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able profession, at the same time it must be said that it has not had altogether a glorious history in the field of business.

Thank you very much, Doctor.

Senator MILLIKIN. Mr. Chairman, if I might burden the committee with an observation: As an offset to some of the things you have said, Doctor, it has been asserted that we are going to continue to raise our national income. I am thoroughly convinced that we can raise it. We can raise it almost limitlessly, on an honest productive basis. But the question is whether it will be raised that way, or whether it will be raised by inflation.

There is another thing to be kept in mind. This is not the only "deduct" that we are talking about. There are several others in the offing. It is not to be assumed that our expenditures will remain static over the next 20 or 30 years; for even if we increase our national income we will be increasing all of our expenditures and will be adding other "deducts" as time goes on. I merely mention that, because those have been stated as offsets and counter offsets to some of your testimony.

Senator KERR. Mr. Chairman, I was quite interested in the remarks of the witness with reference to the proposal to pay as we go. I did not understand what the doctor said as to how much, if any, expanded coverage he was recommending.

Dr. BENSON. Personally, I would not be too much concerned with added coverage if it was on a pay-as-you-go basis, because then we would know what our burden is as we go. We probably would not increase it too much. And we could honorably decrease it if we wanted to at any time.

Senator KERR. Well, would you finance such a program by an added tax in the form of a pay-roll tax, or would you attempt to raise the revenue on the one hand and disburse it from the general fund on the other?

Dr. BENSON. I do not consider myself an expert on taxation. I am not recommending how it be done. I am recommending the principle that we pay as we go, if we increase our benefits, for the two reasons that I gave.

Senator KERR. Well, what would your thought be about expanding the coverage on the one hand and then, in the future, in case of difficulty of payment, being able to lessen it?

Dr. BENSON. If it were on a pay-as-you-go basis, and people were conscious of what they were paying, it could be done; otherwise it could not. I think it is rather striking in England that Churchill did not promise to roll back a single step that had been taken in the direction of nationalization and socialization. All he could promise was: We will stop where we are. I think there is no rolling back. That is why I am saying here: Let what we have got alone, but before we add more let us study very carefully what its costs would be, and do it on a pay-as-you-go basis, so that people will know what they are paying and what it is costing them and can determine from time to time whether they want to continue it or not. But when we adopt legislation that is as far-reaching as this, you cannot stop it without seeing our financial structure crack.

The CHAIRMAN. Doctor, as I understand it, your recommendation is that arrangements be made to take care of the increased benefits

or increased cost of the social-security system on the pay-as-you-go basis?

Dr. BENSON. That is right.

I appreciated, too, your remarks about England. As a student of history I used to watch with much interest the rise and fall of civil izations. I thought that was something that belonged to antiquity. Yet now we see, here in our own day, a nation which we can remem ber as one of the great nations of the world moving down the western slope; and to see that they haven't got what it takes to come back brings the challenge pretty close to home. I don't think England will stage a comeback. After twice studying conditions on the field, I am not convinced that England will come back. I think we will see them move on down the western slope, as did Rome and other nations. It should be a sobering lesson to us, because we are fol lowing pretty closely so far the policies of England. We are doing it with regard to social security.

The CHAIRMAN. Thank you very much, Doctor.

Dr. BENSON. Thank you, sir.

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

Mrs. Ross. Mr. Chairman, if I may, I would like to add one thing. In reference to the discussion that came up regarding testimony this morning on the salesmen's contract, I would like to add to the statement of the National Council of Salesmen's Organizations that to our best knowledge 90 percent of the wholesale and commission salesmen work without a written contract.

While the testimony of the witness, Mr. Marshall Mantler, was to the effect that he could produce contracts in his own particular industries, the National Council takes in a wider range, a cross-section, of trades and industries, and in our experience the majority of sales. men are without written contractual agreements with their employers. We have found on numerous occasions employers seeking to evade their tax liability, requiring their salesmen to sign statements saying that they were independent contractors, regardless of the fact that these salesmen worked under exactly the same supervision and control as salesmen who were actually covered by the Social Security Act. That is all, Mr. Chairman.

The CHAIRMAN. Thank you.

That completes the call of the witnesses for the morning and we will recess until Monday morning.

(The following statements were submitted for the record:)

Hon. PAT MCCARRAN,

Senate Office Building, Washington, D. C.

ABILENE, TEX., January 19, 1950.

DEAR SENATOR MCCARRAN: It has come to my attention through newspaper articles and trade publications that Congress is considering an act to broaden the

coverage of the Social Security Act. The House of Representatives has already passed a bill, H. R. 6000. I am not interested in most of the provisions of this bill-many of them seem to be desirable. There is one provision in this proposed bill, however, that may affect me personally in such a way as to practically destroy my oil business. This provision is one which, I understand, will broaden the definition of "employee" so as to include me in the type of operation I conduct.

I am, and have been for 15 years, an independent businessman. I lease a bulk station from the Gulf Oil Co., and in addition, have a supply agreement with the Gulf whereby they consign me gasoline, motor oils, and other petroleum products. I also purchase automotive accessories, tires, etc., from them, as well as other people, direct. My lease agreement, as well as the supply contract, is for a firm period of 1 year at a time. The arrangement I have has been entirely satisfactory, and very profitable to me during the past year, and I surely want to continue my status as an independent merchant. I engage in other enterprises other than my oil business, such as being Pontiac automobile dealer and have interest in radio stations both in Abilene and Odessa. I devote as much time to my oil business as I feel is necessary, of course dividing my time among my other enterprises. I hire and fire my own help in all of these businesses. fix their wages, and determine the hours they shall work. My employees are under my direction alone, and the Gulf Co. has nothing whatsoever to do with the number of employees, the wages they are paid, the work they perform, or the hours they work. I pay social-security tax on all of my employees. All of my employees are used interchangeably in my oil business and such other enterprises in which I may be engaged. I have in the past, and hope to be able to do so in the future, conducted my oil business without interference from anyone. I have a considerable investment in this business and have built up good will in the territory which I operate. I maintain my own bookkeeping system. My interpretation of this bill in its present form is that it will probably put me out of the oil business. Its effect will undoubtedly deprive me of my status as an independent businessman. If I and my own employees are to be considered employees of the major oil company within the meaning of this proposed bill then I would have to surrender to that corporation all of the benefits, advantages, and freedom I have enjoyed over the years in the conduct of my business. If this bill is passed in its present form so as to include me within its coverage, and I am permitted to continue to operate my oil business under the present arrangement, considerable hardship and confusion will result. This is illustrated very graphically when a few years ago the Commissioner of Internal Revenue ruled that, under the present Social Security Act, I and my employees were employees of Gulf Oil Corp. within the meaning of this act. Under the Commissioner's ruling Gulf Oil Corp., in an effort to comply therewith, requested me to supply them with a list of my employees and the wages they were paid. Since the corporation knew nothing about the internal affairs of my business they necessarily had to rely on the information I supplied them. Until the courts ruled that I and my employees were not employees within the meaning of the present act, this haphazard and unsatisfactory condition continued to exist. If the proposed definition of "employee" is passed in its present form it will be necessary to again report these facts to the corporation in order that they may comply with the provisions of the new act. Frankly, it is none of the Gulf Co.'s business the internal functions of my business, and I do not intend to tell them what my costs of operations are, or how I operate.

I am very much opposed to being deprived of my status as an independent businessman, and would surely like to see the definition of "employee," as contained in the proposed bill, be revised so as to exclude me therefrom.

I realize that I, as an individual, have very little weight in speaking to the lawmakers in Washington, and, knowing that you are acquainted with all of the men in Washington who are members of the Senate Finance Committee, I would certainly appreciate your interceding on my behalf.

This condition applies to oil petroleum distributors all over the United States and effect those in Nevada also.

With kindest personal regards, I am,

Sincerely yours,

W. P. WRIGHT.

AMERICAN FEDERATION OF LABOR,
Washington, D. C., March 24, 1950.

HON. WALTER F. GEORGE,

Chairman, Senate Committee on Finance,

Senate Office Building, Washington 25, D. C.

DEAR SENATOR GEORGE: When on March 1 President Green, Mr. James A. Brownlow, and I appeared before your committee in support of H. R. 6000, our statements were confined largely to support of the proposals contained in that measure, together with amendments which we offered with a view to further liberalizing the bill.

Since that time, a number of witnesses have appeared testifying with respect to the provisions in this bill relating to the definition of "employee." In view of the circumstances, I should like to ask that this communication be brought to the attention of the other members of the committee and included in the record of the hearings on H. R. 6000 as a supplement to our previous testimony.

We are particularly concerned with the provisions of the bill which would extend the protection of social security to hundreds of thousands of working people who are members of unions affiliated with the American Federation of Labor who throughout the past years have been denied this protection because of their classification as "agent drivers." These vicitimized workers are found in the provision and meat industries in all fields, such as processed foods, laundry, milk, bakery, soft and alcoholic beverages, petroleum products-in short, virtually every industry in which delivery is an element. They are employees, yet they are denied the benefits of social security.

The classification of agent-driver was invented by employers upon the enactment of the Federal Social Security Act and the various State unemployment insurance laws. It was designed as a clever subterfuge by which employers could avoid payment of Federal and State taxes required under this social legislation. And because of the Government's apparent willingness to condone such a ruse, the plan has worked splendidly.

For employers, the process of converting some or all of their regular route salesmen into the hybrid agent-driver bracket was simply a matter of taking the driver off the pay roll and putting his income solely on a commission basis. Some employers went further and required the driver to purchase his own truck; others did not. In all cases, the new method was to sell merchandise directly to the driver, letting him keep as his commission the difference between that price and the price at which he sold the goods. Most companies kept a small staff of delivery salesmen on a regular basic salary, while at the same time retaining a number of these so-called independent, or agent-drivers.

Defenders of the system might argue that the agent-drivers like it that way. They don't, for as it works out in actual practice, the agent-drivers' earning capacity is no greater-and often a good deal less-than that of salaried salesmen who perform the same duties.

The agent-driver's truck, whether owned by himself or his employer, is usually emblazoned with the company's or the product's name. Having bought merchandise from his boss, who may paint a rosy picture of the huge profits that lie ahead, he finds that, quite logically, the competition of regular drivers has made it impossible for him to earn more than, at the very best, a commission of roughly 6 percent. In the provision industry, he is lucky if he clears $65 at the end of a week's work. The regular driver-salesman, meanwhile, has delivered his merchandise at a flat 3-percent commission, to which is added a basic salary of some $45. His take-home pay averages $75 a week or better, and conditions in other industries follow the same pattern.

Both men, remember, do exactly the same type of work. Yet, if the regular driver loses his job, he draws unemployment compensation. The agent-driver in similar straits finds himself without protection, and when the regular driver reaches the age of 65, he collects social-security payments. The agent, on the other hand, is ineligible. Very often he becomes a public charge, dependent upon charities for his very survival.

Every day, more and more salesmen on fixed salaries are being reclassified into this unfair work category. How can they then be called independent businessmen? Does this reclassification make their livelihood any less dependent upon the company whose products they sell? They are employees in every practical sense of the word.

They are, indeed, victimized-by employers who have used them as tools for tax evasion and by a Government that has apparently closed its eyes to their plight.

And the employer who uses this agent-driver delivery system runs a constant risk in that he relinquishes all responsibility for his product upon selling it to the driver. It would seem, then, that from the standpoint of management as well as labor, deliveries by salaried salesmen are necessary as insurance that business will be kept on a sound and healthy basis.

Through the years, various State courts have recognized these men as employees for purposes of collective-bargaining agreements, and a few States, Georgia for instance, have gone further and included agent laundry drivers under State unemployment compensation laws (Brewster v. Hewitt, 69 Ga. App. 593, 26 S. E. (2d) 198).

In some instances, test cases have been made for individual agent-drivers before the social-security agencies, but this has required so much litigation through the various courts, that most of the cases have eventually been dropped by the claimant for lack of funds. Even in the few instances where such a claim has been recognized and the inequity corrected, the ruling has benefited only the individual involved.

Finally, in various decisions, the United States Supreme Court has ruled that agent-drivers are employees (Milk Wagon-Drivers' Union, Local No. 753 v. Lake Valley Farm Products, Inc., 311 U. S. 91, 98).

This was also the court's decision in the case regarding newsboys (Chronicle Publishing Co. v. United States D. C. U. S., No. Dist. of Calif., 70 Fed. Supp. 666, aff. per curiam June 23, 1948), but the Eightieth Congress reversed that stand with the passage of Public Law No. 492, the so-called news vendors bill (H. R. 5052), which has denied them social-security coverage.

H. R. 6000 recognizes the economic realities affecting these so-called agentdrivers and other commission salesmen and seeks to eliminate the ambiguities and correct the deficiencies contained in the original Social Security Act. purpose is clearly set forth on page 81 of the majority report of the House Ways and Means Committee, which states:

This

"Your committee believes that the usual common law rules for determining the employer-employee relationship fall short of covering certain individuals who should be taxed at the employee rate under the old-age, survivors, and disability insurance program. The statutory provisions set forth in paragraphs (3) and (4) (sec. 210 (k)) are designed to correct this deficiency in existing law by extending the definition to include those individuals, who, although not employees under the usual common law rules, occupy the same status as those who are employees under such rules."

This was elaborated on by Representative Walter A. Lynch, a member of the Ways and Means Committee, on the floor of the House. Representative Lynch stated:

"It is our intention to bring under coverage those who were callously thrown out of social security by the Gearhart Act and likewise to circumvent unscrupulous employers who believe that, by entering into contracts with agent-drivers, and commission driver salesmen, and similarly situated salesmen stating that they were independent contractors, they can go behind the intenttion of the Social Security Act." [Emphasis supplied.]

The American Federation of Labor is convinced that it is of the utmost importance to clear up any ambiguity in the Social Security Act which might deprive these hundreds of thousands of workers protection afforded wage earners doing precisely the same kind of work. We urge therefore that most careful and favorable consideration be given to the amendments to clarify these provisions of the social-security program.

Sincerely and respectfully yours,

NELSON H. CRUIKSHANK, Director, Social Insurance Activities.

TINTIC SMALL MINE OPERATORS,
LEASERS, AND PROSPECTORS ASSOCIATION,

TINTIC MINING DISTRICT, Eureka, Utah, January 27, 1950.

Senator WALTER GEORGE,

Chairman, Finance Committee,

United States Senate, Washington, D. C.

DEAR SIR: We are a small organization without the resources to send a man to Washington to testify before your committee on H. R. 6000. We have a membership over 200 and represent all of the leasers in the Tintic district. Tintic

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