STATEMENT OF JOHN E. JOHNSTON, CONTRACT LOGGER,

PORT LEYDEN, N. Y.

Mr. JOHNSTON. I am a contract logger, and represent the contract loggers of the Northeast. We take our contracts from half a dozen paper mills in our vicinity and for the last 16 years have operated almost exclusively on their lands. That does not mean that I individually do all the work I contract for and therefore would be deemed an employee under paragraph 3 of sections 104 (a) and 206 (a) of H. R. 6000. With paragraph 3 as it stands, I have no personal nor particular complaint except that it is unnecessary, but if you were by any chance to drop that general qualification covering individual work, I would be concerned with it as much, and for the same reasons, as I am concerned with paragraph 4 of those sections of the act as they now stand.

I object to the provisions contained in paragraph 4 of sections 104 (a) and 206 (a) of H. R. 6000. When I say that I object, I am perfectly certain that I reflect the thinking of every independent contractor in the logging business who is aware of what Congress is threatening to do to him. So from now on, I am going to say "we" instead of "I."

We object to the provisions contained in sections 104 (a) and 206 (a) of H. R. 6000, and particularly to paragraph 5 describing an "employee," because in our opinion they will destroy our status as independent contractors and make us employees.

Ever since logging started in the Northeast generations ago, it has been largely carried on by contractor loggers, large and small, as independent contractors. Frequently large contractors sublet some of their work to smaller contractors and, since the advent of trucks, practically all of us let our trucking to independent contracting truckers, sometimes owner-drivers, and sometimes driven by hired drivers. All of these contractors carry their own public-liability and property-damage insurance, and if they have help, pay social-security and unemployment taxes on them.

We are not talking about piece workers. We understand their status as employees.

Many successful operators have started as lumberjacks, accumulated a little money, become independent contractors in a small way, been successful, and grown and accumulated equipment, and eventually became large contractors in the true American manner. The removal of the incentive to become independent contractors, and the possibility of becoming employees, would be detrimental to the morale of many of the better woodsmen. It would be a blow at small business. It would eliminate the opportunity for more woodsmen and truckers to become independent businessmen and would be another step in the process of causing America to cease being a land of opportunity.

If we are forced to pay social-security taxes on our subcontractors and their employees, then our subcontractors and their employees must actually become our employees; otherwise we could not do it. And if they are our employees, then we must carry compensation insurance on them, and deduct withholding taxes and pay unemployment taxes, and we are responsible for their adherence to the wage-and-hour law, and we must inspect their records and supervise their bookkeeping. What they make or lose on their contracts with us is not our

affair and we have no right to know it, and what we make or lose on the contracts that we take from our principals is none of their concern, and they have no right to ask us.

Seven or eight years ago, the Public Service Commission of New York State announced that they were going to regulate the truckers hauling forest products within the State. They held hearings lasting for weeks in Utica, Watertown, and several other cities conveniently located, and called in not only representatives of paper mills but the logging contractors and the truckers themselves. After several months of weighing the evidence, the public service commission announced that the trucking of forest products within New York State could not be regulated, because the truckers were independent contractors, and would in any event continue to truck what they wished, where they wished, and when they wished. Any attempt to gather these independent contractors into one fold and make the parties for whom they operate contribute social-security taxes for them will meet with the same results. The confusion and the violations will be unlimited:

Logging, whether saw timber or pulpwood, is seasonal and intermittent. There is no control over the contractor, except inspection. There is no necessary regularity. Skill and experience are required. Investment in trucks and their equipment is necessary. In all cases, profit is probable. But who knows or can even guess what weight the Administrator will give to these facts. As a matter of economic reality an independent logging contractor is no more dependent upon the person from whom he takes a contract than any other contractor in any other line of business. They can take the contracts or leave them.

We are listed in the group which may or may not be included as employees. If we have to pay social-security taxes as self-employed, we would much prefer to pay taxes 12 times that paid by the employee rather than be classed as employees and lose our independence. We do not want our books and records inspected by the several companies from whom we take contracts, and we want to continue to be in position to take, and to let, such contracts as we choose, from any company that we choose, and as many as we choose.

Under the proposed law, our status would be too uncertain. We would never know when some Administrator might rule us employees, and the risk of getting innocently into trouble would be great. We consider this bill just another step toward regimentation and socialization, and we have already taken too many steps in that direction.

We feel that we and our subcontractors simply cannot properly be classed as employees because in fact we are not but are independent small-business men. The present administration has said much about helping small business. Accordingly, we respectfully request that the Senate eliminate from the bill paragraphs 3 and 4 which are included for the sole purpose of making possible the forcing of independent businessmen out of business and into the category of dependent employees.

The CHAIRMAN. Are there any questions?

If not, we thank you very much, Mr. Johnston. We appreciate your being here.

Mr. JOHNSTON. Thank you.

The CHAIRMAN. Mr. C. S. Crosby, of Farmington, Maine.

STATEMENT OF C. S. CROSBY, FARMINGTON, MAINE

Mr. CROSBY. Mr. Chairman and members of the Senate Finance Committee, I am a small producer and buyer of wood, handling from 5,000 to 8,000 cords of pulpwood for the Brown Co. of Berlin, N. H., and 500 to 1,000 cords of veneer-grade hardwood for the Foster Manufacturing Co. of Strong, Maine. This wood is procured from 75 to 100 individuals as over 50 percent of all forest products produced for the consuming mills are produced by the small operator. The larger part of these 75 or more individuals is the farmer who lumbers a part of the season.

I, as a small producer, am very much concerned with the definition of "employee" contained in the Social Security Act amendments of 1949 (H. R. 6000). Subsection 4 of section 104 (a) of the act is a very broad definition of "employee." There are very few small producers of pulpwood but what three or four of the factors mentioned in subsection 4 would apply to them in some degree. The bearing of these several factors relative to the status of the individual is left entirely to the discretion of the Administrator. I believe that the definition should be clarified so that the individual can determine whether he is self-employed or an employee without taking the chances of being penalized because of some ruling made by the Administrator of the act with which the producer is not familiar.

I would like to take just a moment to tell you how we operate as I believe that will give you a better understanding of our problem.

Using my own case as an example, I take a contract from the consuming mill for a certain number of cords of different species of wood, then in turn buy small lots of 10 to 50 cords and subcontract for larger lots. The wood is contracted for at a price delivered roadside in some cases and in other cases priced delivered to the mill. It is rarely that I know the laborers on these various jobs as I see the wood only when it is piled on the roadside and ready for shipping; in fact, it would be impossible to visit 75 to 100 operations each week and keep track of the wages paid in each individual case. If these men are to be considered employees of mine, I could only purchase wood from the producer who had 500 or more cords per year, because I could not possibly check up on wages paid and profits made by a much larger number of smaller operators in order to make the necessary withholdings and tax payments.

This would leave the small-business man who employs from four to eight men without any market for his lumber. There are thousands of those men in the State of Maine and other New England States, and it would be a great hardship upon them, I believe that the mills would not purchase pulpwood from any of us as they would not take the risk of having us classed as their employees under this act, and because of the added expense of checking on the small operators which is estimated to cost at least $1 per cord, or 10 percent of the present cost of pulpwood on roadside. Therefore, these mills would produce their pulpwood with their own crews and generally on their own land or large tracts of land where they can purchase the stumpage. This will also leave the owner of small tracts of land without any chance of selling his stumpage.

The small-business man who employs four to eight men is very proud of his station in life and is usually the backbone of the rural

community in which he lives. Yet this act would appear to do away with him and the opportunity for a young man to go into business for himself except in some field that is exempt from the Social Security Act, such as the retail field.

I hope the common law definition that we now have for employees will remain as the definition to be used, thereby preserving the status of these small-businessmen.

There would be little difference in the amount of taxes received, as those who are not employees will be self-employed and as such will pay the social security tax.

Senator KERR. Do you think that it would be wise to include this group under the act, but classified as self-employed.

Mr. CROSBY. If you and the people want additional coverage of social security, I see no reason why self-employed should not pay the social security tax. Our main worry is the fact that we will lose our independence of being self-employed.

Senator KERR. I understand, and I share your concern in that, but I was interested to know what your opinion is with reference to the advisability of extending it to this group but with the classification of self-employed.

Mr. CROSBY. I think that that is all right.

Senator KERR. Thank you.

Mr. CROSBY. It will make more work for the Internal Revenue Department to handle the larger number of accounts, but I believe it is worth that added expense to preserve what I consider the backbone of the country, the small-business man.

There is an exemption clause to the wage-hour law for the producer of forest products who uses less than 12 men. But with the definition of "employee" in the Social Security Act, there would be no small operators, so it would appear that where the small-business man is to receive help on one hand, one the other he would lose everything and will have to try to find employment with the large mills. In many of our small communities a large percentage of the population is em ployed by the small-business men, employing less than 12 men, so it will mean these men will have to leave their families and go where the large concerns are operating or remain with their families and depend upon the Government for aid in getting a living. Either way is not pleasant for some people.

I know you gentlemen are going to give the Social Security Act in its entirely a great deal of thought for it is one of the most important pieces of legislation you will have to consider this session, and I hope that I have been able to give you a better idea of what the act means to the small fellow in the rural community.

I thank you gentlemen for your time.

Are there any questions?

The small-business men are paying the social security taxes on their employees. I think the most of us have little objection on the additional coverage of the act, but we do urge you gentlemen to preserve the status of the independent contractor and the opportunities for the small-business man.

Senator BREWSTER. These people you speak of, these 75 or 100, are mostly farmers who have some other activities as well?

Mr. CROSBY. Probably 95 percent of those people are farmers who Jumber a part of the year. That is their way of maintaining a steady income throughout the year.

Senator BREWSTER. How is the cutting going on now?

Mr. CROSBY. At this present time it is improving. They are getting a fairly good cut at this time, and it would appear to continue good until summer.

Senator KERR. Do you think it would be a tragedy for a Federal agency to have the power to change your status from that of an independent operator that you have achieved for yourself, and automatically make you an employee which would put you under a situation that you neither asked for nor could survive under?

Mr. CROSBY. I do. I do not think that the mills can use all of us as employees. They have to concentrate their operations within an area where they have individual supervision.

Senator KERR. You do not want to be their employee?

Mr. CROSBY. I do not want to be, no, sir, and I do not intend to be. The CHAIRMAN. Thank you very much.

Mr. CROSBY. Thank you.

The CHAIRMAN. Next we will hear from Mr. William S. Mundy, Jr., Lynchburg, Va.

STATEMENT OF WILLIAM S. MUNDY, JR., PRESIDENT, MUNDY & CO., INC., LYNCHBURG, VA.

Mr. MUNDY. I am William S. Mundy, Jr., of Lynchburg, Va. I am president of Mundy & Co., Inc., a very small corporation. As a matter of fact, in addition to its officers, it has only two employees. I am also an attorney at law, practicing in Lynchburg, and as such am familiar with the problems of a great many small-business men and different kinds of businesses. The kinds of small-business men who I think are the subject of so many benevolent general comments in the process of enacting legislation, but whose burdens resulting from the legislation actually enacted seem for some reason daily to increas

more and more.

My remarks on the subject of this bill are not to be construced as reflecting a generally negative attitude. On the contrary, I am very much in favor of most of the objects of this legislation, and, in fact, I think that the coverage of the act should be extended even further than it is extended by the House bill.

I am opposing only the definition of the word "employee" as con tained in these two subsections 104 (a) and 306 (a) of the bill. Tho opposition does not include or imply opposition to coverage for any single person. The issue of the propriety of extending social security coverage does not relate whatever in any way to the issue of the propriety of extending it by means of this definition.

These sections of the bill would enact a definition of the word "employee" different from its definition by the present law, and different from the definition of the word for the purposes of other laws. It would be a special definition for the sole and exclusive purpose of the Social Security Act. The employer-employee relation is a common and ordinary relation. It is a relation that exists on the one hand between large corporations and their numerous employees, and on

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