National Labor Relations Board v. United Insurance Company of America – Oral Argument – January 24, 1968

Media for National Labor Relations Board v. United Insurance Company of America

Audio Transcription for Oral Argument – January 23, 1968 in National Labor Relations Board v. United Insurance Company of America

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Earl Warren:

Numbers 178 to 179, National Labor Relations Board versus United Insurance Company of America, et al. and Insurance Workers International Union, AFL-CIO versus National Labor Relations Board.

Mr. Manoli, you may continue your argument.

Dominick L. Manoli:

May it please the Court.

Mr. Justice Black yesterday inquired about some insurance salesman cases in this Court and I mentioned that we had had one Metropolitan Life Insurance case not too long ago and that that case involves question of unit.

Through some somewhat curious lapse of memory, Mr. Justice Black, I forgot to mention one other case.

I say curious lapse of memory because I argued it and since I’ve lost it, that’s probably why I don’t want to remember it.

But that was the insurance agent, the Prudential Insurance agent’s case which is also cited — both these cases certainly are cited in our brief and that one was on 361 477 and I’m sure Mr. Justice Brennan will recall that he wrote the opinion for the Court.

Hugo L. Black:

What did they hold?

Dominick L. Manoli:

Sir?

Hugo L. Black:

What did they hold?

Dominick L. Manoli:

In those — in the first case, the Prudential Insurance case you had involved there some debit agents.

There was no issue as to whether or not they were employees.

They had engaged in some intimate and work staff.

But there’s in the question there was whether those intimate work staff is constituted bad faith bargaining on the part of the union.

Hugo L. Black:

Do they have to assume that they were employees in order to decide in that —

Dominick L. Manoli:

It was so assumed but I don’t want to raise the issue.

Have the issue was not –-

Hugo L. Black:

It wasn’t raise but they have to employees to be under the Act?

Dominick L. Manoli:

That’s right.

Now, in the Metropolitan Life Insurance case, that too involved debit agents and there as I said yesterday, the question was whether or not the unit which the Board had fund was inappropriate collective bargaining unit.

In that case, it was conceded that they were employees.

Now, in the remaining few minutes that I have, I would like to turn to my final part of my discussion.

Yesterday, I sought to explain that the Board’s judgment that these debit agents are employees under the meaning of the Act is reasonable and wholly within the framework of the applicable governing test.

We believe that the court below in displacing the Board’s judgment as the status of these agents has, as I said yesterday not only misconceived the controlling test but we also think that it has overstepped the bounds of judicial review.

This Court has often said that problems of definition of status have been wisely committed by Congress to the expert agency as created and not to the courts.

The company argues that since the controlling test here is a common law test, that the Board has no special expertise in this area and that therefore the Court of Appeals owes the Board no particular deference in applying such a standard.

But I suggest Your Honors that the question involved, the problem involved is not simply one of law but rather the application of a statutory term to a variety, an infinite variety of factual situations.

And in that area — in that area, it seems to us that the primary responsibility of the Board for administering the statute is singularly appropriate and this Court only recently said, “Universal Camera is not an invitation to disregard that primacy.”

Indeed, Universal Camera says that even in areas where the Board does not possessed any special competence or expertise that the Board’s choice of two fairly conflicting views is to be respected by a reviewing court even though the reviewing court, upon the de novo consideration of the matter might have fairly and reasonably come out with the adequate way, the other conclusion.

Byron R. White:

Well, Mr. Manoli, Congress certainly indicated that it wasn’t satisfied with what the Board was doing with employees, he wanted to amend the Act.

Byron R. White:

And yet, do you think the amendment has made any difference at all?

You apparently believed that the News Voice case is — a result from the News Voice case isn’t going to be changed under the new test and yet that’s what disturbed Congress —

Dominick L. Manoli:

Well, yesterday —

Byron R. White:

— is that going to make any difference at all?

Dominick L. Manoli:

Let me say this.

The principal criticism that both the House and the Senate had with respect to the Hearst cases as I see it, the thrust of their criticism was that they thought that this Court here had pretty much left the Board at large in determining whether or not individual for employees and for the contractors without any definite standard.

And in the House Conference Report, the Court — it was said there, Conference Report, speaking of Hearst —

Byron R. White:

So there not — so Congress didn’t want the courts to review these kinds of determinations of agencies with some care?

Dominick L. Manoli:

No, I think that what they wanted to do was to make sure that the Board would be applying agency rules — agency rules in determining the status.

But the fact that they adopted a common law rule doesn’t mean that in the application of that rule that the Board was not to have the usual area of discretion of judgment that it ordinarily has in the application of statutory terms to particular specific situations.

Now, the — as I say, I don’t think that Universal Camera, Universal Camera as this Court said, is an invitation of the Court of Appeals to disregard that premise in the application of a specific statutory term to specific situations.

It’s very much the same in the case of a supervisor to be sure that the supervisor is not a common law term but Congress in the Act has defined the various incidents that established supervisory status.

And repeatedly, the Courts have said that that’s primarily the responsibility of the Board to apply that definition, to apply that definition to a specific situation.

And incidentally, I might mention that unlike this case here, the Seventh Circuit itself has paid that kind of difference to the Board and the application of the terms “supervisor” to a specific situation.

Now, to say the Board has no special competence in this area, I think merely overlooks what the Board does.

The Board has these situations almost daily.

There are a number of cases in the Boards, volumes dealing with the employees’ status within the independent contractors’ status, with supervisors’ status, all kinds of shadings, all these various and almost infinite different situations.

And it seems to me that surely, that experience makes for the kind of knowledge that in the words of this Court is entirely the usual difference by a reviewing court to the Board expertise in applying specific statutory provisions to specific situations.

Thank you.

Earl Warren:

Mr. Groner?

Isaac N. Groner:

Mr. Chief Justice, may it please the Court.

I think that the parties in this case have agreed as to the legal test to be applied when an issue arises under the Labor Relations Act as to whether particular workers or employees or independent contractors.

There are two aspects to the test, two aspects.

One is what may be termed the general agency principle or the common law principle.

And I think that the parties have looked primarily to the restatement of the law of agency for the factors which are involved in terms of their test.

But the parties are agreed that that test is not the entire test.

There is a second test which the company, the respondent, joins the petitioners in making relevant, at least so the brief says, and that is, that there must be consideration to effectuation of the purposes of the Act to a realistic application of the common law test, so that there are two facets.

One is the common law or the general principles of law.

The other is the effectuation of the principles of the Act or a realistic application of the first.

Now, the first facets was added by — was made express as a result of the congressional action or reaction to the Hearst case of this Court.

Isaac N. Groner:

That congressional action, we would submit, Mr. Justice White, can be summed up fairly and accurately as a feeling that both the Board and this Court in the Hearst case had given no attention whatsoever to common law principles.

Congress felt that the Board had not paid any attention to those principles.

Congress read the opinion of this Court as expressly saying that common law or general principles of agency law are not to be considered but only the effectuation of the purposes of the Act, only the expertise of the Board.

Now, whether that reading was right or wrong is beside the point.

What we submit and submit most emphatically is that the congressional record, the reports of the committees make very clear that this was the congressional reading so that the difference that the congressional reaction made was that the common law test had to be considered and we further submit that this is the only difference that the congressional reaction to the Hearst test makes.

Byron R. White:

You don’t think that Congress disagreed with the result of the Hearst?

Isaac N. Groner:

But Congress was agreeing —

Byron R. White:

You don’t think that Congress disagreed with the Board on his voice?

Isaac N. Groner:

I don’t think that that is the primary thrust of the — of the —

Byron R. White:

What if we — what if the legislative history is that way to us?

Isaac N. Groner:

That Congress disagreed with the result?

Byron R. White:

On News Voice, yes.

Isaac N. Groner:

Then I would submit to, Your Honors, that you would look to the standard as defined by the Congress in the legislative history.

The way that Congress reached that result was that it believed the News Voice to be independent merchants.

This is the phrase used in the House Report “Independent merchants”.

And the Congress stated, well, I think we would all agree that in general, the concept of an “employee” is one who makes his living as part of someone else’s organization through a wage or a salary whereas an “independent contractor” is one who makes his living by profit, by the difference between the costs of the goods that he purchases and his selling price.

Abe Fortas:

Now, you — your position is different from the Government’s position, is it not, with respect to the interpretation of the congressional action?

Isaac N. Groner:

I do not — I do not believe so, Your Honor.

I believe Mr. Manoli stated that the common law test had to be taken into account by the Board.

Abe Fortas:

Well, I’m looking at page 17, Footnote 17 of the Board’s brief and which is just an elaboration of what they say several times in the text as I’ve recall and that is that the governing standard as a result of the congressional action is that agency principles are dispositive.

And you — you sir, are you telling me that that is not the Government’s position as you understand it?

Isaac N. Groner:

Well, that is the Government’s position as I do understand that, excuse me.

Abe Fortas:

“Dispositive” means “dispositive”, doesn’t it?

Isaac N. Groner:

Yes, indeed.

But agency — the principles of agency law has to be examined realistically.

The two facets of the test which I was emphasizing are not inconsistent.

They are compatible.

I merely separated them for purposes of emphasis.

What the Board is emphasizing is what we are not emphasizing.

That in the application of the agency tests, there must be some room for the effectuation of the purposes of the Act.

Isaac N. Groner:

There must be some room for a realistic application and respondent joins us in this.

If you will look at pages 13 and 15, and 18 of his brief, you will find that they also emphasized that they are not arguing that the effectuation of the purposes of the Act is to be disregarded.

Hugo L. Black:

As I was told like spears independent contract, definitions that had been given to independent contractor are not models of the decision of such and such?

Isaac N. Groner:

That is certainly true, Your Honor.

Hugo L. Black:

Base on these records that in each, doesn’t it — doesn’t it?

Isaac N. Groner:

It does — yes, there are factual circumstances that have to be taken into account that include almost any pertinent fact in determining whether a group — a particular group of workers are employees or independent contractors.

The reinstatement list as I recall about ten separate clusters of fact which are pertinent.

Hugo L. Black:

As I recall it have many adhered this evidence.

The Court had been decided either way it wishes under the common law rule.

Isaac N. Groner:

Well, that — it’s because of that, Mr. Justice, Black because the application of the common law rule, if it is viewed in isolation as some kind of automatic touch stone for defining rock which will give the answer which may lead to error and will lead to a diversity of results.

But if it is illuminated by — in terms of the Labor Relations Act, if it is illuminated by regard for effectuation of the purposes of the Act, our regard for a realistic application.

Then, we would submit that the Board in that context has an expertise which the Court should respect and which the normal —

Hugo L. Black:

What if anyone argues to the contrary of that and it was considered to rest on the independent contract in light of the Act and what is so far as the purposes of Act?

Isaac N. Groner:

No one here is arguing that but the decision of the court below reflects that.

The decision of the court below provides no realistic basis for saying that they gave regard to effectuation of the purposes of the Act.

Hugo L. Black:

But if that — it seems to me actually on the ground that common law independent contractors are saying that anybody could know or could see it?

All they have to do is just look at it and know that contractors are not in control?

Isaac N. Groner:

That is precisely the way that I would read it, Mr. Justice Black and it is for that reason that I would say that on analysis they did not give any consideration, any realistic or informed consideration to effectuation of the purposes of the Act or to the fact that this problem arose in the context of an issue under the Labor Management Relations Act.

It is precisely because the court below regarded the common law test as some abstraction which could guide them infallibly without regard to the context that the decision below will lead to a very wide error if it is not reversed.

Hugo L. Black:

In the common law, as I recall it, it had to do mainly with tort.

Isaac N. Groner:

The common law —

Hugo L. Black:

If you were the some minor who is working in the mine, was an independent contractor when he only had one foot of mine whether he was an employee.

Isaac N. Groner:

That is correct, that it — the original question which gave rise to the concept of independent contractor was whether there was liability in tort when a third party who had been engaged by the defendant to do some work committed a tort against the plaintiff.

And the original common law test was a test of independent calling.

This was the basis for the so-called “rider patrol test”.

The common law decisions held that if that third party were engaged in an independent calling such as draymen or minor or what you will.

If he was truly independent, then the person who had engaged in these services should not be held liable for the tort.

And that independent calling test, as a matter of fact, evokes the independent merchant phraseology which the Congress used so that the background in tort was a background of looking to the cause for the lack of control.

And the original cause was that the party was engaging in a different calling or enterprise.

It was a different economic or legal business entity.

Hugo L. Black:

As I recall it, one of the main things which you had to consider was rather this was a mere device or an employer’s part to escape liability for tort.

He should work it as a play.

Whether it was a man was a genuine employee of the company, they were trying to conceal it behind a lot of camouflage?

Isaac N. Groner:

That is — that is correct.

Hugo L. Black:

It didn’t limit itself to a precise definition, did it?

Isaac N. Groner:

It did not limit itself to precise definition.

No, Your Honor.

And that is why the context makes a difference and that is why I assume that respondent joins us in pointing out that the context makes a difference.

And that the context in this case is in the Labor Relations Act, so that we would apply that if we apply the test that Congress specify in the legislative history ought to have been specified in the Hearst case, that test will result in this case in the finding of employees because these insurance agents are not independent merchants.

They do not make their living by profit.

They are an integral part of the respondents’ entire organization.

They are not separate business entities.

They do not have their own place of business.

They do not hold themselves out to the public as being a separate and distinct business entity.

And so, whatever test is applied and there are obviously many different verbal formulations, whatever test is applied, whatever standard of judicial review is applied, the decision below cannot be sustained.

The decision below sweeps to one side many of the evidences of factual control, which are contained on this record with the statement that they are inherent in the insurance business or in the debit life and accident and fire insurance business.

Now, whether or not they are inherent in the business, we would submit it’s beside the legal point of the right of control tests realistically or unrealistically applied because the right of control looks to whether or not in fact the controls may be exercised.

The right of control is a right of controlled tests.

If the right to control has been reserved even though it has not been exercised, that, according to the traditional formulation is enough so that those involved must be classified as employees.

And to say that it is necessary in the nature of the industry because a debit insurance agent is given a collection book with a group of life and health and fire policy holders from whom he collects, so that he must perforce make many reports and must report to the office on a weekly basis because these are necessary in the industry.

That is obviously no reason to disregard the fact quite to the contrary.

It is a compelling reason for saying that on this record in this industry, demonstration has been made, that control has been reserved and that in fact control has been exercised.

The Court made much — the court below made much of the concept that these agents were on their own.

I must confess I do not know what that means.

I suspect that again it is only another way of saying that the court below concluded that they were independent contractors.

If the Court meant that they were on their own in the sense that they were on their own business enterprises, that is clear error.

There is nothing on the record to support it.

If the court below meant that they were “on their own” in a physical sense because it is true that most of their working time they spend out and the debit, their concentrated territory where most of their policyholder’s reside.

If that is what the Court meant, again, that is not relevant legally and not supported on the record factually.

It is not relevant legally because the right of control may be reserved.

Isaac N. Groner:

The right of physical control may be reserved even though it is not exercised.

And indeed, it is wrong factually because the record demonstrates that the right of physical control has indeed been reserved and it is being exercised on at least two different ways, One is that there is a regular meeting which all these agents must attend on a Thursday or Friday morning; they must be there, they are there and this is an occasion when supervision is physical felt, when management may physically confer with the agents and for example, tell him that he is not doing a satisfactory job and therefore must resign or should look for other employment.

Furthermore, there is physical presence felt by the accompaniment on the debit of the agent as he makes his collections and sales rounds.

There is a hierarchy above the agents, assistant managers, special riders, managers and then all the way up to Vice President of Sales.

Abe Fortas:

Do I correctly recall that there are two other cases that did not come to this Court involving the same company in which the debit agents were held to be — held not to be subject to the Act?

Isaac N. Groner:

There have been three decisions but basically there’s only one other case.

The two that — the first decision did not reach of the Seventh Circuit in the previous case.

The first decision on the Seventh Circuit turned on a due process point.

It was a remanding for further hearing.

After that further hearing, the case did go to the Seventh Circuit and involved a Pennsylvania unit, as I recall it was 1960, 304 F.2d and the Seventh Circuit did hold and that is the only decision prior to the case now under review that they were independent contractors.

They both —

Abe Fortas:

Was there — was there a factual difference in that — between that case and the one we have before us?

Isaac N. Groner:

That the — the primary without me to be facetious, Your Honor, the primary factual difference is that we are here.

Abe Fortas:

But why — why —

Isaac N. Groner:

At that point, the union had no right to take a petition for certiorari and the National Labor Relations Board did not petition.

Abe Fortas:

There was no petition for certiorari as I recall.

Isaac N. Groner:

There was no petition for certiorari.

The union had no legal right so far as we know the file what —

Abe Fortas:

So what?

Isaac N. Groner:

— the Board did not.

Abe Fortas:

So what you’re saying — telling us now is that in your submission, there is no difference in the facts between that —

Isaac N. Groner:

No, no.

Let me answer.

Secondly, there are differences in facts, yes.

They are differences in facts can be described it seems to me on two different levels.

First of all, the record is different.

In other words, the particular witnesses who testified here and what they testified to is different.

Abe Fortas:

Well, that’s what I’m asking about, Mr. Groner.

What are the differences?

Isaac N. Groner:

Well, the —

Abe Fortas:

In the records?

Isaac N. Groner:

They — let me make clear.

That we do not agree with the initial decision of the Seventh Circuit.

So that if I was saying that I’m relying on the differences, that would not be an accurate and fair statement.

It is clear on this record than perhaps it was on the last that these agents are required to come weekly to the office.

It is clearer on this record than perhaps it was on the last that they do not invest any of their own money; that they make no investment whatsoever with respect to becoming agents or staying agents with the exception of $5.00 or $10.00 for the initial state license.

The renewals are paid for by the company.

It is perhaps clearer on this record that it was on the last that these agents are not separate independent business entities but that they are an integral part of the entire structure and hierarchy of the respondent.

So that, for example, when they are absent for illness or for the so-called “service bonus”, which is in reality a vacation plan, their assistant manager covers the debit and the sales that he makes in general accrual to the agents’ advantage.

It is perhaps —

Abe Fortas:

In other words, the agent gets the same commission or whatever it is?

Isaac N. Groner:

Yes.

It is perhaps clearer on this record than it was on the last that the method and amount and type of compensation is dictated unilaterally by the company that the contract which the agent signed has been written solely by the company without any negotiation or consultation with the agents.

It is perhaps clearer on this record that that it was on the last that the company retains and indeed has exercised the right to hire and fire these agents.

Those are perhaps the principle elements on which this record is clearer.

We believe that the prior record was that the case for the general counsel had more witnesses in this particular hearing.

They were, we think, more persuasive and then thorough witnesses.

In short, the documentary evidence is more ample with respect to the rights of control retained in the fact.

For example, the transfers of cases may not be made without the approval of the company.

There is, for example, in this record enumeration of two or three cases where the approval was not given; thereby giving a clearer proof that the right had — the right of control in this respect had been retained.

And so on and so on and so on down through the various elements.

We believe that the facts are much clearer on this.

The bargaining unit involved in this case is a different one.

This case involves Anne Arundel County in Baltimore.

The other case involves the Commonwealth of Pennsylvania.

And there are other certain differences on the facts; some of the agents in this case came from the Quaker City Life Insurance Company and that made some difference in the record so that there are some differences with respect to the two records.

That if — if there are no other questions, I should like to save the balance of time for rebuttal.

Earl Warren:

Mr. Segal?

Bernard G. Segal:

Mr. Chief Justice, may it please the Court.

Right here and now, I should like to sever the connection which my friends this morning have built between them and me.

Bernard G. Segal:

They have said, Mr. Manoli, yesterday that there is no significant dispute as to facts.

Mr. Manoli said there was no significant dispute as to the scope of review or as to the definition.

And this morning, I hear from my friend, Mr. Groner that there is no significant dispute between us, as to the meaning of Congress, as to what happened to the Hearst Act, as to whether News Voice are or are not covered.

I suggest, Your Honor that in the words of the famous author, “Methinks my lady doth protest too loudly.”

The fact is, that of course there are very, very substantial differences between us.

The fact is, as we apprehend the law, Congress intended very specific and very positive and very definite results.

Mr. Manoli said yesterday that in his view, the only time that the economic realities came into effect, mind with you the Hearst case, was when there was a Taft case that in the easy case you apply the law of agency.

And in the Taft case, and I quoted exactly, the policies and purposes of the statute, “tilt the scales”.

I suggest, Your Honors, if that is true, Congress achieve nothing.

Mr. Groner, this morning, said categorically, Mr. Manoli said this morning categorically that this determination is not one of law.

If that is true, Your Honors, then Senator Taft was completely in error when he defined for the Congress what the Conference Report achieved.

My friends say that they have not departed from the test.

Let me read, in addition to the portion of the brief that Mr. Justice Fortas so aptly referred to, namely the footnote and other part of the brief on page 19.

The determination whether an individual is an employee or an independent contractor thus allows considerable room for the exercise of judgment and discretion tests which the Board, with its wide experience in handling cases, involving different hiring relationships is a specially competent to perform.

Then we skip down to the middle of the page, middle of the sentence, the factors to be considered and the way to be assigned them “are so infinite and subtle that of necessity a large major of informed discretion”.

“So infinite and subtle” instead of so simple as we were told this morning that of necessity at large and measurable of informed discretion is involved in the exercise by the Board of its primary function to determine whether an individual is an independent contractor or an employee.

And then comes something, which I don’t want to take time with the moment for, but the Board then says that the test — that the Court must apply is warrant in the record and a reasonable basis in law.

That again was Hearst and that was overruled by Universal Camera but I’ll come to that later.

And then I come to the footnote to which Mr. Justice Fortas referred and I see where the Board feels that where respondeat superior, which is what Congress said was to be the test, the same test that has been applied there.

That where that is not involved, the subsequent infusion of flexibility.

This is something new in the law of independent contractor, the subsequent infusion of flexibility into the relevant standard.

Something else that Congress didn’t intend for determining employment status is a especially appropriate where the purpose of the inquiry is not to decide the applicability of respondeat superior liability but to determine the coverage of the National Labor Relations Act.

Well, that’s all the Congress was dealt with if it – dealing with if it please the Court, that’s the coverage of the National Relations Act.

Now, let me just read to Your Honors, if I may, and I have not intended to take your time with this, two excerpts, One from the House Committee Report which originated the language and the other from Senator Taft in explaining to the Senate why he recommended that they adopt the Conference Report.

The House Report says, “An employee, according to all standard dictionaries, according to the law as the Court have stated, and according to the understanding of almost everyone, with the exception of the National Labor Relations Board means “someone who works for another for hire.”

But in the case of NLRB against Hearst, the Board expanded the term “employee” beyond anything it ever had included before.

And the Supreme Court, relying on the theoretic expertness of the Board, upheld the Board.

It is inconceivable that Congress, when it passed the Act, authorized the Board to give to every word in the Act whatever meaning it wishes.

On the contrary, Congress intended then and it intends now that the Board gives to words not farfetched meanings but ordinary measures, ordinary meanings.

To correct what the Board has done and what the Supreme Court putting misplaced reliance upon the Board’s expertness has approved the bill excludes independent contract and so on.

Bernard G. Segal:

And what does Mr. Senator Taft do to my friend’s argument that this is not a question of law?

“The legal effect of the amendment therefore” he says, that the Congress, in presenting the Conference Report, necessary an official position, “is merely to make it clear that the question whether or not a person is an employee is always a question of law, always a question of law.”

Since the term is not meant to embrace persons outside that category under the general principles of the law of agency.

Excuse me.

Abe Fortas:

Well, Mr. Groner referred us to your brief, Mr. Segal and at the bottom of page 15 of your brief, you quote a Court of Appeals with approval.

It reads, as follows, “While due regard must be had for the purposes of the Act” — we find it on the bottom of page 15 —

Bernard G. Segal:

Yes, Your Honor.

Abe Fortas:

— it was at very bottom, “While do you regard must be had for the purposes of the Act, nevertheless, agency principles constitutes the controlling test in distinguishing between employees and independent contractors.”

And then in the next sentence you say, “Hearst clearly demonstrates us to be the correct approach.”

Bernard G. Segal:

That is correct, Your Honor.

If you have a question of an unfair labor practice in an Act which involves independent contractors, if you have a question of representation, as to the representation question, as to the unfair labor practice question, do regard as had for the Act.

But when you get to the independent contractor, then as we say the controlling principle must be the law of agency.

Abe Fortas:

I didn’t understand that.

Is that what you are saying in your brief that phrase?

Bernard G. Segal:

That’s precisely what we meant to say, Your Honor, that nevertheless the —

Abe Fortas:

I thought you are construing the effect of the congressional action (Voice Overlap)

Bernard G. Segal:

No, we say never —

Abe Fortas:

— for the purposes of this case?

Bernard G. Segal:

— nevertheless, agency principles constitute the controlling test.

Abe Fortas:

I understand that but I mean to say, I don’t know what the importance of this is and I’m not at all sure that this verbal excursion is going to help me conclusively but you do say while do you regard, must be have for the purposes of the Act.

Agency principles constitute the controlling test and that’s pretty close to what Mr. Groner was saying.

Bernard G. Segal:

No.

Mr. Groner was saying, Your Honor, that this is never a question of law.

Senator Taft says it is always a question of law.

Mr. Groner — Mr. Manoli says that in a closed case, agency principles are departed from and you look only at the purposes of the Act.

We say that while the framework is the Act, the controlling principle must be agency law.

Certainly, that’s what we intended to say, that’s what we thought we said that we didn’t.

It isn’t what we intended.

Now, I address myself to a question, several questions that Mr. Justice White asked and that is what the Senate thought as to the specific issue of this case, namely the Newspaper Drivers.

I may say that in the back of our brief as appendix A, we have drawn three columns, four columns really.

Bernard G. Segal:

The first are the items that were considered by courts.

The second contains the items which the courts have felt important as to United’s agents.

But, of course, we say that there is no generic debit agent.

There are certain things they have in common.

There are great many things they have different from each other.

The third contains interestingly enough.

The items in the Phoenix Mutual case where the court below held that debit agents were not independent contractors but were employees because they operated differently from United’s employees and the Court showed the difference between those.

And the last column shows what’s in the Hearst case the Court defined as the controls and lack of controls over the News Voice.

Now, Mr. Justice White, what the Court — what the Congress said about the Hearst and then specifically about these rather petty types of employees as the Board regarded them.

In the first place, the House Conference Report said it is believed that the provisions of the Conference Agreement relating to the Court’s reviewing power will be adequate to preclude such decisions as those in Hearst.

Now, I don’t know what precluding a decision like the one in Hearst can mean except precluding the holding of those News Voice to be employees.

And then I go to a portion of Senator Taft’s statement and he said specifically, “While the Board has never claimed that independent contractors were employees, the Supreme Court has the Hearst Publication’s case held that the ordinary test of the law of agency could be disregarded by the Board in determining if petty occupational groups were employees.”

That’s very much like Mr. Manoli, in reverse.

Mr. Manoli says that where it’s a clear case and that he very clearly says as these petty occupational groups in effect, the Board’s view has become today as I shall show that you’ve got to be an independent businessman.

That if it’s the type of thing that some people had employees and some have independent contractors that has fled from the law.

That’s not what the Congress said.

The Congress said that, if petty groups were employees within the meaning of the Labors Relations Act, the Court consequently refused to consider the question.

The legal effect of the amendment, therefore, is to make clear and so on.

So that I would say categorically, Mr. Justice White, that rightly or wrongly, the Congress in an issue which is not constitutional in character but merely involves what it wants words to mean, obviously, it could use any word and define as it pleases and this Court, I respectfully submit, is bound by it.

The Congress in an issue not involving constitutional questions has said, the Court has played mistaken, has paid mistaken difference to the Board.

This is a question where the Court’s expertise, where the long list of cases to which Mr. Justice Black referred, whatever may have been the issues in those cases have established the law of independent agency, you cannot say that economic realities make it so that if there’s a right of termination, if the status is not a lofty status, if it’s not an independent business, will no longer regard it as an independent contractor.

And I can see the reason why the Board says that.

The Board says that because its function is to extend coverage, to extend coverage.

Congress has said, it extended it too far.

Now, we are going to put a stop in this one respect.

Hugo L. Black:

Would you mind telling me what piece of legislative history You chiefly rely on your position?

Bernard G. Segal:

Yes, Your Honor.

I only rely on two things, and there are only two significant ones.

Hugo L. Black:

In your brief?

Bernard G. Segal:

Yes.

Bernard G. Segal:

One is the House Report because the House originated the language.

The Senate, originally, did not.

Then in the Conference, Senator Taft and the Senate conferees went along with the House definition.

And so, the second thing I rely on is the Conference Report, House and Senate, and Senator Taft’s explanation to the Congress of what the Conference Report achieved and so we quote the House Report and we quote Senator Taft statement.

And I may say that the amicus brief quotes further portions of both.

Byron R. White:

Well, do you understand the Government to say that if the Board is right in this case; that the result would be the same in the News Voice case?

Bernard G. Segal:

Well, it has to be, Your Honor.

If you will —

Byron R. White:

I can see their petition for certiorari suggests about says that?

Bernard G. Segal:

Yes, and, Your Honor, if you will look at this tabulation we’ve shown, you will find fewer controls in the debit agent case than were present in the News Voice case.

Now, I address myself factually to a statement by Mr. Manoli.

He says there is, and I quote him exactly, he said yesterday, “There is really no significant dispute as to the basic facts.”

And that is what the brief says for the Government, for the Board that is what the union brief says and interestingly enough, that is what the trial examiners introduced the statement said.

If so, Your Honors, my task would be an easy one because under the test I have just shown, this Court would be the expert agency to apply the various factors of traditional independent agency.

But I fear that if we argued the case on the basis of their being no significant dispute, Your Honors, when you reread the briefs, would find that it would be like Hans Christian Andersen’s famous “The Emperor’s New Clothes”.

You would find that it was all a mirage because the simple fact is that they’re very substantial disputes.

I was rather surprised to hear my friend, Mr. Groner, and I’m sure it was an inadvertence, say in reply to Mr. Justice Fortas that one of the differences between this case and the other cases was that this case the Board offered more witnesses.

The Board had one significant witness in this case.

You couldn’t have less than that and it had one witness to corroborate on transfers, very brief witness who told very briefly.

And that was the total Board’s case.

There wasn’t one other solitary thing type of testimony in the Board.

So, Mr. Groner’s recollection obviously is at fault.

Now, Your Honors, I’d like to talk just a minute about what debit agents do?

If they are such simple focus, Mr. Manoli described to Your Honors, if their total time is simply devoted to knocking at the door in saying “your premium is due, please pay it”, why does the brief of the Government spend more than 50% on the facts?

And why does the union brief takes 44 pages to do nothing but state the facts?

It’s because it is not an uncomplicated job.

Mr. Manoli’s deprecatory references to the debit agents activities calls for a very brief statement of what they are.

I take it that every one would agree that United had the right to parcel out this phase of its business.

Business can parcel out anything that it wants to.

It could have parceled out its advertising; it could parcel out its accounting.

Bernard G. Segal:

It shows to parcel out three phases of its business.

One is the collecting, it is true, another is the selling, and the third is the servicing of its policies.

I’d like to tell Your Honors, that a third of the income of these people comes from not from collections, but from the new business they write.

And I might say as this record shows one-third to 40% of their time spent on activities other than collecting, selling, servicing of policies.

But don’t let me deprecate selling, Your Honors, it’s not a routine job to collect premiums on insurance policies.

Each collection in the first place is the reselling job.

These are simple folk that buy industrial insurance.

They have to be resold each time you collect the policy.

I may say competition is very keen.

It’s a good deal of endeavor to try to change these people especially early in the policy where there’s no loss to other policies.

The scheduling in a wide territory is difficult.

He must learn the habits of each client.

He must learn the best time to collect.

He must learn about the man who when he gets his pay on Friday, no longer has it on Sunday night.

He’s going to get there Friday before it goes to the corner cup brew.

He’s got to know about the housewife who will spend her allowance Monday.

Prepayment is a very, very important thing.

He’s got to know that the man who works, for example, on a contracting job in Montana may have months without work and he’s got to try to persuade that man to pay in advance three or four months premiums so the policy won’t lapse during the time that the snows are on the ground and no construction is going on.

So that, Your Honors, I suggest that there’s nothing routine or clerical about this kind of collection.

He’s got to be a specialist; he’s got to learn how to be.

Selling —

Earl Warren:

Couldn’t that be done by an employee as well as an independent contractor?

Bernard G. Segal:

Yes, Your Honor.

Oh!

Without doubt.

But they could have paid the salary, they could have paid an employee but this company has decided that its best interests are not using an employee.

I would say Your Honors that 90% of the independent contractorship can be done through employees.

I’m one of the Board of the distributors for RCA.

We, in Philadelphia, distributes through an independent agency.

In your State, Mr. Chief Justice, of California, RCA distributes itself.

Bernard G. Segal:

It doesn’t use a distributor.

In Chicago, it doesn’t use a distributor.

It does it through its own employees.

The choice is the contractor.

Earl Warren:

Well, I’m — I’m just wondering if you were stressing that point to show that he wasn’t an employee.

Bernard G. Segal:

I was stressing that, Your Honor, to show why this company believes that it’s wise to give it to the individual entrepreneur.

Now, some other companies believe differently like Phoenix.

Hugo L. Black:

Mr. Segal, I have just read each quotation you have of Senator Taft and from the Committee Report and from the other statement.

I get very little assistance from it except they emphasized their purpose to see that independent contractors were treated as independent contractors and employees are treated as employees.

Bernard G. Segal:

Well, Your Honor, I must say that I get a good deal more out of it —

Hugo L. Black:

What could you get out of it?

Bernard G. Segal:

I get out of it the fact, and I might say I read more of the reports this morning than we quoted because in answer to Mr. Justice White’s specific inquiries, which we didn’t have before when we wrote the brief, but I get of it this.

I get out of it that what the Board was saying is that there is nothing technical about this relationship.

There is nothing in which there’s an expertness on the part of the Board; that this is an area wants the Court to be the expert in applying the principles in weighing the factors; that the traditional law of respondeat superior, that the law of agency which created the difference between independent contractor and employee which the courts created shall apply here and the Court shall not have what it called false reliance upon the Board.

That’s what I get out of the report, Your Honor, and I think I’m quoting it verbatim.

And, I get the fact that Senator Taft said it is not as my friend Mr. Manoli said, a matter for the Board’s expert fact determination among factors but it’s one of law.

Hugo L. Black:

Well now, that’s the part I can’t get much of.

Of course, it’s a question of law as to what an independent contractor as we go over the statute than what an employee.

But the facts, the law has to be applied to the facts.

So, it is a mixed question of law and fact, is it not?

Bernard G. Segal:

Yes, and the Committee Reports and Senator Taft say that here’s where this Court — as this Court itself said in the Texas Transmission case, this Court said that when contract principles were involved, the Federal Power Commission has no expertise, it’s this Court that overruled the Federal Power Commission on the interpretation of whether “they had entered into” or rather whether “Texas Gas Transmission had entered into a new contract, a contract”.

And so in the Chenery case, this Court said that it was the courts that were expert on the law of fiduciary obligations.

And so when the SEC said there was a violation of fiduciary obligations, this Court said it owed no filthy to that finding.

And, what Congress said, is the Court who has mistaken with full deference.

The Court was mistaken in saying that it did owe that type of application in the determination of this question in the Hearst case.

Surely, Your Honor —

Hugo L. Black:

What will now if this is that I don’t have a good deal of dealing with independent contractors and employees and I never was a rule to try in anyone definition whereby you can just hurl those words out and say, “Now you decide whether this is an independent contractor or an employee as a matter of law.”

Bernard G. Segal:

Precisely what Senator Taft said.

He said, “There are no talismanic words to define the relationship but it’s the courts that are experts and not the NLRB.

The fact, the very factors —

Hugo L. Black:

I see why he said the NLRB was not (Voice Overlap) —

Bernard G. Segal:

I’m quoting them, Your Honor.

He said there are no talismanic words.

Hugo L. Black:

Well, that’s right.

Bernard G. Segal:

And he said that it is for the Court to make the determination of his whole complaint and I’ll come to that in the scope of review.

His whole complaint, his second complaint was as first complaint, was really an answer to Mr. Justice White’s questions.

Not to be anticipated them but he did answer them.

His second complaint was that the Court was wrong as to the scope of review in this type of case.

Hugo L. Black:

Are you able to give a definition now, the common law difference between an independent contractor?

Bernard G. Segal:

Oh, I would say — I would say Your Honor, I sat for three months and the counsel for the American wants it to in arguing this but we, I’m sure came to the conclusion that the right of control is the primary test.

Now, the rest of it are —

Hugo L. Black:

Not all of it, is it?

Bernard G. Segal:

I’d say it’s primary and I’d say it’s 80%.

Now —

Hugo L. Black:

It could all of it, could it?

Because they might just let some employee control three or four employees around him, that would be this?

Bernard G. Segal:

Yes, that’s right.

I’d say that right of control is a primary and not the sole test, Your Honor.

Hugo L. Black:

It’s quite a number of facts and circumstances —

Bernard G. Segal:

Yes, there are.

Hugo L. Black:

— than the others.

Bernard G. Segal:

And I might say that in the reinstatement, we took a specific example.

We said take the salesmen an illustration.

We said take the salesman, who supplies his own car as this man does and who goes out on his own to sell as this man does.

They said in that case it is not to be inferred that he’s an employee.

Abe Fortas:

Mr. Segal —

Bernard G. Segal:

That’s in the reinstatement, Mr. Justice Black.

Abe Fortas:

— for some purposes — for some purposes, these debit agents are in law agents of the insurance company, aren’t they?

Suppose a debit agent makes a material misrepresentation of fact in selling a policy to somebody, isn’t the insurance company liable for that ordinarily or generally?

Bernard G. Segal:

Your Honor, I can’t speak for all states.

Bernard G. Segal:

I have to say that are differs in states.

Some states —

Abe Fortas:

Well, just take each plain agency principle if there is such thing I had take back, take agency principles.

And if the debit agent goes around, sells an insurance policy of this company and makes a material misrepresentation of fact, ordinarily went to the Court say that principle of respondeat superior applies and the company is held to responsibility for the agent’s misrepresentation.

Bernard G. Segal:

I would say in most states, they would say that.

That’s an obligation imposed on law and explains why in a book to which I will refer the rate book which Mr. Manoli thought consisted of instructions and has only two pages of suggestion as to policy that is emphasized not to make any misrepresentation and that the reason given is, that the company in Maryland as that happens where this was involved is responsible.

Abe Fortas:

Oh, yes.

I think so.

Bernard G. Segal:

There are some states that have solved that responsibility, Mr. Justice Fortas, if it takes safeguard.

That’s all I’m referring to.

Abe Fortas:

Well, the next thing is the debit agents have no power whatever to modify the terms so to speak, the terms of sale.

That is to say the rights are given to them, the terms and conditions of the policy are prescribed by the company so that if in the act of some, they are bound, they have no freedom to bury the terms, isn’t that right?

Bernard G. Segal:

I’d say that is right but I’d like to add to that if I may, Mr. Justice Fortas.

That except as the law adds one requirement that is no different from the handling of General Motors product by its distributor or the handling of RCA product by its distributor.

What the law —

Abe Fortas:

I don’t think — I don’t think General Motors would like being bound by that Mr. Segal?

Bernard G. Segal:

Well, what the Board —

Abe Fortas:

If they’ve found an uncomfortable and perhaps dangerous.

Bernard G. Segal:

No, I was about to say and that’s what I want to add.

What the law imposes here is that the company is allowed to sell only the contract that is approved by the insurance commissioner and that the rates improved by the insurance commissioner.

Abe Fortas:

Whatever — whatever the cause may be?

Whatever the cause may be, the fact of the matter is that the debit agent does not have control or discretion over the product so to speak or the terms and conditions of sale, number 1.

And number 2, for certain purposes, in any event the company is responsible for the actions and the representations of the debit agents.

Those are the two points that —

Bernard G. Segal:

Your Honor, I’d rather restrict it to representations rather than actions.

But, I may say that that is precisely the same as the insurance broker who himself employs a hundred men, he is bound by the policy, he is bound by the rate and his misrepresentation binds the company and yet not even the Board would hold.

We tendered the testimony here although it was rejected of an independent insurance broker who himself employs a large number of men and this is a very large offer of proof, both in this case and the prior case, to demonstrate that such controls as there are here are precisely the same as to him.

Abe Fortas:

Well, I understand that.

And the problem is that, there are one of these cases, I expect you to bring despite the proposition that you have emphasized which is an ultimately the question as one of law.

The legal judgment depends upon, as Mr. Justice Black was saying, depends upon the totality of the facts and circumstances.

Bernard G. Segal:

I would agree to that very readily, Mr. Justice Fortas.

Now —

Earl Warren:

Mr. Segal who — who insures these employee — these agents against automobile accident liability?

Bernard G. Segal:

The agents pay their own accident liability.

They pay their own burglary insurance in case the funds which they have collected are stolen.

They own the cars.

They pay the expense of the cars.

Earl Warren:

Are they reimbursed for that?

Bernard G. Segal:

Not at all, not in anyway.

Now, those with very wide territories, because of time and many elements in a very few in number, get 1% commission on collections additional but a great bulk of agents don’t get that and they are never reimbursed in any way for the items that you have mentioned, Mr. Chief Justice.

Now, I won’t emphasize the expertise that goes into selling except that I’d just like to say this, Your Honors, that these debit agents sell from one-third to 40% of all the ordinary, the non-debit insurance type, the non-industrial life sold by this company.

Now, Mr. Justice Harlan asked Mr. Manoli whether debit agents hold other jobs.

Mr. Manoli answered having no advance notice, of course, of the question that usually, that some of them can sell other insurance but usually do not.

Well, as to that answer, he was mistaken.

This record shows that the Board’s witness, Mr. Scott, had four licenses to sell for other companies; that he sold in five months one quarter of a million dollars of insurance for other companies.

It shows that Mr. Spalding, who devotes just 20 hours a week to his work for United, devotes the rest of his time to selling casualty or on appeal insurance for other companies.

The prior record to which Mr. Justice Fortas referred gives 29 men who hold licenses and sell insurance for other companies.

Now, Mr. Justice Harlan then followed that up with a question, “Do they engage in other businesses?”

And Mr. Manoli replied, “No”.

And I submit to Your Honors with deference he has mistaken.

There is no doubt that they have the right to engage in other businesses, there is no doubt that they do.

As this record show one witness testified he is in the real estate business.

Another runs a ballet school with his wife and as an actor and playwright.

I may say that he’s on the Board of the John Hopkins’ great facility in that field Board of Trustees.

Another sells general merchandize on credit and another sells used cars and obviously, there are many other activities.

These are just typical.

Hugo L. Black:

Where are the headquarters?

Bernard G. Segal:

Well, you mean — their headquarters, Your Honor, is admittedly in this record, their homes or portions of their homes set apart and they deduct from their income tax for that use of their home; everyone of them.

The prior record shows that some of them rent their own offices and pay their rent and their telephone.

Now, the Board conceded that these men do not come to the district offices more than once a week and that when there, they are not there more than two to four hours in a whole week.

Bernard G. Segal:

So, it’s obvious, that’s not the center of their activity.

Earl Warren:

What are they there for?

Bernard G. Segal:

They come there, Mr. Chief Justice, first to present a weekly report.

And while I’m on it, I may as well get back straighten, it’s not that complicated difficult accounting report of great detail which my friend has referred to and which was present in the Phoenix case where everyday they have to report the hours, the people they saw, their sales, what they did hour by hour.

That’s one of the differences that in the Phoenix case they were employees and they had a work at certain number of hours and they had to respect their hours.

Whereas here, admittedly, they are on their own and the — it is made very clearer indeed that these agents have no restrictions at all.

That the report that comes in weekly that Chief Justice asked about is a report of the new business they sold.

Obviously, they got to report back was then policies are assured on them within the next couple of weeks and every other phase, it’s in the record and it’s a one-page report, and it’s their own computation of their own commissions because this money though trust funds in the hands of an insurance agent, a general insurance agent, are not trust funds in their hands.

They may use them for whatever their purpose.

Once a week when they come in, they turnover the net, they take out their commission.

If they’ve settled any claims, they take out their claims.

If they have any checks they’ve collected, they turn in the checks and the net is what the company gets.

Then there are meetings on that day of the week at which changes in the law, recommendations as to policy are given to these people.

They are very much the same as the general sales meetings that all big companies in America have for their distributors except that, frankly, they occur much more often.

I mentioned the distributor in Philadelphia; RCA has a man exclusively assigned to that distributor 100% of the time.

That isn’t because they want to control, that’s what they wanted to be sure that their products are marketed in the best possible way.

Mr. Segal is Mr. Manoli correct in saying that prior experience of insurance field is not a factor upon these debit agents?

Bernard G. Segal:

I think that’s right, Your Honor.

If it were, you simply couldn’t get enough of them with the turnover.

But I would say that the success of the agent — you see their compensation runs from $7,000 and pull or more to $20,000 a year in this record.

The success of the agent depends on how quickly he becomes a specialist.

How many of this total number of agents the record shows were brought in the insurance business of the state for the first time?

Bernard G. Segal:

Sorry, Your Honor, it doesn’t show.

All that shows is that some were old-time insurance agents and some had no experience at all.

One testified he’d been in it for 20 or 30 years and actually had been a general agent.

Another testified he hadn’t been in it at all.

Earl Warren:

How many of these agents are there in the company?

Bernard G. Segal:

Well, Mr. Manoli said yesterday that there are 3,000.

That’s not in the record but I would guess it’s about right.

Perhaps a low by two or three hundred and involved here are a 159 and I want to get to a difference because there were 80 in St. Paul Street and 79 in Franklin Street.

Bernard G. Segal:

And that’s really the difference to answer Mr. Justice Fortas between the other case and this.

Now, I pat —

Byron R. White:

Anything in the record to show the names of their compensation

Bernard G. Segal:

Yes, Your Honor, that in Maryland, it’s $7,000 to $20,000 a year.

That’s very specific.

Now, I might say as to servicing policies that’s an expert job.

They have to help with the claim forms, they settle claims, change the beneficiary, cash surrender value, loans, advances, terms of — there are many policies involved, insurable interest, illegibility of Beneficiary Clause.

These are things — then got to pass an examination given by the insurance commissioner before they can get their license.

Now, I must —

Earl Warren:

May I revert back to those meetings on Thursdays.

Is there anything else they do there?

Are there any instructions that they are bound to follow or anything of that kind is given to them at those meetings?

Bernard G. Segal:

I’d say, Your Honor, that the categorical answer that we make is no and the prior examiners so found, if I’m going to come to these examiner, admittedly there’s no individualized treatment.

They are only there two to four hours and perform all these things.

There is a general meeting at which company, the assistant manager, will go over with them, developments in the field.

But that is advisory and as I say it has its direct counterpart in the kind of meetings held for distributors by large industries throughout America.

Hugo L. Black:

What do you mean by going with them the developments in the field?

Bernard G. Segal:

Well, they will go over everything from saying, “You better be advised that the weather report show, whitely snow next week”; they will tell them that the insurance commissioner has issued the ruling; they will say that the experience in Philadelphia or Chicago has demonstrated X or Y which you men may want to take into consideration.

They are the kind of promotional inspirational meetings that you expect the projector of a project to try to inspire his independent contractors or his employees with.

Hugo L. Black:

Oh —

Bernard G. Segal:

They’re used in both.

Hugo L. Black:

How about the salesmen.

Bernard G. Segal:

I say it or his employee’s salesmen.

I say in either event that’s the kind of meeting they have.

Byron R. White:

Mr. Segal, I gather these individual debit agents are not free to get any help themselves in terms — can they hire — are they free to hire few people

Bernard G. Segal:

Oh!

Certainly, Your Honor, there’s a great mistake in this record.

Byron R. White:

And do they?

Bernard G. Segal:

Well, now there is evidence on this record to this extent.

One, that they have the right to; Two, that they use other members of their family.

Bernard G. Segal:

One man, for example testified that his wife does collect before hand.

Byron R. White:

No territorial restrictions or anything else?

Bernard G. Segal:

None.

Byron R. White:

If one want to hire ten people and go out if he could do so?

Bernard G. Segal:

Without doubt.

Now, there’s one who for example said that he hires the payroll girl —

Byron R. White:

But doesn’t he assign the list of customers to collect?

Bernard G. Segal:

That’s his original — when he comes with the company, he has what is called the “debit” and that’s a list of (Voice Overlap)

Byron R. White:

But he could build that list up as large as he wants.

Bernard G. Segal:

Anywhere in the State of Maryland and indeed one man testified, he pursued his customers outside the Maryland and one went to Columbia in South America where he has — he sold the policy.

And, well I think that answers your honest question.

Hugo L. Black:

Suppose that that man has a criminal record?

Bernard G. Segal:

He wouldn’t be given a contract here.

He just wouldn’t be with the company.

Hugo L. Black:

But would he be given a contract I presume?

Bernard G. Segal:

With this company?

Hugo L. Black:

For the company.

Bernard G. Segal:

This company, of course, as does any good company investigates the background.

These people going to home should get to be very careful.

I don’t believe that that’s typical, independent contractorship.

Hugo L. Black:

Well, how did the company has to do to the selecting itself?

Bernard G. Segal:

Oh!

I think every company has to select whether —

Hugo L. Black:

But I understood you to indicate.

Bernard G. Segal:

Whether they are independent contractors, Mr. Justice Black or employees.

The company is very foolish that doesn’t set a high standard.

Hugo L. Black:

I had understood you to say a moment ago that they could employ other people to do their work.

Bernard G. Segal:

I didn’t finish that.

The law is that you may not employ as a salesman anyone other than another licensed salesman for that company.

If I’m licensed to sell for Equitable, I can’t sell for United.

Bernard G. Segal:

I must have two licenses.

But as to the collection, as to the servicing, as to the other activities, they are free to take on their pick, anyone they want.

Now, —

Hugo L. Black:

They pick on bad people?

Bernard G. Segal:

Well, Mr. Justice Black, if they took one —

Hugo L. Black:

I can’t believe that!

Bernard G. Segal:

They can take on whom they want.

I would presume that if they took on a thief, the company would have to say, “If you want to employ thieves, your contract is terminated.”

Hugo L. Black:

Well, that’s what I would suppose.

Bernard G. Segal:

Just as they would do with the distributor of RCA.

If he has thieves going around the salesman, they simply will separate with their contract.

Hugo L. Black:

So that the company has to have some kind of control over —

Bernard G. Segal:

Not all.

Excuse me?

Hugo L. Black:

The company has to have some kind of control over whom are we working or it of the — these debit collectors?

Bernard G. Segal:

Well, it’s an old question of the floor and the ceiling, Mr. Justice Black.

It doesn’t have control.

But when it gets out of control, it can sever the relationship.

Is it — I think —

Bernard G. Segal:

Out of control of the contractor.

Are these your arrangements termed if it will?

Bernard G. Segal:

They are, Mr. Justice.

Earl Warren:

You mean they can —

Bernard G. Segal:

Either party.

Earl Warren:

— fire them anytime they want or call a termination of the contract unilaterally anytime they want?

Bernard G. Segal:

Either party just as in the News case.

I have a case right now for a distributor with a $7 million investment where he was told on Monday morning he was out.

We’re taking the position that they have the right to put them out but they got to do something about the stock that he has on hand.

This is not peculiar to the insurance business.

Now —

Earl Warren:

It’s rather common — it’s rather common to an employer-employee relationship, is it not?

Bernard G. Segal:

Yes, and it’s getting more and more common, Your Honor, to the independent contractor relationship as big companies do to improve transportation and communication are not as dependent they were.

This is why where RCA and thought of you can get an outstanding distributor that will to $50 million, $60 million a year business and have a building, a block long it uses them.

And when in Chicago, it had to terminate and then feel it could get to someone else; it went into its own distributorship and formed the RCA Distributing Company.

This is not peculiar again to this business.

Now, some have a month termination notice but I don’t know of any independent contract with my experience as a lawyer that had more than three months notice.

And there, there are people with millions and millions of dollars of investment.

Now, I would say the basic difference between the Board and the Court is that the Board takes the position, that a debit agent is generically an employee and the Court takes the position that that is not so.

The Board pursues with that at determination and the Court would find discrimination.

And so, the Board says in the Phoenix case that —

Abe Fortas:

Which is better?

Bernard G. Segal:

I would say taking the word “fine” as in this day defining discrimination and eliminating any onerous aspects of that may have a connotation that it’s much better to take it case by case and not have a rule that applies regardless, a rule which is based on the economic realities.

Now, I might say that in answer to a question by Mr. Justice Harlan, Mr. Manoli replied that United is the only holdout, the only company that still employs debit agents as employees.

It just happens.

I know that it’s wrong because our office had litigation last year in which the president of the company called Pilgrim Life Insurance Company testified that his debit agents are independent contractors.

I happen to know in my own city that there is a company who put up the United Life Insurance Company where they operate as independent contractors and I’ve been informed by the president of this company last evening, the American General Life Insurance Company of Houston.

Byron R. White:

I see the Board making careful notes of your position.

Bernard G. Segal:

Alright.

Yes.

No, I think it’s the Union is making my notes.

Well now, if it please the Court, I would like to get on to two things that curiously were not mentioned here.

Mr. Justice Fortas asked whether the records weren’t really the same and I’d like to say, Your Honors, they are different in one respect.

It is true that in the other cases the examiners made that pertinent findings and they found the facts as they were and they concluded on this Board’s philosophy of economic realities that these are debit agents.

But they said they are on their own and they have unlimited hours, they can do what they please, they can work 20 hours as one man testified or 42 hours as another man testified.

This examiner found every significant fact against the company.

And not only that, the conceded facts, this fact that I mentioned, he just diluted it, he reduced it, he said it applied only to selling.

He then said that it was too in extent and he then said they have to work day and night anyway, that it’s all around the clock job which of course, it isn’t.

The testimony here is at 20 hours to 42.

But there is — and the testimony of the witnesses for the company here was virtually identical.

It happens the same lawyer tried the cases, it happened to be my brother.

Bernard G. Segal:

It happens that the same attorney from the company was assigned to the case.

They operate uniformly.

There is a big difference and this difference is Franklin Street.

This company had taken over Quaker and incidentally, it’s interesting that my friends do not even refer to.

The company took over the Quaker City Life Insurance Company, which was a company whose debit agents were clearly employees.

They exercise all controls, they required the reports that were present in Phoenix Life and that we‘ve outlined.

A man named Scott, by the examiner’s definition, became the ring leader.

The examiner said that Mr. Scott was obviously partisan, was obviously endeavoring to further the General Counsel’s case.

But he believed Scott explicitly and every single word he said and most of his words were different from both Board witnesses and employee and employer witnesses or company witnesses in the last case.

Now, he was at Franklin Street and all of the former agents of the Quaker City Life were at Franklin Street.

And curiously, this one witness that the Board produced and the witness who substantiated him as to these transfers both came from Franklin Street.

Admittedly, they knew nothing about St.Paul Street.

We put on the assistant manager we had at Franklin Street.

Obviously, these fellows were formed as a group.

They were filing written demands.

They were endeavoring to frustrate the endeavor to make them independent contractors.

Now, here were our witnesses, all of them were from St. Paul Street, which had been our traditional office there.

Both are covered here.

There were 80 agents there in 79.

And this examined, without a word of testimony by a Board witness what went on to St. Paul Street simply said everything Scott said applied to St. Paul Street.

Now, I submit to Your Honors that no court could sustain that and this Court didn’t sustain that.

Now, the examiner tried to get around that by saying, “No, but that only went on for two weeks in March and it was all over by then.”

But this record has letters in June and in September and it has the testimony of Mr. Forwaldt, the assistant manager who said things were chaotic in December at that time of the hearing.This was an aberration.

This was sui generis at this one point.

And I suggest to Your Honors, that the examiner, in trying to gloss it over as a part of a kind of absolute policy that he was going to write the one — he was going to write the one report decision that couldn’t be reversed by a Court, differed from all of his predecessors in the findings.

There’s been one sense and we cite the case in the footnote.

I’m going to send the clerk the citation because it will show, Your Honors, how the same agents have been treated as if they were different breeds of animals in the four other trial examiners versus this one.

Now, this examiner did a remarkable thing.

The Court said that it seriously influenced the Court and yet, Your Honors, Mr. Manoli didn’t refer to it this morning.

Mr. Groner didn’t refer to it this morning.

Bernard G. Segal:

The Board brief relegates it to the very last footnote on the very last page and the union does the same thing.

And this was something which the court below simply could not accept.

Earl Warren:

Can the court below comment on that fact?

Bernard G. Segal:

Oh!

Your Honor, it’s a very major part of its decision.

The court below said that there was not, from its examination of the records, substantial evidence for critical facts and there were at best what it called tenuous support for others.

It said that critical findings had infirmities from the standpoint of lack of substantial evidence we support and it gave the test of Universal Camera and said it could not conscientiously rely on this examiner.

Now, then it gave this story, it said, “Why is it that this examiner believed one witness, who admittedly know only about Franklin Street and disbelieved all the others who testified about a wholly different location?”

And he said “that he was undoubtedly influenced by the fact that he said as he observed these not witnesses but debit agents, both those who testified and those who didn’t in the courtroom, he called it on and off the stand demeanor”.

As he observed their demeanor, they showed — I’d like to read that to Your Honors.

“They showed a servile attitude.”

They showed something — let just if I may read that to Your Honor.

I have that right here.

Here it is.

“They showed a marked deference beyond the sometimes illusive requirements of courtesy.”

He said that “They failed to show in their off the stand and on the stand attitude, a demeanor of independence.”

And he said, “Typical of what happened, his attitude was when there was stipulated that six witnesses, six debit agents wouldn’t testify, they just identified themselves and the testimony would be the same as the other”.

He said, “While being deprived of their ‘moments of the glory’”.

And this was his all attitude towards these debit agents.

Hugo L. Black:

What page is that on in the records?

Bernard G. Segal:

The “moments of glory” is 877 if it please your —

Hugo L. Black:

877?

Bernard G. Segal:

Yes.

And the — but the important matter, Your Honor, that demeanor testimony, you will find it on page 1151, I mean the demeanor statement, 1151 in Footnote 26, which starts on that page; it’s a very long footnote.

Then he says, he makes the significant finding.

He terms it a “finding” that I just read to Your Honors.

And then in the text, he says, that “he uses this in conjunction with other and themselves sufficient basis for all of these findings”.

Now what is the Board do with that?

The Board puts that in a footnote too.

And the Board says, — the Board says, “We do not,” one sentence, “we do not rely on the trial examiner’s observation as set out in the footnote,” observation.

Bernard G. Segal:

Now, Your Honor, in the first place, by saying they don’t agree with the observation in the footnote, I don’t know whether they mean they don’t agree with the “finding”, so label the finding by the examiner.

But it isn’t just the footnote.

The text says that, “As he observed the debit agents in eight days of hearings,” well, our people run stand only five days, so his textual reference has to be off the stand as well and he says that, his observation, he is using that support for “my findings”.

And I submit, that the Court then said, “We can’t do that.”

The whole thing is tainted.

This whole attitude, the reason he had said these people are unworthy of belief is because they are saying things which label them as independent contractors and his view is, that they’re servile, that they don’t show ordinary independence as they walk around the courtroom.

The examiner swears himself before he makes the (Inaudible)?

Bernard G. Segal:

No, Your Honor.

He didn’t swear himself and he rode a very learned discourse on why off the stand, demeanor was proper.

And —

Abe Fortas:

The Board found that no prejudicial error is committed by the examiner.

That’s on page 1200.

You know, Mr. Segal, whether that is a customary form that the Board uses when it affirms examiners’ findings?

Bernard G. Segal:

I think that’s a short form of order.

Abe Fortas:

Then that they, you can use that?

Bernard G. Segal:

I’d rather defer to Mr. Manoli.

Abe Fortas:

Well, he can answer.

Dominick L. Manoli:

The Board often does have short form of decision at that time.

Abe Fortas:

So it finds that no prejudicial error —

Bernard G. Segal:

That usually —

Abe Fortas:

— and I suppose your point is that this was a prejudicial error.

Bernard G. Segal:

Oh!

Yes, and the Court very, very conscientiously went into why.

The Court pointed out that you cannot split up a man’s mind in two segments.

And say, well, we know he wasn’t influenced although we said he was.

And I submit to Your Honors that this Court under these circumstances, since my time is almost up, this Court under these circumstances applied the rule of the Universal Camera case.

Hugo L. Black:

What evidence could these people give that he held is not worthy of belief?

Bernard G. Segal:

Oh!

Your Honor, all the evidence they gave in the other cases.

They gave evidences to the fact that there are hours of work are free.

Bernard G. Segal:

There are 1,500 pages, I guess of evidence.

12,000 pages of evidence.

They went through the fact.

They own their own automobiles.

They thought what the answers that I gave to Chief Justice.

Hugo L. Black:

Did you deny that he did?

Bernard G. Segal:

Why sure —

Hugo L. Black:

Deny they did not own their own automobile?

Bernard G. Segal:

He said — he specifically found that the 1% that a few agents get is for transportation and he disregarded the rest.

He never mentions that in his opinion, Your Honor, if it’s not important.

The reinstatement says that that is a factor, that’s important.

He disregards it.

He never even mentions it.

Hugo L. Black:

So he hold it justified falsely and saying, they own their own automobile?

Bernard G. Segal:

He didn’t say that but he said that they’re —

Hugo L. Black:

As I understand it, the evidence does not so much in dispute.

Bernard G. Segal:

No, that is not correct, Your Honor.

The evidence is vigorously in dispute.

And that’s what I stored out by.

That’s where I disagree with my friends.

That’s why they take so much time to go through the facts and that’s why we do so.

And, if may, Your Honors, simply say that in the scope of review, this Court faithfully and loyally followed Universal Camera.

The Court made it very clear and I might I say that here, the brief is perfectly clear of the Board that it wants to return to warrant in law and a reasonable basis in law.

Well, this Court said on that point unanimously in Universal Camera and in Pittsburg Steamship that that is no longer the test.

And I submit that the Court, having followed the standard, having reviewed the finding, having found it couldn’t conscientiously rely was in this posture.

Mr. Justice Frankfurter said for this Court, “Where we called upon to pass on the Boards conclusions in the first instance, or to make an independent review, of the review by the Court of Appeals, we might well support the Boards conclusion and reject that of the court below.

But Congress has charged the Court of Appeals and not this Court, with normal and primary responsibility for granting or denying enforcement orders.

And I submit to Your Honor that having applied the test under the mandate of the Act, having followed faithfully the Universal Camera’s scope of review, the Court should be affirmed.

Thank you, Your Honors.

Earl Warren:

Mr. Groner.

Hugo L. Black:

Mr. Groner, would you mind stating first your reply to the statement that was made about this examination and the statement about these examiners during the eight day?

Isaac N. Groner:

To the —

Earl Warren:

The statement he has just prepared.

Isaac N. Groner:

Yes.

The first answer I will give Your Honor, is that the Board expressly disavowed any reliance on the off the stand demeanor testimony.

So that what was before the Court was the Board order?

So that even though the Board had adopted the short form order, which in effect adopted the findings and decision of the trial examiner, they dropped the footnote, indeed, from the record to form to call special attention to it and to say we disavow any reliance upon the comment by the trial examiner with respect to off stand demeanor.

That is my first answer.

My second answer is that any fair reading of the trial examiner’s decision will demonstrate that this is pure dictum, that he said it was pure dictum and that the entire elevation of this issue by the court below and by the respondent is merely, and I regret to say it but it is our view that it is merely one way of attempting to mask the overwhelming facts of this record demonstrating that these agents are employees.

The trial examiner’s decision is a long and a careful one.

If you open it to any page, it relies as much upon witnesses called by the respondent, Vice President Ross, Division Manager Forwaldt, the agents from St. Paul Street.

It is simply not true that the examiner found that all the testimony called by the respondent was false.

If you read the examiner’s decision, you will find that he weighed all the evidence and that he doesn’t give — he does indeed give credence to many of the statements by the respondent’s witnesses.

Many of the facts which Mr. Segal has said it have admittedly so and did are not admittedly so.

For example, on Page 222 of the record, the question is, “Do you think it is against the rules for you to get someone to collect for you?”

Answer, “If I may you asked me, if I thought it was against the rules to have an outsider and that’s the term you used, do my work for me and I said yes and I still say yes that I consider it a violation of the rules.”

Now, Mr. Segal said admittedly there were no individual meetings.

On page 632 of the record, the question is, “Was Mr. Gore asked to come in on a day other than his regular reporting day?”

The witness, respondent’s witness, William H. Forwaldt answer, “Yes, he was”, page 632 of the record.

Mr. Segal states that the headquarters of these agents are in the home.

If you look them up in the phonebook, you would find the address and the telephone number of that district office of the company.

These employees are part and parcel of the hierarchy and organization of the respondent.

Abe Fortas:

Is that in the record?

Isaac N. Groner:

Yes, indeed, that’s on the record.

They have no employees of their own.

The products which they sell are the respondent’s products.

The headquarters which they use is the respondent’s headquarters.

The very purpose of the district office testified to by witnesses called by the respondent.

The very purpose of the district office is because the respondent has decided that that is the best manner on means it has selected for carrying on its business.

So that the business we are dealing with as the organization that we are dealing with is the business and organization of the respondents.

Isaac N. Groner:

These employees rely upon this employment, Mr. Justice Harlan, for their livelihood.

Whatever they may do by way of advocation as the salaries of $7,000 to $20,000 demonstrate and as the record demonstrates, many times, these are full time employees.

They have no genuine bargaining power vis-à-vis the respondent.

The company pays Social Security tax payments which they would not do in terms of statutory provision that they must be full time insurance agents if the contribution is to be made.

Hugo L. Black:

You say the company pays Social Security.

Isaac N. Groner:

Yes, the company makes the Social Security payments.

Hugo L. Black:

Does that Act refer to independent employee?

Isaac N. Groner:

The Act does not to it —

Hugo L. Black:

Does it refer to any contract?

Isaac N. Groner:

No, it does not Your Honor.

But if the —

Hugo L. Black:

To whom does it apply?

Isaac N. Groner:

If — there is a provision which specifically refers to full time life insurance agents and it is cited in our brief.

And there are various other requirements such as that most of the services must be performed personally which is effective response to the statement that they may hire others, if they do hire others and they are not performing the services personally.

So in response to the particular part of the statute that refers to full time life insurance agents and provides various conditions they’re not effective which, Mr. Justice Black, is indeed that the implication in that effect is that these agents are employees and not independent contractors that the Board was correct in within its statutory finding, authority and finding them to be employees, that the Court exceeded any test of law or a fact of law.

Any proper test of review, any proper test of agency, any proper test of law in deciding that they were not on the basis, we submit, of the Court’s own approach to this problem.

Hugo L. Black:

Do I understand you to say or do I not that you’re taking a position that Social Security Act to which they pay covers the employees only?

Isaac N. Groner:

No, Your Honor.

No.

I’m relying particularly on the section of the Act which expressly refers to full time life insurance salesmen, I believe.

Hugo L. Black:

And you do not claim that that refers to employees only?

Isaac N. Groner:

Not necessarily.

No.

I’m merely calling attention to the particular elements that the statute requires.

Full time is one of them.

Performing the services personally is another.

Not making substantial investment is another but the terms “employee” and “independent contractor” are not relevant to the particular payments on behalf of full time life insurance agents.

For these reasons, we believe that the judgment below should be reversed.

And that the (Voice Overlap) that these debit agents under any pension plan or something?

Isaac N. Groner:

These agents are under a debit plan — excuse me, under a pension plan which is in effect a profit sharing plan.

Isaac N. Groner:

The definition of this plan applies to employees, the definition of employees as drafted by the company covers specifically the debit agents.

So that there is no concession by the company that the application of the pension plan to the employees has an — or the word “employees” in that context is applicable here.

But yes, they do have a pension plan and they are covered by the same pension plan and as all other admitted employees of respondent are covered by.

Thank you very much.