Rev. Rul. 63-115

The Internal Revenue Service will not follow the decision of the United States District Court for the Eastern District of Virginia in the case of Bonney Motor Express, Inc. v. United States , 206 Fed.Supp. 22, entered June 22, 1962.

The principal question in that case concerned the Federal employment tax status of individuals who were engaged by the taxpayer's truck driver-employees, with the express consent of their employer, to unload the taxpayer's trucks and who were paid by the taxpayer's employees out of funds provided by the taxpayer.

The court, relying heavily on the fact that the unloaders were not regularly employed by the taxpayer, held that the unloaders were independent contractors rather than employees. The Internal Revenue Service is of the opinion that this holding is in conflict with the decision of the Supreme Court of the United States in United States v. Albert Silk, et al. , 331 U.S. 704 (1947), Ct. D. 1688, C.B. 1947-2, 167, wherein it is stated, at page 173, as follows:

* * * we cannot agree that the unloaders in the Silk case were independent contractors. They provided only picks and shovels. They had no opportunity to gain or lose except from the work of their hands and these simple tools. That the unloaders did not work regularly is not significant . They did work in the course of the employer's trade or business. This brings them under the coverage of the Act. * * *' (Emphasis supplied.)

While regularity with which services were performed was significant in determining employment for social security tax purposes prior to 1955 with respect to services which were not in the course of the employer's trade or business, regularity of employment has never been significant with respect to services which are in the course of the employer's trade or business. The District Court, in deciding Bonney Motor Express, Inc. , stated, at page 29, as follows:

We are in accord with the Government's contention that the work of unloading was a part of plaintiff's business. The trucking company was contractually obligated to deliver the cargo on the consignee's dock. This test is not, however, conclusive.

It is the position of the Internal Revenue Service that unloaders of trucks are the employees of the trucking companies that engage them and pay for their services. The trucking company in such cases unquestionably has the right to control the manner in which its cargo is unloaded, and whether it exercises that right continuously, or only sporadically, is not material. Under a realistic application of the common law rules, the unloaders in such cases are employees. The position of the service regarding truck unloaders is set forth in Revenue Ruling 55-543, C.B. 1955-2, 400, Revenue Ruling 57-12, C.B. 1957-1, 353, and Announcement 59-38, I.R.B. 1959-14, 37. See also S.S.T. 45, C.B. XV-2, 408 (1936), which held that men hired to unload steamers were employees despite the fact that they were paid and discharged as soon as the steamer was unloaded.

The position of the Service regarding individuals who are hired by employees to help them in the normal course of their employment is set forth in S.S.T. 336, C.B. 1938-2, 295, as follows:

The Bureau has consistently held in cases where an employee, with either the express or implied consent of his employer , engages other individuals to perform services in connection with his employment by such employer, that such other individuals are also employees of his employer within the meaning of the taxing provisions of the Social Security Act. (See generally S.S.T. 295, C.B. 1938-1, 390, and rulings cited therein.) * * * (Emphasis supplied.)

In the Bonney Motor Express, Inc. , case, the unloaders were hired by the driver-employees and were paid out of company funds which the company designated `casual labor.' Thus, there is no doubt that the unloaders were hired with the express consent of the employer, so that an employer-employee relationship actually existed between the unloaders and the trucking company.

For the foregoing reasons, the Internal Revenue Service will not follow the Bonney Motor Express, Inc. , case.

¹ based on Technical Information Release 470, dated May 6, 1963.