someone you know and who knows you, someone who lives in the same community you live in, than there is in working for a remote corporation. You might think it would not make much difference to the pulp and paper companies, that they might even save money by cutting out the profit of the middleman. I can assure you that no pulp and paper company will be happy about it. There are a variety of reasons for this. From the purely material point of view, the companies know it will cost, not save, them money. Please do not misunderstand me. I am not talking about added cost due to paying social-security taxes. I am talking about the added expenses of procuring wood in an impractical manner. If it would save money for the companies to make pulpwood entirely with their own employees, that is the way they would be doing it. Cost of wood is the basic cost of paper, and every mill in the country is accordingly striving to keep that cost down by efficiency in its production. To the best of my knowledge, and I think my knowledge is entirely complete on this subject, there is not a single mill in the whole country which does not buy wood from independent dealers, or producers, or contractors or farmers. That is more than significant. To any reasonable man it would be proof beyond any question that pulpwood production through independent contractors, at least in part, is the most efficient and economic method of procurement. Supervision by paid employees of the paper companies in the case of these scattered operations was not economically sound 50 years ago and it is not economically sound today. This is the most important reason why the paper companies have avoided integrating pulpwood procurement operations to their own operations. This lack of supervision is the reason that the law for centuries has concluded that such relationship should not be considered that of an employer and employee. There are reasons other than those purely materialistic. No pulp and paper company is going to be happy to be the instrumentality by which an agency of the Government in Washington forces small-business men out of business. No pulp and paper company is going to be happy to be forced into undesired and uneconomical vertical integration, and it will not assuage its unhappiness in the least to know, as everyone does, that the same Government in Washington sometimes seems to believe that vertically integrated companies are guilty of illegal and monopolistic concentration. It will not make any pulp and paper company happy to become a forced participant in such concentration of economic power. The industry is at present one of the least concentrated of all. A recent outhoritative tabulation shows that out of 452 industries, the paper and pulp industry was near the bottom of the list in degree of economic concentration; its ranking was 396. The same tabulation shows that only one of 42 industries, with an average plant as large as the pulp and paper industry, is less concentrated-that of big industries, billion dollar or more, only 7 of 38 are less concentrated." Considering all the heat that seems to be developing here in Washington about concentration of economic power, it is not surprising that the pulp and paper industry is pleased with its position and will not be pleased with anything which forces it away from that position. The next logical question is: Even if paragraph 4 is included in the act, will it be applied to the pulpwood industry? To this question there is no answer. I do not know and you do not know and the industry does not know. It depends upon the judgment of the Treasury Department and the Administrator. More accurately, because of the indefiniteness of the factors set forth in paragraph 4, the whim of the Treasury Department and the Administrator, rather than their judgment, would control. It might be pointed out that judgments or whims of the Treasury Department and the Administrator of the Social Security Act may differ. They have in the past. The result of such a situation of uncertainty is identical with the result of an affirmative answer to the question. If you do not know, but have to guess what the ruling will be in any given situation, you simply cannot afford to continue these situations; not when the penalty for guessing wrong is, as it is here, heavy fines, possible imprisonment, and interest on debts you did not know you had, at a rate about three times as high as you can earn money put out at interest. Senator MILLIKIN. In the Government we have what is called calculated risk against yourself. As a witness, you do not know about that. Mr. CANFIELD. The difficulty here, Senator, is that no one is capable of making the calculation. Senator MILLIKIN. Of course, you can make a guess and call it a calculation. Mr. CANFIELD. And what happens when you guess wrong? Mr. CANFIELD. It is not good for the company. Senator MILLIKIN. Some day somebody will start calculating safety for the country. Would that not be a novelty? Mr. CANFIELD. It certainly would; rather an interesting one, too. If the application of paragraph 4 is as uncertain as I have said it is, then, not daring to run the risk of accumulated interest, fines, and imprisonment, and not caring to be branded a felon any more than you would care to be, companies are simply not going to take the chance. They will have to, and will, change their method of pulpwood procurement in such a way as to eliminate dealing with the small-business men they now do business with. They will have to, and will concentrate their pulpwood procurement into one of two channels, or perhaps both; production by their own employees, or procurement from independent suppliers who are so large, who have so much capital invested, who deal with so many companies, that even the most whimsical Administrator would not care to call them employees. Is the application of paragraph 4 as uncertain as I have said it is? Let us analyze it and see. A majority of the members of the House Ways and Means Committee said: In this paragraph of the definition your committee has attempted to chart a more definite course than that laid down by the Supreme Court * * *. Your committee has prescribed the factors which it believes should be considered in paragraph 4 of the definition in determining the existence of an employeremployee relationship for social security purposes * *. The combined effect of all the factors will control the determination under this paragraph of the definition. Having stated that there was intended to be laid down a definite course to be followed, they immediately found it necessary to add almost seven pages of explanation, and examples of how they thought those factors should and would be applied. At the same time, 10 members of the same committee, commenting on the same paragraph, said: A mere cursory glance at the wording of the above definition will show that at any time the Internal Revenue Bureau, or the Federal Security Agency, or the Court wants to make a person an "employee" rather than a self-employed person, or vice versa, it can do so paragraph 4 serves no social purpose. Instead, it leaves the status of millions of our citizens to the almost unbridled exercise of administrative discretion * * * * * When two groups of representatives of the people who have studied the matter in detail can come no closer to agreement than this, is it any wonder that businessmen think there is something less than definiteness in the definition. In the process of explaining for several pages what this allegedly definite set of factors means, which of course would have been wholly unnecessary if they were in fact definite, the majority of the House Ways and Means Committee cited an example having to do with woods operations. In that example, they said that when a contractor, having sufficient capital, including equipment to carry out certain operations, contracted with a company to cut trees on the lands of that company according to certain specifications stated in the contract-including the completion of the work within a definite period, although there were successive similar contracts-and hired others to work for him, kept his own records and was paid the contract price periodically, "the combined effect of all of the factors clearly shows that-the contractor-is pursuing a business of his own and is accordingly not an employee under paragraph 4 of the definition." That is what the majority of the House Ways and Means Committee said. Some months later the Administrator of the Wage and Hour Act published an interpretation of the word "employee" as used in that act in connection with certain types of forestry work. His interpretation of the word "employee" followed the familiar pattern heretofore used: First, by the National Labor Relations Board and then in the dicta of the Supreme Court, until Congress specifically ordered otherwise, then proposed to be used by the Administrator of the Social Security Act and the Treasury Department until Congress again specifically ordered otherwise, and now proposed to be included in the new Social Security Act, H. R. 6000. Although in slightly different words, the criteria stated by the Administrator of the Fair Labor Standards Act are, for all practical purposes, identical with those contained in the definition in H. R. 6000. In discussing his interpretation, Mr. McComb, the Administrator, said that the total situation in each individual case would have to be considered in order to decide whether or not a person was an employee. He then went on to say: At least, in one situation it is possible to be specific; where a sawmill or concentration yard to which the products are delivered owns the land, or the appropriation rights to the timber or other forestry products, the crew boss has no very substantial investment in tools or machinery used, and the crew does not transfer its relationship as a unit from one sawmill or concentration yard to another Senator MILLIKIN. I do not understand that. Mr. CANFIELD. I think they mean that they work on successive contracts for the same mill, rather than hopping around from A company to B company to C company. The CHAIRMAN. Where he takes over this whole crew and puts them on another job. Mr. CANFIELD. He says unless they do that. * * -the crew boss and the employees working under him, will be considered employees of the sawmill or concentration yard. Where all of these three criteria are present, it will make no difference if the crew boss receives the entire compensation for the production from the sawmill or concentration yard and distributes it in any way he chooses to the crew members. Similarly, it will make no difference if the hiring, firing, and supervising of the crew members is left in the hands of the crew boss. You will note that the example cited by the majority of the Ways and Means Committee, and the example cited by the Administrator of the Wage and Hour Division, are identical. The only apparent difference is that the Ways and Means Committee's operator had "adequate capital" and the Administrator's operator, while he presumably must have had adequate capital, had "no very substantial investment in tools or machinery used." Yet, the members of the Ways and Means Committee and the Administrator come to directly opposite conclusions. In the face of this, is it any wonder that businessmen feel that there is something short of certainty in the definition? A week ago Senator Taft asked a question here of a witness as to whether his fears about the definition could be justified in the light of the Ways and Means Committee example, indicating that timber operators were not employees. I do not think he got a clear answer then. I think the clear answer lies in the example of administrative interpretation I have just cited. There, without any shred of authority, an Administrator interpreted the law directly contrary to the clearest possible congressional language. While you sit here considering whether or not to make this definition law, an Administrator has effectively written it into another law where Congress never even considered including it. Why? I do not know why. But I know what they are doing with it. The Wage-Hour inspectors in the field are using that interpretation to keep people from utilization of the 12-man forestry exemption the Congress thought they gave them. Our fears about the definition are justified by experience. We have been administered before. And to put it mildly, not always in accordance with what Congress intended. Three weeks ago the Pulp Wood Association made a formal written protest to the Administrator of the Wages and Hours Act, pointing out his total lack of authority from Congress for his actions. The result to date, not even an acknowledgment. It looks as though there might be needed another joint resolution of Congress to point out to another Administrator that when Congress says "employee," it means "employee." The trouble with the definition is that the factors listed constitute no criteria at all. They are simply things to be taken into account which, in themselves, are intangible and indefinite in every particular, and when taken into account-intangible and indefinite to begin withare to produce an equally indefinite "combined effect" without any statement of the weighting to be given any single factor. The Admin istrator and the Treasury Department are given no clue, let alone direction, as to what to do with these factors. Consider them one by one. 1. Control over the individual: How much control? There is always a scintilla of control. Is that enough? H. R. 6000 does not say. Senator MILLIKIN. If a man makes a loan from a bank, he is under a certain amount of control. Mr. CANFIELD. I have always felt that way myself. Senator MILLIKIN. Yes. Any corner grocery store who has an account with a jobber to a certain amount of control. Mr. CANFIELD. I would think so. That is what I had in mind when I said there is always a scintilla of control. Senator MILLIKIN. Maybe more than a scintilla, and yet you could not say that the corner grocery man is an employee of the jobber. Mr. CANFIELD. I could not, but the Administrator could. Senator MILLIKIN. Yes, and would, probably. Mr. CANFIELD. Undoubtedly. The CHAIRMAN. You think there is a difference between a debtor and creditor and employee and employer? Mr. CANFIELD. If there is not, I will have to go back to law school. 2. Permanency of the relationship: What does permanency mean? If you do something only once, of course, it is not permanent. If you do it twice, is it or is it not? If you do it 10 times, is it permanent? Who knows? H. R. 6000 does not say. 3. Regularity and frequency of performance of the service: If you perform the service every day, 5 days a week, 52 weeks a year, for several years, it would be regular and frequent. If you did it 1 day a week every third week for a year, it would be regular, but would it be frequent? If you did it 5 days one week, did nothing for the next 2 weeks, then performed again three consecutive weeks, 5 days a week, it would be frequent, but would it be regular? Who knows what the phrase means? H. R. 6000 does not say. 4. Integration of the individual's work in the business to which he renders service: Nobody hires anybody to do work that is not necessary in connection with his business. Does that mean that a hired worker is always integrated in the business of the hirer? If it does not mean this, then what degree of integration or essentiality to the business is necessary? I do not know, nor do you, nor does the Administrator. H. R. 6000 does not say. 5. Lack of skill required of the individual. How much skill, or how little? What kind of skill? The clumsiest man in the world might be a good businessman. The most skillful axman in the world, despite his skill, is almost certain to be an employee, not a businessman. What conceivable relationship has skill as such to the question of whether or not somebody is an employee? Nobody knows. H. R. 6000 does not say. 6. Lack of investment by the individual in facilities for work: Does that mean total lack of investment? Cannot a man even own an ax or a bucksaw and still be an employee? Or does it mean that if he does not have, to use Mr. McComb's language "very substantial investment in tools or machinery used," he is an employee. Senator MILLIKIN. I think Senator Kerr knows even more about this than I do; out in the oil country, very frequently it happens that |