Security Storage and Van Company of Norfolk, Virginia v. United States

WIDENER, Circuit Judge:

Appellant taxpayer, Security Storage & Van Company of Norfolk, Virginia, appeals from a judgment for the United States in a civil action brought by appellant seeking a refund of payment of $27,135.80 in federal employment taxes and interest.

The question presented in the district court was whether certain workers were employees or independent contractors.¹ The jury found them to be employees and accordingly employment taxes were due on account of payments to them for their work.

The sole issue raised in this appeal is whether the district court erred in refusing to instruct the jury that the right to discharge a worker without cause is a factor to be considered in determining whether the worker is an employee or independent contractor. We hold that the failure to give the requested charge was error and accordingly reverse.

The workers in question, commonly known as gypsy chasers, engage in the loading and unloading of furniture moving vans. They meet or get in touch with the drivers of the vans at truck stops and similar meeting places and make arrangements to load or unload a van, usually for a fixed compensation. The work is on a single van basis, with no continuing work agreement.

Two of Security’s van drivers testified that they did not believe that they had the right to dismiss the gypsy chasers without cause.

Based on this, plaintiff requested that the court charge the jury that whether or not Security had the right to discharge without cause was a factor to be considered in determining whether the gypsy chasers were employees or independent contractors. The court refused to give the instruction.

The relevant sections of the Internal Revenue Code of 1954, Title 26 U.S.C., are Chapters 21 (Federal Insurance Contributions Act) 26 U.S.C. § 3101 et seq., 23 (Federal Unemployment Tax Act) 26 U.S.C. § 3301 et seq., and 24 (Collection of Income Tax at Source on Wages) 26 U.S.C. § 3401 et seq. of Subtitle C. The applicable Treasury Regulations for these chapters all state in the same words that: “The right to discharge is also an important factor indicating that the person possessing that right is an employer.” 26 CFR § 31.3121(d)-l(c)(2) (Federal Insurance Contributions Act); 26 CFR § 31.3306(i) — 1(b) (Federal Unemployment Tax); and 26 CFR § 31.-3401(c)-l(b) (withholding of income tax). (Italics added)

Further, the right to discharge is recognized at common law as a factor in determining whether a person is an employee, e. g. A. C. L. Ry. Co. v. Tredway’s Administratrix, 120 Va. 735, 744-45, 93 S.E. 560 (1917); and 26 U.S.C. § 3121(d)(2) defines “employee” as “any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee.”

In Bonney Motor Express, Inc. v. United States, 206 F.Supp. 22 (E.D.Va.1962), a case that also dealt with gypsy chasers, the court recognized that the right to discharge without cause was a factor which should be considered in determining if a person is an employee.

In view of the language of the statute, the applicable Treasury Regulations, the common law rule, and the Bonney Motor decision, we are of opinion the district court should have instructed the jury as to the right to discharge without cause.

The requested instruction was not substantially covered in the charge given. Cf. Service Trucking Co., Inc. v. United States, 347 F.2d 671, 673 (4th Cir. 1965). The charge in no place mentioned the right to discharge.

The judgment of the district court is accordingly reversed and the case is remanded to the district court for a new trial in accordance with this opinion.

Reversed and remanded.

1 . The taxes involved here are on the wages of employees, not on payments to independent contractors.