benefits now provided. If our economy remains in status quo, on the average a man will get what he pays for and oftentimes more, with some exceptions. Sometimes under the proposed bill he will pay in money, pay income tax on such money, and get nothing in return. In conclusion, I feel strongly that there is no need for adopting the vast commitments of H. R. 6000 at this time, and that the whole matter needs further study. The CHAIRMAN. Any questions? Thank you very much, Mr. Battle, for your appearance and the information you have given the committee. The committee will stand in recess now until 10 o'clock tomorrow. (Whereupon, at 12:15 p. m., the committee recessed to reconvene Friday, March 17, 1950, at 10 a. m.) SOCIAL SECURITY REVISION FRIDAY, MARCH 17, 1950 UNITED STATES SENATE, The committee met at 10 a. m., pursuant to recess, in room 312, Senate Office Building, Hon. Walter F. George, Chairman, presiding. Present: Senators George, Connally, Millikin, and Martin. Also present. Mrs. Elizabeth B. Springer, chief clerk, and F. F. Fauri, Legislative Reference Service, Library of Congress. The CHAIRMAN. The committee will come to order, please. Mr. Reporter, please insert in the record two letters addressed to me, as chairman of the committee, but in the nature of supplemental statements by Mrs. Nola E. Patterson, editor and representative of the Life Insurance Field Force of America. Mrs. Patterson appeared at an earlier date in the hearing, but she wished to extend her remarks to this extent. (The letters are as follows:) LIFE INSURANCE FIELD FORCE OF AMERICA, Atlanta, Ga., March 14, 1950. Re H. R. 6000 Hon. WALTER F. GEORGE, Chairman, Senate Finance Committee, Washington, D. C. DEAR SIR: Pursuant to my presentation before your committee on February 6, 1950, in behalf of life insurance salesmen compensated solely by commission, it will be greatly appreciated if you will enter the following remarks in the record. As predicted in my first presentation, certain life insurance companies are making a desperate attempt to have the fourth definition of the term "employee" eliminated from H. R. 6000. If they succeed in that, we firmly believe they will immediately claim that commission compensated life insurance salesmen are not "full time" salesmen as described in the third definition and thus continue to deprive these people and their families of their coverage. Mr. Willam E. Jones, assistant general counsel of the Northwestern Mutual Life Insurance Co., even proposes a ridiculous amendment under which these salesmen would be included as "full-time independent contractors" for whom the companies would be willing to pay half the tax. The purpose here is twofold. Not only can the companies then claim that the salesmen are not "full time" salesmen, but it would bolster their defense against negotiating with them in regard to their working conditions if they are classed as "independent contractors." In regard to Mr. Jones' preposterous suggestion, we add the following evidence of employee status, particularly in connection with the salesmen of the Northwestern Mutual Life Insurance Co.: 1. Would any company dare appropriate the premium money of policyowners to pay social-security taxes for people who were not employed by the company? 2. The Northwestern Mutual has provided a company pension for its salesmen to which the company contributes. Again, would the company dare use premium money of policyowners to buy pensions for people who were not employed by the company? 3. Like many other life-insurance companies, the Northwestern Mutual inserted a disavowal of employee-employer status in its salesmen's compensation contracts upon the advent of social security. However, they contain much evidence of employee status even yet. For instance, a rule is laid down in the contract as to how the salesman must conduct himself. It provides financial penalties for salesmen who do not produce a certain amount of business within a given time. 4. Salesmen of the Northwestern Mutual and other life-insurance companies cannot sell anything. They can only persuade people to make application to the company for the issuance of a policy. It is the company which accepts, rejects, postpones, or rates the risk. These salesmen cannot close any transaction. A reinstatement of a lapsed policy, a change of beneficiary or settlement agreement, and so forth, is not binding until approved by the company. 5. The evidence of employee status set forth in my presentation of February 6, 1950, applies with full force to the salesmen of the Northwestern Mutual. Mr. Jones pretends that the wages-and-hours and unemployment compensation laws might apply if these salesmen were included as employees. Although this is not a good argument for excluding anyone from coverage, these salesmen as outside salesmen are exempt from wages-and-hours laws and in most States are exempt from unemployment compensation if they are compensated solely by commission. (See p. 51 of the enclosed Georgia law.) Mr. Jones also deplores the administrative difficulties which would be involved. Again this is not good argument for depriving the salesmen of their benefits. Other business concerns, all industrial-life-insurance companies and the following 10 ordinary-life-insurance companies have fuond it possible to administer the law without undue difficulty. The 10 ordinary-life-insurance companies listed below recognized the employee status of their commission-compensated salesmen and included them into coverage, thus proving that other such companies can do likewise: Acacia Mutual Life Insurance Co. of Washington, D. C. Monarch Life Insurance Co. New World Life Insurance Co. North Carolina Mutual Life Insurance Co. Provident Life Insurance Co. of North Dakota. Security Mutual Life Insurance Co. of New York. State Farm Life Insurance Co. Sun Life Assurance Co. of Canada. Connecticut General Life Insurance Co. The above-listed life-insurance companies have proven that commissioncompensated life-insurance salesmen can be included into coverage and the law can be administered. Mr. Jones says that as independent contractors the business expenses of these salesmen are deductible under the income-tax law. The business expenses of employees are likewise deductible under "Miscellaneous" in the self-same incometax law. Mr. Jones referred to the rulings of the Internal Revenue Bureau in regard to the coverage of life-insurance salesmen. The Internal Revenue Bureau did not have access to information from the employees. It had only the biased and incomplete information which was furnished it by the life-insurance companies which were determined to exclude their field forces from the benefits of socialsecurity coverage. We implore you to retain the fourth definition of the term "employee" in H. R. 6000. It is the only definition which will assure the coverage of life-insurance salesmen who are compensated solely by commission as the employees which they are and have always been. Respectfully yours, (Mrs.) NOLA E. PATTERSON, Editor and Representative of the Life Insurance Field Force of Ameries. Re H. R. 6000 LIFE INSURANCE FIELD FORCE OF AMERICA, Hon. WALTER F. GEORGE, Chairman, Senate Finance Committee, Washington, D. C. DEAR SIR: Pursuant to my presentation before your committee on Februa 6, 1950, and my subsequent letter of March 14, 1950, it will be greatly appreciated if you will enter this letter in the record. Following printed reports that the Equitable Life Assurance Society made representations to your committee to the effect that its life-insurance salesmen are "independent contractors," one of the Equitable's salesmen sent me the following evidence of employer-employee relationship between the Equitable and its salesmen. He requested that I forward it to you to be considered by your committee: "It would be difficult for an unbiased inquirer to adjudge the full-time agents of the Equitable Life Assurance Society anything but 'employees' in fact and in law. Not 'self-employed.' Not independent contractors.' Not 'operating their own business.' "Some cogent, reasons, briefly stated: "1. Under New York and other States' laws and under Equitable regulations, 'group life insurance' can be purchased only by an 'employer' who has the right to make premium-deductions from his 'employees.' Absolutely forbidden is group life insurance for independent contractors' or 'associates' of any category. But, all Equitable agents enjoy full group life insurance.' Lawfully so. "2. Agents fill out an 'application for employment.' They must pay an annual fee for an 'employee's fidelity bond.' “5. Until a few years ago the agency-contracts were replete with such phrases as the employer,' 'the employee,' 'employment,' etc. These were called in and a new printed form substituted. "4. Agents are subject to book Rules for Agents. No discretions. Rigid. "5. All independent contractors' buy their own occupational licenses. Equitable buys all such occupational licenses for its agents. "6. Equitable can and does change compensation at will. In some cases it pays its actual independent contractors' ('brokers' and 'one-case agents') more compensation than it pays its own agents. 7. Equitable charges against an agent's previously earned compensation a cash penalty for terminating his employment under some cases. "8. Legal papers served on Equitable agents are binding; the society has to accept and respond to such service. 9. By its printed unilateral contract of employment, Equitable holds the right to intrude and defend its agent against all claims and suits for any cause whatsoever. And to deduct from his compensation and otherwise to recover whatever it deems to be expense in connsction with any such claim. Hardly independent actions. 10. Whoever heard of a firm's purchasing for its 'independent contractors' a retirement pension plan'? Such is unlawful, forbidden by law and by regulations of all companies. Yet, Equitable has purchased a pension plan for its agents." This is copied verbatim from this Equitable agent's letter. His use of the word "agent" refers to life-insurance salesman, both terms being erroneous. These people are neither agents nor salesman. They are employees who are paid according to the result accomplished rather than by the hour. Sincerely yours, (Mrs.) NOLA E. PATTERSON, Editor and Representative of the Life Insurance Field Force of America. The CHAIRMAN. The committee will begin its work this morning. We hope that there will be other members of the committe present within a short time. We will proceed without delay since we have matters coming up on the floor of the Senate today that make it necessary for us to conclude around 12 o'clock, or shortly after 12. Mr. Mosher, I believe that you are first on this list. Mr. Mosher, you may be seated, if you wish. STATEMENT OF IRA MOSHER, CHAIRMAN OF THE NATIONAL ASSOCIATION OF MANUFACTURERS EMPLOYEE BENEFITS COMMITTEE, AND DIRECTOR, RUSSELL HARRINGTON CUTLERY CO. Mr. MOSHER. Thank you, Mr. Chairman. For the record, my name is Ira Mosher. I appear before you as chairman of the NAM Employee Benefits Committee, which deals |