank you very much. Mr. Weiss, the quotation that you read is not a part of the report of the majority of the Ways and Means Committee, but it is found in the minority report. However, that does indicate that there is a difference of viewpoint and a difference of opinion and therefore possible difference of construction of the actual language contained in the bill. The House majority indicated rather clearly that in your position you would not be covered. They do not go, however, very much be yond the case where the bulk distributor himself is the owner of his plant and the owner of his trucks and vehicles. What the agency might insist and what the Treasury might conclude if the bulk distributor was not the owner of his trucks but was the mere lessee from the supplier, I am not able myself to say. I just call attention to the fact, however, that it would seem that the majority opinion does not construe your case to fall within that of "employee.' Mr. WEISS. Thank you, Senator. Of course, the thing that we are afraid of is the fact that if it was left to the judgment or interpretation of the Administrator we will have trouble constantly in trying to clear it up, unless, you know, we go to court and get a court decision. The CHAIRMAN. The committee understands your position. Senator Connally? Senator CONNALLY. Your position is that as long as it is nebulous and uncertain, the Administrator might make such a construction. Mr. WEISS. That is right. Senator CONNALLY. You are urging that the act be made so clear that there cannot be any doubt about it; is that the point? Mr. WEISS. That is right. That is what we are asking. Senator CONNALLY. Now, Mr. Weiss, in beginning your statement you said that your association, these handlers, represent several oil companies; and you named them. What you meant was, was it not, that the association was composed of people who were distributors for those companies? They do not represent the companies as such. Mr. WEISS. No, sir. They are distributors handling the products of these different companies. Senator CONNALLY. What is the basis of your handling them? You get a commission, do you? Mr. WEISS. Yes, sir. Senator CONNALLY. In your case, do you own a lot of equipment and things of that kind? Mr. WEISS. Well, I own all the rolling stock, trucks, because it is necessary to deliver; and I lease my warehouse from the Gulf Oil Corp. and pay them monthly rent for that. Senator CONNALLY. In other words, with your own equipment you carry on, and you naturally pay the expenses of that equipment and things of that kind. Mr. WEISS. That is right. Senator CONNALLY. Is there anything else you want to submit, sir? Mr. WEISS. I would like to ask this, Mr. Chairman, if you will permit me: Our association has another member present, Mr. E. B. Chapman. If you will permit it, sir, he would like to make a short state ment. Senator MILLIKIN. Might I ask the witness a brief question, Mr. Chairman? The CHAIRMAN. Yes, Senator Millikin. Senator MILLIKIN. Does the oil company send you the oil products on consignment, or do you pay for them as you get them? Mr. WEISS. It is on consignment, Senator? Senator KERR. In that connection, you either have to send it back or pay for it? Mr. WEISS. That is right. I am responsible for it. I have to pay for it. Senator KERR. Or return it? Mr. WEISS. Or return it. The CHAIRMAN. Thank you very much, Mr. Weiss. Mr. WEISS. Thank you, Mr. Chairman. The CHAIRMAN. All right, Mr. Chapman. We will be glad to hear from you. You are from Sherman, Tex.? STATEMENT OF E. B. CHAPMAN, DISTRIBUTOR FOR THE TEXAS CO., SHERMAN, TEX. Mr. CHAPMAN. Yes, sir. My name is E. B. Chapman. I am from Sherman, Tex., Grayson County. I am a distributor for the Texas Co. and have been for 18 years. I own my own equipment. The Texas Co. owns the warehouse in which I do business, but the products are consigned to me. I also am interested in two other businesses. And if we were termed as "employees" under this bill, we are afraid that we would not be able to participate in these other businesses that we are interested in. Now, I am interested in an International Harvester dealership, and if we were termed as "employees," it might be possible that I could only be considered as an employee of each company. We would like |