must therefore be examined. It is undeniable that the plaintiff retained a very large measure of control of the operation of the stores by the licensees. This is the one single element that is clearly in the defendant's favor. Concededly it is an important one. As against it, every other factor points the other way. The licensees were not obligated to devote any specified amount of time to the business and they were free to choose their own hours of work. They could not be discharged at the plaintiff's pleasure though, of course, employees as well as independent contractors may be protected by contracts for definite periods of time. They did not receive anything remotely resembling regular wages as that term is ordinarily understood, though, again, compensation for an employee's services can be determined in many ways and need not necessarily consist of regular cash payments. As a matter of fact, the question of wages is a subordinate one, because, where the relationship of employer and employee exists, whatever the employee receives for his services must be regarded as "wages." The licensees had unqualified ownership of the chief instrumentalities for the conduct of the business, including the merchandise on hand. The right to select employees and supervise their conduct in the business, though qualified by the plaintiff's veto power, was in the licensees. Finally, the licensees had a very considerable financial stake in the business.
If we look at what was accomplished as a practical matter by any one of these agreements, we find that the chief result from the standpoint of both parties was to establish a separate (though not a fully independent) business in which the licensee had a personal interest which was more nearly the interest of an owner than anything else. He could make or lose money in the business. The possibility of profits could be enhanced by efficiency, economy and skill. He took the risk of considerable personal loss in case the business was not successful -- a risk which involved a good deal more than the mere possibility of loss of position. He obtained complete freedom in connection with his own time, working hours, etc., and an opportunity to increase his income not only by sales records (as in the case of a commission salesman) but by business judgment in most of the matters which are in the province of any independent retailer.
The plaintiff assured itself of a market for its goods and took the same risk in respect of its sales to the licensee as any wholesaler takes in dealing with a retailer.It relieved itself of the minutiae and responsibilities of the retail business, for example, matters of compliance with various state and municipal regulations. In fact, for all practical purposes, the plaintiff was not in the retail business, as far as the stores were concerned. It obtained a connection in which the head of the business had more than merely the incentive which a store manager or salesman would have had in the way of possible salary increases or larger commissions.
The relationship between the plaintiff and the licensees is, in short, that of a wholesaler who, in order to assure a market for his goods, has contracted with retailers that they should buy exclusively from him, allowing them, as an inducement, to use his name and good will, and of retailers who, in exchange for this benefit, have surrendered such powers to the wholesaler as were necessary for the protection of this good will.
See Standard Oil Co. v. Glenn, D.C., 52 F.Supp. 755; National Labor Relations Board v. Carroll, 1 Cir., 120 F.2d 457.
I, therefore, conclude that the licensees were not employees within the meaning of the Federal Insurance Contributions Act.
The statements of fact and law in this opinion may be taken as special findings and conclusions. In addition, the requests submitted are answered as follows:
I affirm the plaintiff's requests for findings of fact numbers 1 to 13 inclusive, and 16 to 18 inclusive.
I affirm the defendant's requests for findings of fact numbers 1, 2, and 3. Requests numbers 4 to 11 inclusive are interpretations of various provisions of the license agreements and need not be answered. I affirm the last sentence of the 12th request, substituting the word "considerable" for the word "such." I affirm requests numbers 13 to 15 inclusive.
In addition, I find that the license agreements P1 and P3 are typical of all the license agreements in issue.
I affirm all the plaintiff's requests for conclusions of law, and I deny all the defendant's requests for conclusions of law.
Judgment for the plaintiff, order to be submitted.
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