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to remain as independent businessmen, which we are now. We direct our own activities, we hire our own people, and we take what time off we deem necessary. We don't ask anybody about what we should do. We like this relationship much better. In fact, we would not be able to operate, I don't believe, if we were termed as employees, because they would just go ahead and take us over. They would operate it themselves.

Senator CONNALLY. You hire your own people?

Mr. CHAPMAN. Yes, sir.

Senator CONNALLY. And you pay them?

Mr. CHAPMAN. Yes, sir.

The CHAIRMAN. And your workers employed in other departments of your businesses may be called upon to serve in any one of your businesses?

Mr. CHAPMAN. That is correct.

The CHAIRMAN. That is the general custom, practiced throughout the country.

Mr. CHAPMAN. Yes, sir. We are permitted to expand our businesses. We own service stations, over which we have absolute control. They are not leased to the companies. We are really independent businessmen, the way we operate now, and we are afraid if this thing happens we will lose that status. And that is what we certainly don't want to see happen.

Senator CONNALLY. May I ask a question, Mr. Chairman?

The CHAIRMAN. Senator Connally.

Senator CONNALLY. You say you are independent businessmen. In other words, if you are going to deal in oil, however, you have to get it from oil people?

Mr. CHAPMAN. That is right, sir.

Senator CONNALLY. You do not produce it?

Mr. CHAPMAN. That is correct, sir.

Senator CONNALLY. So that you are merely an intermediary, as it were, independent as to your own expenses and your own help and all of the apparatus that goes along with the business. Is that correct! Mr. CHAPMAN. That is correct, sir.

The CHAIRMAN. Thank you very much.

Mr. CHAPMAN. Thank you.

Senator CONNALLY. We are glad to have had you.

The CHAIRMAN. Mrs. Olga Ross?

STATEMENT OF OLGA S. ROSS, EXECUTIVE SECRETARY, NATIONAL COUNCIL OF SALESMEN'S ORGANIZATIONS, INC., NEW YORK, N. Y.

Mrs. Ross. Mr. Chairman and gentlemen of the committee, I realize that you are pressed for time, that a great many people are petitioning you for an opportunity to be heard, and consequently with your permission I would like to ask you gentlemen simply for time to identify myself and to have included in the record this statement, copies of which have been furnished to you and your clerk, Mrs. Springer. Naturally, if you prefer, I will read the statement.

The CHAIRMAN. If it is agreeable to you, you may include it in the record as a whole and make such statement as you wish.

Mrs. Ross. I think that actually this statement, Senator George, will speak for itself, and I feel sure that it will have your complete consideration.

I should also like to ask that it be included as part of these hearings. The CHAIRMAN. It will be included as your statement in the record of the hearings.

Mrs. Ross. Thank you.

May I just say this: My name is Olga Ross. I am the executive secretary of the National Council of Salesmen's Organizations, Inc., with headquarters at 80 West Fortieth Street, in New York City. We are a nonprofit organization of affiliated salesmen's associations.

We would like to ask only your favorable consideration of paragraph 3, lines 17 and 18 of H. R. 6000, which covers outside salesmen in the manufacturing and wholesale trades, to the end that they may be identified as employees. That is the burden of our statement.

The CHAIRMAN. We were very glad to have you, and your statement will be included in the record.

Mrs. Ross. Thank you.

(The statement referred to follows:)

STATEMENT OF THE NATIONAL COUNCIL OF SALESMEN'S ORGANIZATIONS, INC.

IDENTITY

Mr. Chairman, gentlemen of the committee, my name is Olga Ross. I am the executive secretary of the National Council of Salesmen's Organizations, Inc., which represents the largest single groups of affiliated wholesale salesmen's associations in America. Chartered under the laws of New York State, ours is a nonprofit, voluntary organization; our main objectives to foster, promote, and advance the welfare of salesmen, to improve their working conditions and employer relationships, and to advance their opportunities for profitable employment.

FOR WHOM WE SPEAK

I am here today to plead the cause, not only of our members but that of an estimated 3,000,000 wholesale salesmen throughout the country-that vast group whom the editors of Fortune magazine recently designated "the biggest manmade force working to keep the economy going." Save for the spokesmanship of our organization and that of a kindred group, these men have no other voice in matters of national concern that directly relate to their own well-being.

TWO YEARS AGO

Two years ago my organization had the privilege of addressing itself to this most important committee at that time as the sole spokesman for the salesmen-on the very matter that brings us here today. I refer to the Gearhart resolution and the legislation H. R. 6000 now before this committee for consideration.

THE GEARHART RESOLUTION

On our previous appearance here we came to voice our protest against enactment of the Gearhart resolution, which served to deprive many thousands of salesmen of the benefits and protection afforded those who enjoy coverage under the Social Security Act.

Today we are here to urge your favorable consideration of that particular section of H. R. 6000, paragraph 31 (a), covering outside salesmen in the manufacturing and wholesale trades. This would nullify the Gearhart resolution and restore to salesmen full assurance of their rights to social-security coverage. It will further clear away any remaining doubts as to their genuine status as employees.

1 P. 49. lines 17-18.

NOT SPECIALISTS

National council is not here to argue the pros and cons of social-security legis lation. We are neither specialists nor authorities in this field. As laymen, we believe that it is wise and good legislation, that it should be extended, and its benefits increased in order that the people of America may face the future with the serenity that only a feeling of some economic security can provide.

WHY LEAVE SALESMEN OUT?

What principally concerns us here is why the salesman should be singled out from his fellow citizens and coworkers to be deprived of the same protections they are afforded under the Social Security Act. Wherein does he differ?

Are his employment opportunities any greater? No; because the salesman, who is the first to feel the effects of business off-years, is also the last to benefit in boom times when his services are least essential.

Are his rewards so much greater? No; because they are far less stable and the maximum of his best earning periods will barely offset his losses when goods are hard to move.

WRONG ASSUMPTIONS ON SALESMAN STATUS

Too many false assumptions exist regarding the economic position of the salesman and his status as an employee. The truth of the matter is that while this status is as variable as the weather, it is much more easily shifted to suit the employer's convenience. In plain language, when a salesman is hired-when he is being trained-when the terms and conditions of his employment and the rate of his commission are under discussion-he is an employee. When his services are no longer wanted, he was an independent contractor.

EMPLOYER-SALESMAN RELATIONSHIP

The relationship between the salesman and his employer is neither easy to understand nor easily defined. The variations in this relationship are multiple because of the complex structure of our economy and because the salesman epitomizes the very spirit of our free, competitive enterprise. Choice of and control over the factors that govern this relationship are never the salesman's

own.

TERMS AND CONDITIONS

Salesmen are hired under all sorts of terms and conditions; under written contracts or the loosest forms of verbal agreements. But however they may be hired or under whatever terms they may work, the incontrovertible fact remains that the great mass of salesmen are most literally "employees," if that term is to be determined by the criteria of control and supervision exercised by the employers.

THE POINT OF SUPERVISION AND CONTROL

We make this point of supervision and control and will strive to prove our point because, during the past 2 years, this has been the continuous source of debate in discussion of social-security coverage for salesmen.

REVIEW OF FACTS-SUPREME COURT DECISIONS

To review briefly facts of which this committee is undoubtedly well aware: Determination of the status of salesmen for purposes of title II of the Social Security Act was always obscure until in June 1947 the Supreme Court of the United States handed down decisions in the now famous Silk, Greyvan, and Bartels cases, which found that "an employee is an individual who, as a matter of economic reality, is dependent upon the business to which he renders service."

GEARHART RESOLUTION

But with enactment, in June 1948, of the Gearhart resolution, the salesman's status again reverted to the twilight zone and it became necessary to establish degree of supervision and control exercised before he was entitled to coverage, as a bona fide employee.

DEGREE OF CONTROL AND THE MASTER-SERVANT RELATIONSHIP

The point is invariably raised that the degree of control exercised by employers over salesmen does not conform, as stipulated by the Gearhart resolution, to the usual common-law concept of the master and servant relationship. But, by the very nature of the work salesmen perform, such control must deviate from this narrow, legalistic concept.

NOT THE DEGREE BUT ITS MANIFESTATION

As a matter of fact, it is not the degree of control, but its manifestation which, in the case of the wholesale or "outside" salesmen, differs from that of other employees. Obviously, these salesmen must work away from the premises of their employers.

EXERCISE OF CONTROL BY THE EMPLOYER

Nevertheless, the employer retains direction, supervision, and control over their activities. He does this when he assigns the territories they may cover and the accounts they may solicit; the products they sell and the quantities, terms, and methods by which these products are to be sold. He assumes direction when he trains them in his methods of selling; when he provides them with the samples and advertising matter that are the "tools of their trade"; and he further assumes control when he dictates to them what "side lines"-if any— they may carry; and when he summarily decides to cut their commission ratesoften retroactively-and on a take-it-or-leave-it basis. Most important of all, he reserves to himself the right to hire and fire "at will."

FACTUAL MANIFESTATION ACCEPTED BY THE LOWER COURTS

These are the factual manifestations repeatedly established in numerous State courts and upon which these courts have based their decisions that determined the salesmen's status as employees. As example of two such cases, I respectfully refer this committee to the case of Margaret Morton v. Spirella Co., decided by the New York State Court of Appeals on November 19, 1940, and that of John F. Goeber v. H. Busch & Co., decided by this court on October 1, 1941.

DETAILS OF THE SALESMAN'S WORKING CONDITIONS

With the committee's permission, I should like to go briefly into some detail of the salesman's employer-employee relationships. In actuality, he is far less well off than his counterpart among other professional employee groups. He has no job tenure; he can be told he is "through" without so much as a day's notice; his earnings can be and are reduced at the whim of his employer; he is required to share the credit risks of his firm. He is paid only for business that he has already produced and not upon a reasonable evaluation of his continued worth to his company.

A CASE HISTORY

I have here a post card that came unsolicited to the office of national council. It is only one of hundreds we receive, and was selected solely because it is both current and concise. This penny post card, dated February 27, 1950, is addressed "National Council of Salesmen's Organizations, 80 West Fortieth Street, New York City," and it reads:

GENTLEMEN: Can you advise me whether or not there is a law protecting an outside commission salesman from being discharged, thereby losing all commissions on future incoming business, that had been built up over a period of 14 years?

I omit the name of the sender, but offer the card in evidence.

THERE IS NO ANSWER

Gentlemen, there is no satisfactory answer the national council can offer this salesman, as you yourselves must be aware.

THE PLIGHT OF THIS SALESMAN

While I have not as yet had an opportunity to interview this salesman, I would like to venture a guess-that I am pretty sure is a good one-that this man's

employer did not assume social-security tax liability for him; that if the salesman is close to retirement age he will experience almost insurmountable difficul ties in obtaining another connection; and that in the years he has worked he has managed to save very little to provide for himself and his dependents should he fail to get a job or should he have passed the normal retirement age.

OTHER EXAMPLES

I could cite to you innumerable instances of this nature of men 72 and olderstill job-hunting, as salesmen, still desperately needing these jobs, after years in a single firm's employ. Nor are these exceptional cases. Rather, they are the general rule.

STRAIGHT COMMISSIONS

Let me give you the prevailing circumstances under which straight commission salesmen are hired and the conditions under which they work. Incidentally, the practice of hiring salesmen on this straight commission basis has become increas ingly widespread during recent years.

SALESMEN'S COMPENSATION FORMS

These salesmen's compensation is based solely upon the payment of a flat commission on those orders they secure which are accepted and shipped by the employer. It remains, however, within the employer's discretion as to what orders or what percentage of any order he may elect to fill. Furthermore, the salesmen's commissions are figured upon a net basis-which means after the deduction of every possible loss that might accrue to the employer such as credit losses, cancellations, returns, discounts, etc.

DRAWING ACCOUNT-OVERDRAWING AGAINST COMMISSIONS

These same conditions apply also to the salesmen who work on a drawing account. This means that they are "guaranteed" a certain weekly amount, but this is solely as an advance against their anticipated earnings. Should the salesman fall too far behind they are, of course, "let out," even though future orders may be pending as a result of their work. Some employers have gone so far as to bring suit to recover the "advances" made to dismissed salesmen. But we know a few instances where employers have voluntarily offered to salesmen the commissions due them on orders that have come in after they have been dismissed.

THE SHORT-SIGHTED EMPLOYER

One might well ask, what is there in the relationship between salesmen and their employers that brings about this disregard for accepted and standard practices to maintain good employer-employee relationships?

THE GOOD EMPLOYER IS ALSO PENALIZED

The national council believes that it is not genuine callousness upon the part of employers but a normal-if thoughtless and short-sighted-expression of our strongly competitive enterprise system. The salesman is in the one spot where the employer can cut corners, reduce costs, and hence outdistance his competitors. A word must be said here for the many conscientious employers who willingly accept the social-security tax for their salesmen. Should these employers too be penalized by loopholes in the law which provide their competitors with a useful method of evading their like responsibility?

SUMMARY

SALESMEN NEED OLD-AGE INSURANCE

For the many valid reasons I have cited national council believes that socialsecurity coverage is a vital necessity for both the young salesman beginning his career in selling and for the older man who is facing the downgrade. Federal old-age and survivors insurance-and unemployment compensation as well—is as great a need for all categories of salesmen as for those workers who are now clearly covered.

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