THE ASSOCIATION'S EXPERIENCE

Every salesmen's association can attest to this, for each is forced to maintain sickness, unemployment, and death benefit funds for its members and their dependents. And there is seldom a time when these funds remain idle. At great cost, these associations can, to a limited extent, provide for the emergencies of life which befall their members.

BENEFIT FUNDS NOT EXTENSIVE ENOUGH

But this can nowhere near begin to help the thousands of salesmen who have no associations within their own industries or who may not be able to afford membership in existing associations.

The National Council of Salesmen's Organizations respectfully submits that the majority of salesmen-save those who can be clearly identified as independent contractors-differ in no other way from other types of employees included under the Social Security Act, except insofar as one type of job may differ from another; that it is not the degree of control exercised by the employer but its manifestation that is different; that the salesmen provedly stand greatly in need of this economic protection; and that as long as the Social Security Act stands they are equally entitled to participate in its benefits.

Furthermore, we firmly believe that the definition of employee as set forth in H. R. 6000 is reasonable, fair, and protective both of the salesmen's rights and his employer's interests. We must heartily endorse its enactment and urge that this august committee give it due and favorable consideration.

May I thank you in behalf of my organization for the courtesy you have extended to it in granting us the privilege of placing our views before you. Respectfully submitted.

OLGA S. Ross,
Executive Secretary.

(For the National Council of Salesmen's Organizations, Inc.) Representing: Allied Textile Association, Inc.; Associated Millinery Men; Fabric Salesmen's Association for Boston; Fabric Salesmen's Club of Chicago; Garment Salesmen's Guild of New York, Inc.; Infant and Children's War Salesmen's Guild, Inc.; Luggage and Leather Goods Salesmen's Association of America, Inc.; National Handbag and Accessories Association, Inc.; New York Candy Club; New York Corset Club; New York-Penn.-Ohio Travelers Association, Inc.; National Paint Salesmen's Association of the United States; Philadelphia Textile Salesmen's Association; Sales Representatives, Inc.-plumbing and heating division; Southern Travelers' Association, Inc.; Sportswear Salesmen's Association, Inc.; the Far Western Travelers Association, Inc.; the Piece Goods Salesmen's Association, Inc.; Toy Knights of America; Underwear-Negligee Associates, Inc.; Work Clothes and Sportswear Salesmen's Group; Wash Frock Salesmen's Association, Inc. The CHAIRMAN. Mr. Mantler? Mr. Marshall J. Mantler?

STATEMENTS OF MARSHALL J. MANTLER, MANAGING DIRECTOR; ANDREW FEDERLINE, WASHINGTON COUNSEL, BUREAU OF SALESMEN'S NATIONAL ASSOCIATIONS, WASHINGTON, D. C.; AND JACK WENCK, VICE PRESIDENT AND GENERAL SALES MANAGER, "PIONEER, U. S. A." DARBY, PA.

Mr. MANTLER. Mr. Chairman, I have with me Mr. Jack Wenck, the president of our bureau, and Mr. Andrew Federline, Washington counsel for our bureau, who will say a few words when I am through. The CHAIRMAN. Yes, sir.

Mr. MANTLER. My name is Marshall Mantler, and my home is in Atlanta, Cia. I am here today in my dual capacity as managing director of the Bureau of Salesmen's National Associations and executive di

rector of the National Association of Women's and Children's Apparel Salesmen. The latter organization is one of the three Nation-wide organizations of salesmen which make up the bureau. The other two are the National Association of Men's Apparel Clubs and the National Shoe Travelers' Association.

These three organizations have a combined membership of approximately 20,000 commission salesmen selling at wholesale to retailers for resale. These members cover all parts of the United States and reside in every State of the Union. The three national groups maintain among them 86 State, regional, and territorial organizations to which their respective members belong. During the course of a year, practically every major city in the country witnesses a convention, trade show, or exhibitors' market sponsored by these member groups.

For your information, the bureau is a service organization or joint staff set up by the three national associations named. One of our main objectives is to foster good will and cooperation between manufacturers and their salesmen. Our employment service helps manufacturers obtain qualified salesmen to carry their lines, and does this without charge. We help both manufacturers and their salesmen to settle differences about commissions. Only national organizations of salesmen are eligible to belong. Let me add that a basic principle of the bureau is to advocate only those things which are in the best interest of all traveling salesmen, not just those of its members. It is in this spirit that we approach your honored committee today.

Getting down to H. R. 6000, our particular concern is for retaining in the bill an adequate provision which will eliminate any doubt that commission salesmen selling at wholesale to retailers for resale are "employees" for purposes of social security taxation and benefits. The wording of H. R. 6000 as it now stands and as it applies "to an outside salesman in the manufacturing or wholesale trade" appears to meet this need. You will find the specific language in sections 104 (A) and 206 (A) of the bill. These provisions appear on pages 49 and 150 of H. R. 6000. (Specifically, these provisions are par. 3 (A) of sub-ec. 210 (K) of the proposed new language to be added to title II of the Social Security Act when sec. 209 of that act is repealed; and par. 3 (A) of the proposed amendment of sec. 1426 (D) of the Internal Revenue Code.)

The CHAIRMAN. Let me ask you: Are you not now classified as employees?

Mr. MANTLER. Yes, sir. We are classified as such. But under the present wording of the bill

The CHAIRMAN. I am not speaking of the bill. I am speaking of the present law.

Mr. MANTLER. Under the present law we are classified as such. The CHAIRMAN. All right.

Mr. MANTLER. We are interested in seeing such provisions become law because they would clearly define the status of the wholesale commission salesman as an employee within the meaning of the act, and would clarify once and for all his right to old-age and survivors' insurance, disability, and other benefits.

There may be some question in your minds as to why a specific definition is needed to protect the salesmen's rights. You may be amazed

to learn that more than half of all the salesmen who are members of our three national organizations are regarded as "employees" by their companies, and have social security deductions taken from their commissions, while the remainder, who perform the same duties and answer to the same degree of control, are regarded as exempt by their employers. Many of our members have traveled the same territory for the same firm since long before 1937, but have never had one dollar deducted for this purpose. I believe the same could be said of wholesale salesmen in every line that roughly half are without the protection of social security, although their duties, responsibilities, and conditions of work differ not one iota from those who are covered and who can now look forward without dread to age 65.

As you may well understand, the salesman who is not covered wonders why the law cannot be made definite enough to eliminate any question about coverage. He does not feel that it is proper to leave his social-security status to the discretion of his employer, which is the condition that prevails today. He is an employee in every reasonable sense of the word, and does not feel that he should be subjected to the embarrassment of pleading with his employer or resorting to filing a formal complaint with the Bureau of Internal Revenue on account of his employer's failure or refusal to take proper action. In many cases brought to our attention, employers who are not complying with their obligations toward their commission salesmen selling at wholesale are acting under advice of their accountants, whose viewpoint is not that of a lawyer and who have been influenced by the publicity surrounding the Gearhart resolution. There are also some employers who deliberately disregard their salesmen's rights to social security.

I use the word "rights" advisedly, because our Bureau, shortly after passage of the Gearhart amendment, consulted with both Treasury and social-security officials, and received assurance that salesmen working under the conditions that generally prevail among traveling men in our industries are entitled to social security, because their relationship to their firms is clearly and definitely that of employees. But when we asked how to obtain the compliance of recalcitrant employers on this point, we were told it was up to each individual salesman to obtain redress by filing Social Security Form No. 8, whereupon an official decision would be made as to whether or not he is eligible.

While this may seem like a solution, we submit that it is not a safe one for the average salesman, who is open in many ways to retaliation. The present situation not only works a hardship on these uncovered salesmen but also is a discriminatory burden on those employers who do pay the social-security tax.

We are not going to burden your committee with a lot of legal jargon concerning the technicalities of the master-and-servant law, about which large volumes have been written and regarding which the courts themselves have disagreed for many centuries. We are more concerned with the spirit of the act.

We stressed this viewpoint at the hearing of the House Ways and Means Committee on this same bill. That testimony, along with other pertinent details, is printed in pages 1643-52 of the printed record. We were very pleased, therefore, when the committee announced its

decision to insert a specific definition of the traveling salesman as an "employee" in section 210 of the bill which is now before you.

As the Ways and Means Committee pointed out, and I quote: The usual common-law rules for determining the employer-employee relationship falls short of covering certain individuals who should be taxed at the employee rate under the old-age and survivors and disability insurance program. The statutory provisions set forth in paragraphs (3) and (4) are designed to correct this deficiency in existing law by extending the definition to include these individuals who, although not employees under the common-law rules, occupy the same status as those who are employees under such rules.

In applying this principle to outside salesmen in the manufacturing and wholesale trade, the staff of the Joint Committee on Internal Revenue Taxation observed as follows in appendix B of the Ways and Means Committee report, and I quote:

The outside wholesale salesmen who are not treated as employees under the usual common-law rules are the city and traveling salesmen who sell at wholesale to retailers, operate off the company's premises, and are compensated on a commission basis. These salesmen are ordinarily assigned to specific territories, are required to sell merchandise at the price set by the company, and their relationship with the company may be terminated at short notice. The company reserves the right to accept or reject orders sent in by the salesmen. The com pany fills the salesmen's orders by shipping directly to the customers and billing the customers directly. The salesmen receive their compensation from the company. The salesmen are not controlled as to the details and means by which they cover their territories, but in the ordinary case they are expected to call on regular customers with a fair degree of regularity, and if their sales fail to meet the expectations of the company they may expect the relationship to be terminated. These salesmen may in some cases be required to make periodie reports to the company on their own activities, and they may be required to attend sales meetings and to report at the company's offices periodically.

Salesmen of the type described above are subject to a considerable degree of control, although it may not be sufficient to meet the usual common-law rules. Permanency of the relationship is contemplated and in the ordinary case it may be assumed that they are closely integrated in the business of the company they serve.

Senator MILLIKIN. Mr. Chairman, may I ask a question, please! The CHAIRMAN. Yes, Senator.

Senator MILLIKIN. I do not want to involve you in a technical discussion on the common-law rule, but in what respects does this relationship that you are describing fall short of the requirements of the common-law rule?

Mr. MANTLER. Sir, under the common-law rule they try to establish the master-servant relationship, and in simplified test cases they ask: does this man have to punch a time clock every morning? Or: if this man wants to go fishing on Thursday afternoon, does he have to ask his boss? Those things are not applicable to a salesman who is covering an entire territory, because he might well come into Washington in the morning to call on one account here, and have the buyer say, "I can't see you until 4 o'clock in the afternoon." That man doesn't have to punch a time clock at 8:30 in the morning. He may be able to sleep until noon if he wants to.

Mr. FEDERLINE. May I answer that question, Senator?

It falls short in that outside commission salesmen, generally speaking, are not within the master-and-servant rule insofar as their employers are not liable for torts committed by the salesmen. In other words, when the tort test is applied as the basis for social security coverage, there may be instances where the employer is not liable. In every other respect they are employees.

Senator MILLIKIN. Well, let us take this particular category that you are referring to. A salesman of the type described here gets careless with his car and injures someone. Is the salesman responsible, or is the employer responsible, under the decisions that have come down?

Mr. FEDERLINE. My opinion is that the salesman is responsible.
Senator KERR. And that the company is not?

Mr. FEDERLINE. Ordinarily the company is not. But because there might be question about it some cases, companies frequently require their salesmen to be coverd by insurance; so that the situation is taken care of in that way.

I made an inquiry recently as to whether or not the companies themselves provide automobile liability insurance for their outside commission salesmen and I understand that they do in some instances at their own expense.

The CHAIRMAN. Well, I suppose the company might not be held liable in all tort actions, or for all torts; because the employee—and it seems to me you are employees; I do not think there is any doubt about that, under your statement of fact-is left the discretion of means by which to accomplish his end. He does not have to use a car. He might walk or take a train.

Mr. MANTLER. He might take a train or take a plane, yes, sir.

The CHAIRMAN. And he is an employee still, but he is given discretion as to the means that he will employ in doing the job.

Mr. MANTLER. Yes, sir.

The CHAIRMAN. But otherwise, it seems to me that your people under present law are employees.

Mr. MANTLER. That is the way we feel, sir. We are employees, and yet our men are not getting the coverage, sir.

The CHAIRMAN. Some of them?

Mr. MANTLER. Some of them are not.

The CHAIRMAN. Well, we can understand that, of course. But your position is that you want it made clear that you are employees?

Mr. MANTLER. Yes, sir, so that there is no loophole whatsoever; I mean, so that there is no question of doubt, no legal hodge podge, there. What is needed is a provision stating that every salesman meeting these specifications is an employee-period. It should not be up to the employer to make the decision. When Congress decides that outside commission salesmen are employees, it is not up to the employer to make that decision, sir. We want such decisions taken out of employers' hands.

The CHAIRMAN. I should think a fair disposition of it would be to say that for social security purposes, old-age and survivors insurance purposes, under this act, you are employees.

Mr. MANTLER. Yes, sir. That would be excellent.

The CHAIRMAN. And leave the courts, and the employer, and the agents to fight it out in the case of torts, and libels, and slanders, and other things of that kind. We do not want to upset the whole plan of salvation, here, just to cover the social security aspects.

Senator MILLIKIN. May I ask this question: Do all the sales en for

whom you are speaking operate under the same type of con Mr. MANTLER. Written contract, sir?

Senator MILLIKIN. Whatever the contract may be.

Mr. MANTLER. No.

act?