Appeal from the District Court of the United States for the Northern District of Illinois, Eastern Division; Philip L. Sullivan, Judge.
Before EVANS and KERNER, Circuit Judges, and LINDLEY, District Judge.
We are, by this appeal, called upon to apply the Federal Unemployment and Insurance Contribution Tax Acts*fn1 to a golf club that hires a professional instructor and pays him a salary and also, pursuant to his employment agreement, permits him to carry on a business for his profit on the property of the club. The outcome turns upon our answer to the question, - What is the proper base for determining the tax? Should it include, in addition to the pro's salary of $1200 a year, the substantial profits made by him in conducting his golf shop, together with his earnings received from the giving of lessons to beginners and to those who believe (or know) their game may be improved by instructions from one, other than his golf partner.
The Commissioner included both revenues as the sum upon which the tax was computed. Plaintiff paid under protest and sued to recover that part of the sum which was based upon the pro's earnings and profits over and above the $1200 salary. The claim involved several years' payment.
The pertinent provisions of the pro's contract with the club are set forth in the margin.*fn2 In substance, the pro was to have the shop concession and teach lessons, and the club would turn over to him such funds as were by it collected for such services. Both sides emphasize the aspects of the case which are indicative of either (a) an employment status, or (b) the independent contractor relationship of the plaintiff.
The statute governs. Its applicable provisions are quoted below.*fn3
A study of the pro's contract in the light of the statute compels us to exclude from the appellant's social security tax, the profits from the conduct of the golf shop and the lessons. These profits were gained, not as an employee, but as an independent contractor.
The pro sustained a dual relationship to the club. Concededly, he was an employee as to the annual retainer, yet an independent contractor when he acted as a shopkeeper and instructor.
We have not overlooked the fact that these two capacities were bound together by a single contract and that one was dependent on the other. But, looking at the single issue as to the nature of the pro's relationship to the club when giving instructions or operating the shop, we think it clear that he was an independent contractor.
Under the contract, the club furnished the shop, and its members were the persons chiefly to be served, both as to instructions, and as purchasers of supplies, although such services were not limited to club members. The club received no percentage of the income derived from such shop, or instruction fees. The pro was himself required to hire and pay the expenses of an assistant. The club promised to be an instrumentality to effect payment of charges made against its members.They billed the expenses of instruction and golf supplies to the members, and if they collected the same they paid it over to the pro. But they made no guaranty of the members' debts.Any loss was the pro's. The store was to be run entirely at the pro's own risk, and solely for his own profit. He fixed his own fees for golf instruction. All the aspects of this contract were indicative of an independent contractor relationship rather than the hiring of an employee.
Both sides point out attributes of the "employer-employee" and "independent contractor" relationships, i.e., control by the employer of the employee's activities, right of discharge, etc.
All those criteria are standard tests used in the several unrelated fields of jurisprudence, i.e., workmen's compensation, principal and agent, contracts, etc.
The test of the Regulation which we feel clinches the independent contractor status as to the extra work here in issue is that the control of the club was simply as to the result to be accomplished and not the means of accomplishment. The club wanted to make professional instructional services available to its members and it wanted a store ready to meet its members' golfing needs. It certainly was not dictating to the pro how to teach the members. The Regulations specifically ...