Mr. JOHNSON. Thank you.

The CHAIRMAN. Mr. Thomas B. Farwell. You may identify yourself.

STATEMENT OF THOMAS FARWELL, PRESIDENT AND GENERAL MANAGER, RYEGATE PAPER CO., EAST RYEGATE, VT.

Mr. FARWELL. My name is Thomas Farwell. I am president and general manager of the Ryegate Paper Co. of East Ryegate, Vt. We have a comparatively small company employing about 100 people in the manufacture of pulp and paper. We draw our supplies of pulpwood largely within a radius of 40 miles. Some of this comes from Vermont and some from New Hampshire. Our requirements are approximately 1,000 cords per year.

Our own holdings of forest lands are negligible—providing a growth of only about 2 percent of our annual requirements. There are no really large blocks of timberland in our area-much of the timber is on what we term farm-forest land. Northern Vermont farms are traditionally divided into tillage, pasture, and forest land. Since 1906 when we started in business we have had satisfactory experience in buying our pulpwood from producers or jobbers who cut from farm forests and privately owned forest land and deliver the pulpwood to our mill at so much per cord. By cooperating in the encouragement of good forest practices we believe that we have had some influence in protecting a permanent source of forest products.

I am appearing here for the single purpose of explaining to you how the provisions of paragraph 4, subsection (k) of section 210, H. R. 6000, as it now stands, would be unduly burdensome to us and to the many, many small forest industries in the Northeast that generally operate as we do. If the definition of this subsection should become law, I cannot for the life of me figure how we could practically carry along the traditional relationship with our producers who are, and always have been, considered "independent contractors."

Pulpwood production is a seasonal operation. The people with whom we contract are not working on our supply the year around. They generally are not large operators. The comparatively small amount of pulpwood we purchased in 1949 came from 53 different contractors, and in 1948 from 98. The contract arrangements vary greatly, dependent upon the circumstances in particular cases. Who owns the stumpage? What are the cutting specifications? Is the wood to be delivered to the mill or is it purchased at roadside? Is it necessary to advance money as the operation proceeds? These, and many other factors, have to be taken into account to determine the terms of our contracts with producers.

But, all of those contracts have this in common-they all are purchase and sale contracts under which we undertake to buy a specific number of cords of pulpwood and the producers undertake to sell them to us. There is nothing obscure about them; they are not subterfuge to get around some law or other. They are an exact reflection of the way we have been doing businesss for a great many years. We must have pulpwood. We have found it satisfactory to buy it rather than produce it ourselves, so we buy it from people who have it to sell. It is as simple as that.

The payments we make to contractors cover the many elements of their cost. We pay them so many dollars per cord. This covers elements of labor, such as cutting, peeling, yarding and trucking; elements of equipment, such as saws, tractors, and trucks; elements of expense, such as camps and woods roads; the elements of overhead, such as depreciation, insurance, and supervision; the element of depletion of stumpage, and the important element of profit which keeps these people in business. These payments are not wages by any stretch of the imagination.

These people we buy from consider themselves as independent contractors. They are small business. It would be a blow to their self respect to sudenly find that by legislation, or by interpretation of legislation by an Administrator, they had suddenly become "employees." During the course of a year they may contract with a number of users of forest products. Everyone has always considered them as independent contractors. Under the provisions of H. R. 6000, which we are considering, what would they be? I do not know. Some might be considered "employees" and some as "independent contractors." A producer might be an independent contractor some of the time, and then the situation might change so that he would become an employee. A change in interpretation of the act, if passed as now written, might change the status overnight. We certainly would not be smart enough to be right in our judgment all of the time.

If a contractor suddenly becomes our employee, what about his employees? I do not know how many he has, who they are, or what he pays them. What are the wages of this contractor who has become an employee? As Mr. Canfield said earlier, I suppose it would have to be his profit, but I do not know that any more than I know the profit made by the haberdasher from whom I buy my shirts. Actually, of course, not even the contractor can know his profit from quarter to quarter as would be necessary for social-security purposes.

I am supposed to withhold social-security taxes from wages when they are paid. When is the profit paid? Our small office force certainly is not geared to the mechanics of this problem. Somebody asked me how many it would add, and the best estimate I could make was about 50 percent that it would add to our small clerical force.

It all adds up to the fact that we could not operate practically with some of our pulpwood suppliers being ruled as our "employees" and others as "independent contractors"-with their status changing from time to time-with our never knowing whether we were right or wrong. There would seem no course open except for us to change the whole economy of pulpwood purchasing and operate ourselves from the timberland to the mill. This would be most difficult with the widely scattered sources of supply. This would wipe out a respected element of our local economy.

We used about 8,000 cords per year, and Mr. Robertson said they used about half a million in one mill alone. I would like to emphasize that relatively this problem is just as important to us as it is to a big company.

Senator MILLIKIN. You are like the Swede railroad fellow that had a short logging road who went to Jim Hill and asked him for a pass because he was the chairman of a railroad, and Jim Hill said, "Why, your railroad is only 8 miles long. I can't give you a pass for that.'

He said, "Mr. Hill, my railroad may not be as long as yours, but it is as wide as yours."

Mr. FARWELL. And probably just as important to him, too.

I am not officially authorized to represent anyone except the Ryegate Paper Co. in this matter. I can report, however, that I have talked with a lot of people in our area-other users of forest products, and independent contractors-and without a single exception there has been grave concern when they understood the provisions of this legislation.

I am not here, gentlemen, to argue in any way against the extension in coverage on social security. I am here solely to request that in extending this coverage, if desirable, you do not do it in a manner that will be highly impractical and which will tend to destroy the long satisfactory relationship between purchaser and independent contractor in our industry.

Senator MILLIKIN. If my history is incorrect, will you correct me? As I recall it, before Vermont became independent, the King had the right to select the best trees in every wood lot for making spars for the King's Navy. May I adopt the general conclusion that you would like to have the King keep his nose out of your business?

Mr. FARWELL. That is right.

The CHAIRMAN. Are there any other questions?

Thank you very much.

Mr. FARWELL. Thank you.

The CHAIRMAN. Next is Mr. Russell Watson.

Please identify yourself for the record.

STATEMENT OF RUSSELL WATSON, COMMERCIAL FORESTRY, MANISTIQUE, MICH.

Mr. WATSON. My name is Russell Watson. Forestry is my business, and has been all my life. My location is in northern Michigan, where I am an owner and operator of timberlands, and a buyer and seller of forest products which I obtain from many small producers and resell to pulp and paper plants, sawmills, excelsior mills, and so forth. My territory is typical of most of northern Wisconsin and Michigan, in that the greater part of the original heavy stands of virgin timber have been cut, and a vast amount of second growth is now arising with intermingled small pieces of merchantable forests.

The day of the large lumber camp, with railroad logging, is going. and the bulk of the timber supplies, especially of pulpwood, fence posts, railroad ties, handle bolts, and the dozens of other wood products come from many small-woods operators. Our local pulp and paper mill, for example, usually has a hundred or more separate contracts for deliveries of pulpwood by small producers. Each one may be modest in size, but in the aggregate they bulk large.

As the owner of a considerable acreage of such forested land, I find oftentimes that for many reasons it is most satisfactory to contract with local enterprising fellows to cut the timber and to skid and deliver the wood on a contract basis. I have been doing this for many years, and am thoroughly acquainted with the procedure. The man engaged uses his own simple tools and employs his neighbors to work with him. He is likely to be a local farmer who has little else to do

during the winter months from October to the break-up of winter in March. His tools are those he has about the place, namely, saws, axes, drays, horses or small tractors, a hired man or two, and likely a grown son home from the Army, just married and eager to work. His outlay for equipment is small, and much of it, such as drays or small barns or sleeping shacks, he himself constructs and repairs at odd hours or as needed. He pays the local men whom he employs such wages as he knows from experience they deserve and will get the work done best. Being his own boss, he works as many hours as he pleases and being a contractor, he has the vital incentive of the rewards of hard work, skillful planning, and honest endeavor. I have engaged many such fellows over the years who have enlarged their sphere of activities. until they, too, became owners and in turn let out jobs to local contract loggers. Our north-woods operations are in large part done by such men who rose from humble beginnings.

The method has many advantages. From my point of view, as a forest owner, I am relieved of the detail of the administration of many small jobs, which enables me to place my emphasis on sales of products and the multitude of duties which crowd upon us during the rush hours of the winter season when we are the busiest. It is a systematic delegation of duties to trusted men, and the savings of overhead costs and expenses can be shared with the contractor.

From the point of view of the contractor, it enables him to use his men and equipment during the season when work otherwise might be slack on the farm. His horses, for example, might be "eating their heads off," as the saying goes, doing nothing, if it were not for winter woods work. It brings him in cash payments, and many a farmer in our north country makes more money from his winter's woods operations than he does from his summer's farming. The two operations, farming and forestry, supplement one another splendidly; it is almost an ideal arrangement, and has been built up over the years into a smooth-working performance. I would very much dislike to see it broken up by a law which would insist that these small contractors become my employees.

If such becomes the fact, I shall not be able to deal with these men at all, except as actual individual laborers on a piece-work or a day-wage basis. The reason I will not be able to deal with them as in the past is that I would have to know how much profit they make in order to withhold social-security contributions and to pay social-security taxes for their account. I would assume that if these contractors are deemed to be my employees, then their employees would also be deemed to be mine. In that case, I would also have to take over payment of wages to their employees so that proper withholding and payment of taxes could be made. There is no possible way for me to do either of these things unless the men are actually my employees. If you make this proposed definition the law, then I shall have to make presently independent businessmen my hired hands, or else refuse to do business with them. This, such men definitely will not enjoy. They are independent by nature. They do not wish to work at the beck and call of a foreman; they work best when they are self-employed. Their compensation is directly commensurate with their initiative and hustle, their pay is proportionate to their accomplishment.

From my experience, I would say that the difficulties which were first experienced of getting such small employers (or contractors) to take good care of social-security payments and withholding taxes of the men they employed, are rapidly passing. The entire socialsecurity set-up came upon us suddenly and we all went through a period of sharp pains until we caught on how to handle it and until prices of our products rose enough to cover the added expense of administration and payments. Some of us, with a more bookkeeping turn of mind who handle paper work easily, had little difficulty learning the routine; others, such as are many of these independent small contractors, who are normally rebellious of any governmental interference in their activities, were longer coming to it. But over the years, gradually the difficulties and dissensions have been overcome and in my neighborhood, at least, I doubt that the auditors from the collector of internal revenue have much fault to find. Also, the employees of the contractors are themselves quick to exert pressure upon their employers if their social-security contributions and deductions are not made promptly and properly, and if their withholding-tax returns are not correctly computed.

Such contractors, because of the possibilities of continual work into the future, readily adopt programs which have to do with forest control. They know that fire prevention, better silviculture and trespass control, is part of their business, and they take a deep and abiding interest in such matters. A program of sustained yield, for example, from a forest area, is more important to such a resident contractor, than to anyone else. The local economies of the situation come very close to his fortunes; he visualizes good forest management in terms of his own gain.

It may be felt that an independent contractor should be consid ered an employee in order that he might look forward with satisfaction to receiving social-security benefits when he reaches the age of 65. Perhaps some do, and they will or can obtain old-age coverage under other provisions of the bill without becoming employees and surrendering their independence. But I believe that most of these small contractors think of their security in terms of income from their own place, and they wisely prefer to invest their savings into development of it rather than to entrust it into the hands of a distant government. They have confidence in their ability to provide for their old age through their own foresight and hard work. Many of them know, as men close to the soil everywhere know, that the finest and best old-age security is that of the resources of your own farm, large or small, where one can take full advantage of the gifts of good growing weather, warm sun, and gentle rains on well-kept soil.

Such men are a strong leavening influence in our whole north-woods social structure. They wish to advance. They should by all means be encouraged, not discouraged. They should be given every opportunity to remain free and independent, and not bound into an employee relationship. Leave them alone.

The CHAIRMAN. Are there any questions?

If there are no questions, we thank you very much, Mr. Watson. Mr. WATSON. Thank you.

The CHAIRMAN. Next is Mr. John E. Johnston, of Port Leyden, N. Y.