Definition of Employee

Under the present Federal Unemployment Tax Act definition, the term "employee" does not include anyone (other than an officer of a corporation) who is not an employee under common law rules. The proposed amendment would revise the definition of an employee in the Federal Unemployment Tax Act to be the same (with minor exceptions) as the definition of employee in the Federal Insurance Contributions Act. The new definition of employee would include almost everyone who performs services for others providing:

a.

Subsequently all of the services are performed personally by the individual. b. The individual does not have substantial investment in the facilities used in providing the services (other than facilities for transportation).

c. There is a continuing relationship with the person for whom the services are performed (not a single transaction).

The proposed change in definition includes as an "employee" individuals who, as agent-drivers or commission-drivers distribute meat, vegetables, fruit and bakery products, beverages and provide laundry or dry-cleaning services.

Also included as employees are full-time traveling or city salesmen, engaged by wholesalers, retailers, contractors or operators of hotels, restaurants and other similar establishments.

The definitions of employee in many State laws are broader than the master-servant relationship of the current FUTA definition. Consequently, many of these employees are already covered by State unemployment insurance laws.

Under the proposed definition, the only persons who would still be excluded are full-time insurance salesmen, working solely on a commission basis, and persons rendering a service, for others, in their home (home workers).

The language of the present proposal was that developed by the Ways and Means
Committee for H.R. 15119 in 1966 and passed by both Houses of Congress.
This pro-

vision would not result in a change of status for employers except in very rare cases. The employers involved are almost invariably covered employers under present laws, and

are paying FUTA taxes and State contributions with respect to a majority of their employees who are not in this category.

The proposed change in the definition of an employee would mean unemployment insurance protection for workers in an additional 200,000 jobs.

Cas a home worker performing work, according to specifications furnished
by the person for whom the services are performed, on materials or
goods furnished by such person which are required to be returned to
such person or a person designated by him; or
(D) as a traveling or city salesman, other than as an agent-driver or com-
mission-driver, engaged upon a full-time basis in the solicitation on
behalf of, and the transmission to his principal (except for sideline
sales activities on behalf of some other person) of orders from
wholesales, retailers, contractors, or operators of hotels, restaur-
ants, or other similar establishments for merchandise for resale or
supplies for use in their business operations;

if the contract of service contemplates that substantially all of such
services are to be performed personally by such individual; except
that an individual shall not be included in the term "employee" under
the provisions of this paragraph if such individual has a substantial
investment in facilities used in connection with the performance of such
services (other than in facilities for transportation) or if the services
are in the nature of a single transaction not part of a continuing rela-
tionship with the person for whom the services are performed.

(Sec. 3306(1) and 3306(c) (14) of

the Internal Revenue Code)
EMPLOYER--For purposes of this chap-
ter, the term "employee" includes
an officer of a corporation, but such
tera does not include--

(1) any individual who, under the

usual common law rules applicable
in determining the employer-
employee relationship, has the
status of an independent con-
tractor, or

(2) any individual (except an officer
of a corporation) who is not an
employee under such common lav
rules.
EMPLOYMENT--...the term "employment"
means any service...except-.......
(14) service performed by an in-
dividual for a person as an insur-
ance agent or as an insurance so-
licitor, if all such service per-
formed by such individual for such
person is performed for remuneration
solely by way of commission.

September 16, 1969

Note: Underscoring indicates employees who would continue to be excluded under the proposed legislation.

Statement on Agricultural Coverage

While Agricultural workers should be covered under the same provisions as all other workers, the provision for coverage of employers of four or more in 20 weeks was selected as an initial step. The proposed provision would affect only about 5 percent of all employers, but would include about 30 percent of all workers. These employers are the largest employers in the agricultural industry.

By beginning farm coverage with farmers employing four workers in 20 weeks, the bill applies to the farm area the same gradual approach that was used with industrial employment. Available information indicates that it would probably be as feasible to start with broad farm coverage as it would have been to start nonfarm coverage on a broad basis. But the coverage proposed in the bill will minimize problems both for administering agencies and the farms.

July 30, 1969

113

Many persons are employed in both the agricultural and non-agricultural sectors of the work force. In the past ten years over 30% of all hired workers on farms earned part of their wages in non-farm work.

Number of Persons Who Did Any Farm Wage Work During the Year, 1947-1968 (Persons 14 Years of Age and Over)

1/ Information Not Available

Source: U.S. Department of Agriculture, Hired Farm Working Force, 1947-1968

September 16, 1969