the other hand, it exists between many small employers who have only one or two employees. At one extreme, it is the relation to which a great corporation with a large legal staff is a party, and at the other extreme there are many employers in this country, millions of them, who have no such resources. There are quite a few employers in this country who can neither read nor write. Any uncertainty as to the meaning of the definition of the employeremployee relationship will cause innumerable difficulties, economic consequences, causes of litigation and possibly, indeed probably, substantial penalties to be incurred by many persons who have acted in good faith and used their best efforts to comply with the requirements of the law. The courts of the United States and of the United Kingdom have taken several centuries, taking up one case at a time, studying it and listing it, considering its consequences, to evolve by processes of inclusion and exclusion the common-law tests to determine whether or not a person is an employer or an employee. I would be less than frank to say that sometimes the application of the common-law tests to a particular factual situation is difficult. The reason is that the economic relations which may exist between two persons, particularly in the case of small businesses, vary in different patterns, so numerous as to frustrate all efforts to classify them completely. The difficulty inherent in applying any test or definition of the employer-employee relation to the facts results from the variety of these patterns in the actually existing facts, and this difficulty will exist whether the test or definition to be applied is the common-law definition or a statutory definition as is attempted in this bill. One of the principal objections to any statutory definition of the word "employee," be it good or bad, differing from the common-law definition, is the fact that the common-law definition has been applied by the courts in thousands of cases which now constitute precedents for determination of questions that arise. So many cases have been decided under the common-law definition that the average small-business man has a general understanding as to who is and who is not his employee, although he may at the same time have some difficulty in applying this definition to an unusual or difficult set of facts. There perhaps would be some justification for a statutory definition of the relation if the statutory definition were in terms more definite and certain in application than the common-law definition. But this is not true of the definition in these two subsections. As a matter of fact, to paraphrase a well-known quotation, it is as if to make uncertainty doubly uncertain. The language of the two sections is more vague and uncertain than the terms of the common-law definition. The elements mentioned in this statutory definition are in a large measure the same often referred to by the courts in discussing and applying the common-law definition. But presumably these elements were intended to have a different meaning or effect in the statutory definition. The courts could hardly assume that the elements of this statutory definition are to be given the same meaning and effect as in the common-law definition, for if this were the correct construction there would be no legislative purpose in enacting the definition. If these elements of the statutory definition are to have a different meaning and effect from their meaning and effect in discussion of the common-law definition, what is that meaning? The definition provides that the relation is to be determined * by the combined effects of (A) control over the individual, (B) permanency of the relationship, (C) regularity and frequency of performance of the service, (D) integration of the individual's work in the business to which he renders service, (E) lack of skill required of the individual, (F) lack of investment by the individual in facilities for work, and Assuming that these elements must be given some meaning or effect other than their meaning and effect when in discussion of the commonlaw definition, what meaning and effect do they have? I seriously doubt that the draftsmen of these sections themselves could tell us what it is. How often is frequent? How long is permanent? How much lack of skill is involved? In this definition there are untold opportunities for the Supreme Court to divide 5 to 4 and with every justification for doing so. If the elements of this defintion are to be given meaning and effect different from the definition at common law, it will take many years of litigation to make the new statutory definition attain the degree of certainty already attained by the common-law definition. The average small-business man cannot afford to litigate such matters with his Government. The cost of litigation apparently means little to a Government department or agency determined to settle an issue in the courts, but pulpwood dealers, producers and other small-business men cannot generally afford to engage in such litigation. The uncertainties created by the statutory definition will in effect leave such small-business men at the mercy of enforcement officers. If legislation is enacted with such vagueness and uncertainty, imposing substantial penalties, and operating retroactively after judicial interpretation, the average small-business man will have no choice except to settle for as little as possible, if a claim is made against him. Let us assume for a moment that the statutory definition is enacted and is finally clarified by judicial interpretation to the point at which it is possible to determine who constitutes the presently unknown class of persons not included in the common-law definition, but included in the statutory definition. Let us assume this class includes a pulpwood producer from whom another has been buying pulpwood over a period of years at a price per cord. How is anyone to determine the amount of remuneration or compensation on which the tax is to be paid? Presumably the tax relates only to compensation or remuneration for personal services and not to the gross sales price which includes cost of the timber and production and delivery costs. Where the trade is conducted on the basis of sale at a price, that is per unit, the purchaser has no record of the costs and expenses of the seller, even though the statutory definition may have made the seller an employee for purposes of the tax. If this definition is enacted and so construed, there seems to be no means of ascertaining the facts necessary to compute the tax unless the buyer terminates the independent character of the seller's operation and puts the seller on his pay roll. The possibility that the independence and opportunity of many small operators may be terminated in this manner is causing grave concern among pulpwood dealers, producers, and truckers. In addition to the inherent unsoundness of this particular statutory definition, the small-business man will be gravely affected by the legislative policy involved in the defining of a common and ordinary relation, such as employer and employee, in one way for the purpose, for one purpose, and in another way for the purposes of other statutes. If the Social Security Act is to have a definition of this relation for the separate purposes, the same policy would permit different definitions of the same relation for various other acts. If the policy is pursued in other legislation, two persons attempting to ascertain the relation between them could find that one is an employee for the purposes of the Social Security Act, but not for the purpose of the Fair Labor Standards Act, that he is an employee for the purposes of the withholding provisions of the Internal Revenue Code, but that he is not for the purposes of the National Labor Relations Act, and that he is an employee for one purpose but not for another, and so on ad infinitum, and at the same time for the purposes of contract and tort liabilities, and for provisions of adequate insurance coverage, the standards for determination of their relation could be entirely different from any of those in the cases mentioned. It is impractical to expect even the most astute businessman to say nothing of the average operator of a small business to know from day to day who his employees are and who are not and to perform his duties as required by law if the statutes are to define employee in one way for one purpose and in other ways for other purposes. It is obvious that if laws are to be observed, they must first be laws which will allow the people a reasonable opportunity to learn and to know what their duties and obligations are. The people cannot as a practical matter have this opportunity if Federal legislation is to be further and unnecessarily complicated by defining a common ordinary relation, such as employer and employee, in numerous different ways for numerous different purposes. None of these considerations implies opposition to social-security coverage for any person who would be included in the definition of employee as contained in the House bill, but who would not be included as an employee by common-law standards. The issue is not whether such a person should be covered by the Social Security Act, but is whether he should be covered as a self-employed person or as the employee of another. If it is regarded as desirable to bring such persons within the coverage of the act, they should be covered as self-employed persons and not by any illogical and impractical corruption of the definition of a common and ordinary relation, to the further confusion and burden of those who are attempting to do business under our already complicated laws. If the Congress, contrary to our expectations and belief, should be willing to impose further burdens and uncertainties upon small-business men for no greater purpose than is involved in this definition, it would be not difficult to foresee the day when the truly small-business man is completely bound by governmental regulations, gagged with administrative rulings, weighted down with official forms, and drowned in the muck of bureaucracy. The CHAIRMAN. Thank you very much. Mr. MUNDY. Thank you. The CHAIRMAN. Mr. Cloyd Taylor. Identify yourself for the record. STATEMENT OF I. CLOYD TAYLOR, SHADE GAP, PA. Mr. TAYLOR. My name is Cloyd Taylor of Shade Gap, Pa. I have prepared a short statement that is along the lines of the other statements you have already heard. I am not going to read it. I just want to say that I am in the lumber business. The CHAIRMAN. You may put your statement in the record if you wish. Mr. TAYLOR. Thank you. (The statement referred to follows:) STATEMENT OF I. CLOYD TAYLOR, SHADE GAP, PA. My name is I. Cloyd Taylor. I live up in the mountains of Pennsylvania and speak for the group of interested pulpwood dealers, producers, and small-business men operating in southern tier counties of that State. I am in the lumber business, oversee the operation of a farm, and have been a supplier of pulpwood for the past 25 years. Ninety percent of our pulpwood comes from farms, manufactured and delivered to the mill by farmers, their sons, or labor employed on the farm. We have, of course, independent truckers who haul a small percentage of the wood to the mill and occasionally bring back a load of coal or other products. This might be fertilizer, lime, feed, etc. These same truckers haul lumber to the coal fields and wood to the several wood-consuming companies. Under the proposed definition of "employee" it would be difficult to ascertain who is the employee and employer. Under the new definition of "employee," he could be employed by all these people. Many of the small lumber producers purchase stumpage from the farmers and, in turn, the farmer might even cut the logs. Does this make the farmer an employe of the sawmill operator? Of course, it doesn't in fact, but with the proposed definition, the Administrator could say it does. Under the present law, the definition of "employee" for social-security purposes is especially important in determining who is and who is not covered, but this problem is eliminated by the provisions of H. R. 6000 by extending coverage to self-employed, as well as to employees. It would appear that the purpose of defining "employee" as proposed is to cause payment of a higher tax. It certainly won't add a single person to the benefit rolls. It seems to me the Congressmen were right when they said on page 162 of the report: "Paragraph (4) serves no social purpose. Instead it leaves the status of millions of our citizens to the almost unbridled exercise of administrative descretion and does so just at a time when they must for the first time determine at their peril whether they are to be covered as employees or as self-employed. It will result in the unsettling of many established business practices and produce endless costly litigation. Its adoption is a shameful departure from the constitutional division of powers among the three branches of government and marks the surrender by the Congress of its prerogative and duty to define tax liability." The statement that the definition will result in the unsettling of many established business practices means, when you get right down to cases, that I am out of business. Nobody can afford to do business without any idea of what his tax liabilities are, so buyers of wood just won't do business with people like me. In order to know where they stand, and not be in position to get stuck years later with taxes, fines, and penalties for guessing wrong, they will have to produce their wood with their own employees. That means that a lot of people who are now small independent businessmen working for themselves and liking it, are going to have to go to work for somebody else and not like it. They aren't going to like it any better than you would. If the definition of "employee" now appearing in H. R. 6000 is retained, it will greatly retard the growing and conservation of timber in the North by small landowners in that they will have less opportunity to dispose of their timber growth at a reasonable profit. I sincerely believe that there would be so much confusion under the proposed definition of "employee" that small-business men would not know what to do. Mr. TAYLOR. I just want to say that I am in the lumber business. and oversee the operations of a farm, and have been a supplier of pulpwood for the past 25 years. Ninety percent of our wood comes from farms, manufactured and delivered to the mill by farmers. Their sons labor and are employed on the farm. We have independent truckers who haul a small percentage of this to the mill and occasionally bring back a load of coal or other products. It might be fertilizer, lime, feed, and so forth. The same trucks haul lumber to the coal fields, and wood to several woodconsuming mills. Under the proposed definition of "employee" in this bill, H. R. 6000, it would be difficult to ascertain who is the employee and the employer. I am greatly concerned as to the effect and outcome of our business if this proposed definition were to be retained and become law. That is all I have, Mr. Chairman. The CHAIRMAN. Thank you very much, sir. Mr. TAYLOR. Thank you, sir. Senator MARTIN. Do you have any idea how many men are conducting businesses in Pennsylvania similar to your own? Mr. TAYLOR. In Pennsylvania. I would have to make a guess. I would say 75. You mean pulpwood suppliers? Senator MARTIN. I am getting at the ones that supply pulpwood, wood for chemical plants and pit posts for the mines, and things of that kind, if you have knowledge of that. Mr. TAYLOR. We are out of the chemical section, and we have few pit posts, but very few, and most of the products there are used for lumber and pulpwood in our section. Our operations, I might say, are all small, from one to three men operations. We do not have any large ones. Senator MARTIN. A great number of you also operate small farms? Mr. TAYLOR. Yes. Senator MARTIN. You are primarily farmers and then you do this cutting of pulpwood and things of that kind to supplement your farm work? Mr. TAYLOR. That is correct. I think 90 percent, as I mentioned here, is a conservative figure of the wood that they get comes off the farm. I would rather think it would reach 95 percent. The CHAIRMAN. Thank you very much for your appearance. The CHAIRMAN. We will next hear from Mr. Stallworth. Representative BOYKIN. I would like to tell you a word or two about this gentleman who will speak to you now. He and I were born and raised in the same little town, Fairfood, Ala. His father gave me my first job at 35 cents a day. That is a long time ago, before he was born. I was in this business, and his father was, too, and he has come right along on it. He is one of the finest human beings I have |