Internal Revenue Service
Revenue Ruling
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smRev. Rul. 59-49
1959-1 C.B. 255
IRS Headnote
An individual is engaged by a title company to perform services as a title searcher or examiner. The company assigns him titles to be searched, determines the price to be charged its customers, reviews his work and assumes all responsibility therefor, and furnishes him office space, a desk, and a telephone. The individual is remunerated on a fee basis, determines his own hours of work, is not required to do any routine office work in connection with his job, and is not entitled to paid vacations, sick leave, or overtime pay. Held , the individual is an employee of the company for Federal employment tax purposes.
Full Text
Rev. Rul. 59-49
Advice has been requested relative to the status, for Federal employment tax purposes, of an individual performing services as a title searcher or examiner for an abstract and title company.
The individual examines titles solely for the company and is paid at a given rate for each title examination he completes. The company determines the amount to be charged its customers for all titles searched. The fee paid to the searcher for each title examined is a certain percentage of the amount paid the company by its customers, irrespective of the difficulty of the examination or the amount of time spent in making the title search. The individual devotes approximately forty hours per week to the performance of services for the company at times of his own choosing during hours when the courthouse is open, since his findings are based primarily on public records kept at the courthouse.
The titles to be searched are assigned to the individual by an official of the company and his work is subject to review by the company's title officer, whose primary duty is to review all title work done for the company irrespective of whether such work is performed by salaried or nonsalaried personnel, since the company is liable under title guaranty or policy issued. Admittedly, the salaried personnel are employees of the company. When an error is discovered, the individual responsible therefor is expected to correct it in the manner directed by and to the satisfaction of the title officer. The services performed for the company by the salaried and nonsalaried individuals are similar, the main difference being that the salaried employees have definite hours of work and are occasionally called upon to do special work for the company on jobs where it does not receive its usual fee. The nonsalaried individuals devote all their efforts to completing the search of the title and giving their report with respect thereto and are not required to help of the usual routine business required in operating a title company. They are not entitled to paid vacations, sick leave, or overtime pay. The company provides the individual with a desk and telephone for use in its office together with all necessary forms and business papers. The individual does not furnish any facilities or supplies for the work and performs the services personally under the company's name, and without helpers. He does not hold himself out to the public as available to do similar work for others. His services can be terminated at any time at the will of either party.
Section 3121(d) of the Federal Insurance Contributions Act (chapter 21, subtitle C, Internal Revenue Code of 1954) provides, among other things, that the term `employee' means any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee. The guides for determining, under such rules, whether an employer-employee relationship exists are found in section 31.3121(d)-1(c) of the Employment Tax Regulations.
From the facts set forth above, it appears that the individual in question is not engaged in the pursuit of an independent business enterprise on his own behalf but rather devotes all of his working time to the performance of services in the furtherances of company business. An officer of the company assigns to him the titles to be searched; his work is subject to review by the company's title officer; the company determines the prices to be charged the customers; and it provides the individual with office facilities and equipment necessary for the performance of his services. The main difference in the facts and circumstances surrounding the performance of services by examiners paid on a fee basis, (as is the individual in question) and those paid on a salary basis who are conceded to be employees, are (1) the method of payment, (2) the examiners paid by fees determine their own hours of work, and (3) the assignment of some routine work to the examiners paid on a salary basis.
Section 31.3121(a)-1 of the Employment Tax Regulations provides that the term `wages' means all remuneration for employment; that the name by which the remuneration for employment is designated is immaterial; and that therefore, salaries, fees, bonuses, etc., are wages within the meaning of the Federal Insurance Contributions Act, if paid as wages for employment.
In view of the foregoing, it is concluded that, while the company may not exercise control to the fullest degree possible over the services performed for it by the individual in question, it nevertheless has retained the right to exercise such control to the degree deemed necessary to establish the relationship of employer and employee between the company and such individual. Accordingly, it is held that the individual is the employee of the company for purposes of the Federal Insurance Contributions Act.
The conclusion expressed in this Revenue Ruling is also applicable with respect to the Federal Unemployment Tax Act and the Collection of Income Tax at Source on Wages (chapters 23 and 24, respectively, subtitle C, Internal Revenue Code of 1954).