Social Security Legislation, January-June Historical Background One of the first significant steps 1948: Legislative History and Background leading to the passage of the news vendors law occurred in April 1944, By Wilbur J. Cohen and James L. Calhoon* when the Supreme Court declared that vendors making street sales at established locations and working The following article outlines the legislation in the field full time for the Hearst Corporation of social security enacted by the Eightieth Congress in the and other publishers in Los Angeles first 6 months of 1948. Because of the divergent viewpoints were employees of the newspapers for underlying the development of some of the amendments purposes of the National Labor Re• and the implication of the provisions for the social security lations Act (National Labor Relations program, the authors have also sketched in briefly, as a Board v. Hearst Publications, Inc., 322 matter of record, the legislative history and background of U. S. 111). This decision seemed to the various provisions. indicate that the vendors might be employees under the Social Security THERE was considerable legislative cording to the sponsor of the legis• Act. In 1946 the District Court of the activity in the field of social security lation, are affected immediately.1 for the Northern Dis• during the second regular session of The new law does not change the trict of , Southern Division, the Eightieth Congress. Numerous status of the ordinary newsboy. Most heard the cases, Hearst Publications, bills to amend the Social Security Act newsboys are not covered by the Social Inc. v. United States and The Chron• were introduced. One, H. R. 6777, Security Act, either because they are icle Publishing Company v. United would have extended coverage, in• in fact independent contractors or be• States (70 F. Supp. 666, 1946), which creased benefits, and made other cause they come within the terms of dealt specifically with the status, for changes in the old-age and survivors the 1939 amendments to the act, which employment-tax purposes, of vendors insurance program. It had already exclude "service performed by an in• in the area.2 passed the House and was pending in dividual under the age of 18 in the The District Court found that these the Senate Committee on Finance delivery or distribution of newspapers vendors were employed by the Hearst when Congress recessed on . or shopping news, not including deliv• Corporation under agreements nego• Of the five bills passed by both the ery or distribution to any point for tiated for them by an American Fed• House and the Senate in the first 6 subsequent delivery or distribution." eration of Labor union of their own months of 1948, the President vetoed The amendments to the taxing pro• choosing. Under these agreements four. Three of the four vetoes were visions of the old-age and survivors the publishers selected the vendors, overridden. designated their place, days, and insurance program and to the Federal hours of service within certain con• News Vendors Bill Unemployment Tax Act are applicable ditions in the contract, and fixed the with respect to services performed profits they were to derive from the On April 20, 1948, the so-called after December 31, 1939. For the pur• sale of each newspaper. The ven• News Vendors Bill, H. R. 5052, intro• poses of the Federal unemployment dors were expected to be at their duced by Representative Gearhart, tax, services performed before July 1, corners at press-release time, stay was passed over the President's veto 1946, shall be considered as if the there for the sales period, be able to and became Public Law No. 492. amendment had been in effect since sell the papers, and take an interest The purpose of Public Law No. 492 the enactment of the Social Security in selling as many papers as they is "to exclude certain vendors of news• Act Amendments of 1939. could. To see that they complied papers or magazines from certain pro• The act prohibits any credit or re• with the publisher's rules, the ven• visions of the Social Security Act and fund of any amount paid before its dors were supervised by the publish• the Internal Revenue Code." Specif• enactment which is an overpayment er's employee, the "wholesaler." ically, it excludes from coverage under of tax solely because of the new The wholesaler was authorized to re• old-age and survivors insurance and amendment. port the vendor if the vendor failed the Federal Unemployment Tax Act To avoid wiping out benefits and in any of his duties, and was required services performed by newspaper and benefit rights which already have ac• to report any infraction to the pub• magazine vendors who sell directly to crued under old-age and survivors lisher, who could then discontinue the public, even though their contract insurance and on which the worker further sales to the vendor or report with the publisher may vest the pub• and his family may have placed re• him to the union for disciplinary ac• lisher with substantial control of the liance, old-age and survivors insur• tion. The vendor was required to sell vendor's activities. Probably not ance wage credits based on services his papers complete with sections in more than a thousand workers, ac• performed before enactment of the amendment are not affected. *Mr. Cohen is Technical Advisor to the 2Reprinted in Newspaper Vendors: Commissioner for Social Security, and Mr. Hearings Before the Committee on Ways Calhoon is on the staff of the Bureau of 1 Congressional Record (daily edition), and Means, House of Representatives . . . Old-Age and Survivors Insurance. Apr. 14, 1948, p. 4535. on H. R. 3997, pp. 30-37. the order designated by the publisher attack and to slow undermining. We employees depend almost completely and to display only newspapers on must, instead, devote our energies to upon the form in which their employ• the stands or racks that were fur• expanding and strengthening that ers might choose to cast their em• nished by the publisher at the latter's system." ployment contracts. Employers de• expense. He was not allowed to sell On January 20, 1948, Representative siring to avoid the payment of taxes a competitor's newspaper without the Gearhart introduced H. R. 5052, a bill which would be the basis for social publisher's consent. The vendor in• identical with the one vetoed the pre• security benefits for their employees curred no expense or risks save that ceding year. The Committee on Ways could do so by the establishment of of having to pay for papers delivered and Means reported the bill for pas• artificial legal arrangements govern• to him which by reason of loss or de• sage on February 3 (H. Rept. 1320), ing their relationships with their em• struction he was unable to return for saying "whatever effect it may have ployees. It was this sort of manipu• credit. Moreover, a vendor "was on the extension or restriction of ex• lation which the Supreme Court ef• guaranteed by contract a minimum isting coverage provisions is purely in• fectively outlawed in June of 1947 weekly profit." In effect, the vendors cidental to its main purpose, which is when the Court unanimously declared were subject to the publisher's con• the removal of a substantial area of that employment relationships under trol. ambiguity and confusion in the appli• the social security laws should be de• The District Court on January 2, cation of the coverage provisions of termined in the light of realities 1947, held that these particular ven• the act. The bill has the unqualified rather than on the basis of technical dors were employees of the publish• endorsement of the newspaper pub• legal forms. I cannot believe that this ers for employment-tax purposes. lishers, the vendors concerned, and sound principle announced by the The Hearst Corporation appealed the their union representatives." The Court should be disregarded, as it decision to the Circuit Court of Ap• House of Representatives passed the would be by the present bill." peals for the Ninth Circuit, which af• bill without debate and without a The President also declared that he firmed, per curiam, the District Court record vote on March 4. was opposed to other congressional decision on , 1948.3 In the Senate the Committee on proposals that would deprive workers Finance reported the bill on March of coverage under the Social Security Legislative History 13 to the Senate without amendment Act. "In withholding my approval In , Representative Gear- (S. Rept. 985). The Senate, without from H. R. 3997 last August," he said, hart introduced a series of three bills, debate, adopted the bill on March 23, "I expressed my concern that such a H. R. 3704, H. R. 3920, and H. R. 3997,4 again without a record vote. bill would open our social security which would have excluded all news President Truman vetoed the sec• structure to piecemeal attack and to vendors from coverage under the So• ond news vendors bill on April 5, 1948.7 slow undermining. That concern was cial Security Act. The Committee on In his message he called attention to well founded. The House of Repre• Ways and Means of the House of the danger of the bill. "This legis• sentatives has recently passed a joint Representatives on conducted lation," he said, "has far greater sig• resolution which would destroy the so• public hearings on H. R. 3997, at nificance than appears on the sur• cial security coverage of several hun• which representatives of the pub• face. It proposes to remove the pro• dred thousand additional employees. lishers and of the Social Security Ad• tection of the social security law from As in the case of H. R. 5052, the joint ministration testified.5 Both houses persons now entitled to its benefits. resolution passed by the House is di• of Congress passed H. R. 3997 without Thus, it raises the fundamental ques• rected toward upsetting the doctrine a record vote. On August 6, by means tion of whether or not we shall main• established by the Supreme Court last of a pocket veto, the President killed tain the integrity of our social security summer that employment relation• the bill,6 pointing out, in a strongly system. ships should be determined on the worded message, that the legislation "H. R. 5052 would remove social basis of realities. The present bill would "establish a precedent for security protection from news vendors must be appraised, therefore, as but special exemption, and the exclusion who make a full-time job of selling one step in a larger process of the ero• of one group would lead to efforts to papers and who are dependent on that sion of our social security structure. remove social security protection from job for livelihood. Many vendors of The security and welfare of our Nation workers in other activities. Demands newspapers are excluded even at pres• demand an expansion of social secu• for further special legislation would ent from coverage under the Social rity to cover the groups which are now be inevitable." The President also Security Act because they are not em• excluded from the program. Any step warned that "we must not open our ployees of the publishers whose papers in the opposite direction can only social security structure to piecemeal they sell. But some vendors work un• serve to undermine the program and der arrangements which make them destroy the confidence of our people 3 The citation for the circuit decision bona fide employees of the publishers in the permanence of its protection is not yet available. against the hazards of old age, pre• 4 For a summary of the action on H. R. and, consequently, are entitled to the 3997, see the Bulletin, , benefits of the Social Security Act. mature death, and unemployment." p. 15. 5Newspaper Vendors: Hearings . . . on "If enacted into law, this bill would On April 14 the House voted, 307 to H. R. 3997. make the social security rights of these 28, to override the President's veto,8 6Congressional Record (daily edition), Aug. 15, 1947, p. A4456. 8 Congressional Record (daily edition), 7 H. Doc. 594, 80th Cong., 2d sess. Apr. 14, 1948, pp. 4534-4540. See also and on April 20, when the Senate TABLE 2.—Federal participation in aid to also voted 77 to 7,9 to override the dependent children (one-child family) Historical Background veto, the bill automatically became under the Social Security Act The determination of borderline law. Federal share Federal share cases of employer-employee relation• Average under 1946 under 1948 assistance amendments amendments ship is one of the thorniest problems House Joint Resolution 296 payment in administering the social insurance per child programs. To have his employment House Joint Resolution 296, which Amount Percent Amount Percent covered for old-age and survivors in• became law on when it was $6.00 $4.00 66.7 $4.50 75.0 surance purposes and for Federal un• passed over the President's veto, 9.00 6.00 66.7 6.75 75.0 employment taxes, an individual must amends the definition of the term 12.00 7.00 58.3 9.00 75.0 15.00 9.00 60.0 10.50 70.0 render service as an employee for the "employee" as used in the Social Secu• 20.00 12.50 62.5 13.00 65.0 person employing him. The term rity Act and in related sections of the 24.00 13.50 56.2 15.00 62.5 "employee" is not defined in the So• Internal Revenue Code and increases 27.00 13.50 50.0 16.50 61.1 30.00 13.50 45.0 16.50 55.0 cial Security Act or the pertinent sec• Federal financial participation in pay• 40.00 13.50 33.8 16.50 41.3 tions of the Internal Revenue Code ments to needy aged and blind persons 50.00 13.50 27.0 16.50 33.0 except that both laws specify that the and to dependent children. 60.00 13.50 22.5 16.50 27.5 term "includes an officer- of a corpo• The first part of the new law ration." (Public No. 642, 80th Cong., 2d sess.) lations defining the meaning of the In 1936 the Treasury Department, excludes from the coverage of the term "employee" along the lines in• which administers the provisions of Federal old-age and survivors insur• terpreted by the Supreme Court in the Internal Revenue Code, and the ance program and the provisions of three cases decided in June 1947. The Social Security Board issued regula• the Federal Unemployment Tax Act proposed new regulations would have tions to implement the Social Secu• any person who, "under the usual interpreted the term to include per• rity Act, in which they spelled out the common-law rules applicable in de• sons whose status had been in doubt meaning of the terms "employer" and termining the employer-employee re• before the Supreme Court handed "employee." Emphasis was placed lationship, has the status of an inde• down its decision. on the legal right to control the per• pendent contractor," or "who is not The second part of Public Law No. formance of service, but other signifi• an employee under such common-law 642 increases Federal grants to States cant factors were taken into account rules." Thus, all persons whom the for public assistance payments, effec• such as the right to discharge, the Treasury Department, the Federal tive October 1, 1948. The Federal furnishing of tools, and the furnishing Security Agency, or the courts have Government will now share in the of a place to work.11 previously held to be employees cov• payments to the needy aged and blind During the first years of operation ered by the Social Security Act but up to a maximum of $50 a month. under these regulations the Treasury who do not meet the common-law The previous maximum established by Department and the Social Security rules will be excluded from coverage. the 1946 amendments was $45.10 The Board issued a number of rulings to The joint resolution was introduced maximum payments to dependent clarify the boundaries of employ- primarily to prevent the release by children in which the Federal Gov• the Treasury Department and the ernment will share are raised $3 a 11 Regulations 90, Relating to the Excise Federal Security Agency of new regu- month, from $24 to $27 for the first Tax on Employers Under Title IX of the child in a home and from $15 to $18 Social Security Act (p. 5); Regulations 91, lssue of Apr. 12, 1948, pp. 4464-4466, for for each additional child. The law Relating to the Employees' Tax and the Representative Eberharter's discussion of also provides that the Federal Gov• Employers' Tax Under Title VIII of the the bill. Social Security Act (pp. 3—4). 9Ibid., Apr. 20, 1948, pp. 4703-4705, ernment will pay three-fourths of the 4706-4707. first $20 of average payments to the TABLE 3.—Federal participation in aid to needy aged and blind and one-half dependent children (two-child family) TABLE 1.—Federal participation in old-age the balance of matchable payments; under the Social Security Act assistance and aid to the blind under the for aid to dependent children, three- Social Security Act fourths of the first $12 of average Average Federal share assistance Federal share under unde1948 r 1946 payments to such children plus one- payment amendments amendments Federal share Federal share half of the balance of matchable pay• Average under 1946 under 1948 assistance amendments amendments ments. Per Per Per• Per• payment family child Amount cent Amount cent Amount Percent Amount Percent 10 Under the Social Security Act Amend• $12.00 $6.00 $8.00 66.7 $9.00 75.0 $15 $10.00 66.7 $11.25 75.0 ments of 1946 the Federal Government 24.018.00 12.09.00 15.012.00 62.66.75 18.013.50 75.0 20 12.50 62.5 15.00 75.0 paid two-thirds of the first $15 of aver• 30.00 15.00 18.00 60.0 21.00 70.0 25 15.00 60.0 17.50 70.0 age payments to the aged and to the blind 30 17.50 58.3 20.00 66.7 and one-half of the balance up to $45. 36.00 18.00 21.00 58.3 24.00 66.7 35 20.00 57.1 22.50 64.3 39.00 19.50 22.50 57.7 25.50 65.4 It paid two-thirds of the first $9 of aver• 42.00 21.00 22.50 53.6 27.00 64.3 40 22.50 56.2 25.00 62.5 age payments to dependent children and 45.00 22.50 22.50 50.0 28.50 63.3 45 25.00 55.6 27.50 61.1 one-half of the balance up to $24 for the 48.00 24.00 22.50 46.9 28.50 59.4 50 25.00 50.0 30.00 60.0 first child and up to $15 for each addi• 54.00 27.00 22.50 41.7 28.50 52.8 60 25.00 41.7 30.00 50.0 tional child in the same home. 60.00 30.00 22.50 37.5 28.50 47.5 merit relationship. The common- jected the proposal. The Committee The new contracts purported to ter• law meaning of the term "employee" declared that it did not at the time minate the employer's right to control was interpreted as not wholly re• wish the Social Security Act to cover performance of service but actually stricted to cases in which the legal persons who were not employees. did not alter materially the previous right of control was present. In However, neither the Committee nor economic relationships.15 establishing generally applicable prec• the Congress gave any new indication A typical illustration of this prac• edents, the largest area in which dif• how the term "employee" should be tice is the case of Nevins, Inc. v. ficulties were encountered was that of defined.13 Rothensies (58 F. Supp., 460, aff'd per outside salesmen. The first narrowing of the definition curiam, 158 F. (2d) 189), in which a In 1939 the House Committee on of employer-employee relationship oc• chain drug company made licensees of Ways and Means reported out a bill curred in 1941 with the decision in the its branch store managers. The drug (which became the Social Security case of Co. v. Higgins (188 F. company furnished the licensees with Act Amendments of 1939) that in• (2d) 636). In that and several sub• equipment and a stock of goods and cluded an amendment to the defini• sequent cases the courts apparently in fact maintained almost the same tion of "employee" by providing a rule were guided largely by the language economic relationship with them that of thumb for determining the cover• of the contracts between the employ• had previously existed. The court age of certain salesmen. It was pro• ers and their agents. In each instance held the licensees to be independent posed that all salesmen be brought the Government based its case not contractors. under the law as employees unless only on the language of the contract In other instances, even when there they were brokers or factors selling on but also on the actual employment was no change that implied an at• behalf of more than one company conditions that existed between the tempt to avoid tax liability, the nor• and employing at least one assistant parties. mal arrangements between employers salesman in their brokerage or fac• As a result of these reversals, the and employees, such as those for many toring business, or unless the selling Treasury Department felt obligated to outside sales representatives, could was "casual service," not in the course adopt a narrower interpretation of not be realistically evaluated in terms of the salesman's principal occupa• the term "employee" than it had used of control alone. All told, more than tion. This rule of thumb would have in the past. It consequently placed 1 1/4 million persons were in the group brought under the law all salesmen chief emphasis on the employer's legal whose status was not clearly that of whose employment relationship was right to control the performance of an employee or an independent con• not clear cut and, in addition, would the alleged employee's services. At no tractor. This group included cer• have covered many who were obvi• time, however, did the Treasury De• tain taxicab operators, private-duty ously self-employed.12 partment confine coverage to the nar• nurses, owner-operators of leased Both the Senate Committee on Fi• row control test of the employer- trucks, industrial home workers, en• nance, to which the bill was referred, employee relationship.14 tertainers, newspaper vendors, con• and the Conference Committee re- While the Treasury Department tract loggers, commission oil plant altered considerably the character of operators, mine lessees, journeymen 12 H. Rept. 728, 76th Cong., 1st sess., its rulings on employment-tax liabil• tailors, filling-station operators, and pp. 18 and 61-62. This report stated (p. ity, the Social Security Board con• more than 600,000 salesmen. 61), "A restricted view of the employer- employee relationship should not be taken tinued to use the broader interpreta• The legal situation became more in the administration of the Federal old- tion of employer-employee relation• and more complex. In 1944 and 1945, age and survivors insurance system in ship followed by both agencies up to several of the courts held for the Gov• making coverage determinations. The 1941. Because of this divergent ap• ernment while others followed the tests for determining the relationship laid proach the rulings of the two agencies down in cases relating to tort liability 1941 precedents. In all, about 250 and to common-law concept of master differed at times, the Treasury De• cases were litigated. The standards and servant should not be narrowly ap• partment holding that there was no applied by the courts varied widely. plied. In certain cases even the most tax liability in a particular case while Certain of them interpreted the com• liberal view as to the existence of the the Board held that the employment employer-employee relationship will fall mon-law definition of an employee short of covering individuals who should was covered for benefit purposes. very liberally while others restricted be covered, for example, certain classes The restrictive decisions of the lower its meaning to the exercise of sub• of salesmen. In the case of salesmen, it courts and the narrowed interpreta• stantial control. is thought desirable to extend coverage even where all of the usual elements of tions of the Treasury Department en• It was held in Jones v. Goodson the employer-employee relationship are couraged certain employers to revise (121 F. (2d) 176), for example, that wholly lacking and where accordingly their contracts with their agents for taxicab operators were employees. even under the liberal application of the the specific purpose of avoiding liabil• law the court would not ordinarily find In United States v. Wholesale Oil Co. the existence of the master-and-servant ity for Federal employment taxes. (154 F. (2d) 745) a filling-station op• relationship. It is the intention of this 13 S. Rept. 734, 76th Cong., 1st sess., p. 75. erator was held to be an employee. amendment to set up specific standards 14 Testimony of Adrian W. DeWind, Tax In United States v. Vogue, Inc. (145 so that individuals performing services Legislative Counsel, Treasury Department, as salesmen may be uniformly covered in Social Security Status Quo Resolution, 15At the same time, some employers without the necessity of applying any of Hearings Before the Committee on Fi• changed their contracts so that their em• the usual tests as to the relationship of nance, United States Senate . . . on H. J. ployees could be covered by the social employer and employee." Res. 296, pp. 9-10, 22-23. security program. F. (2d) 609) a seamstress was held particular instances of these varia• business to which he renders service, to be an employee. In Grace v. Ma- tions or to emphasize that they have and the opportunity for profit or loss gruder (148 F. (2d) 679) coal hustlers arisen principally, first, in the strug• from the activities, giving to each such were held to be employees. gle of the courts to work out common- weight as it properly deserves in the Many of the lower courts, on the law liabilities, where the legislature light of the statutory aims. other hand, took a more restrictive has given no guides for judgment, These decisions affirmed in major view. For example, taxicab opera• more recently also under statutes part the position taken by the Social tors,16 a bulk-plant operator,17 a home which have posed the same problem Security Board and the Federal Secur• worker,18 and a truck operator19 were for solution in the light of the enact• ity Agency and indicated that the all held to be independent contractors. ment's particular terms and purposes. Treasury Department should in the The predicament in which the It is enough to point out that, with future look to the economic realities courts found themselves was well reference to an identical problem, re• of the arrangements between em- stated by the Supreme Court in sults may be contrary over a very ployers and their agents. On the basis National Labor Relations Board v. considerable region of doubt in ap• of investment and of opportunity for Hearst Publications (322 U. S. 1ll) plying the distinction, depending upon profit and loss, however, the Court when it refused to accept the argu• the state or jurisdiction where the classified as independent businessmen ment that the definition of the term determination is made; and that some persons whom the Agency had "employee" for purposes of the Na• within a single jurisdiction a person regarded as employees and who tional Labor Relations Act must be who, for instance, is held to be an might well be so regarded at common determined by reference to common- 'independent contractor' for the pur• law. law standards. The court declared in pose of imposing vicarious liability In consequence of these decisions, part: in tort may be an 'employee' for the the Treasury Department and the "The argument assumes that there purposes of particular legislation, Federal Security Agency established a is some simple, uniform and easily ap• such as unemployment compensa• joint drafting committee to draw up plicable test which the courts have tion ... In short, the assumed sim• new regulations spelling out in more used, in dealing with such problems, plicity and uniformity, resulting detail the factors that the court to determine whether persons doing from application of 'common-law enumerated as significant with re• work for others fall in one class or the standards,' does not exist." spect to the employer-employee rela• other. Unfortunately this is not true. In order to resolve the welter of con• tionship under the old-age and sur• Only by a long and tortuous history flicting opinions of the lower courts, vivors insurance and unemployment was the simple formulation worked the Supreme Court took jurisdiction insurance programs. out which has been stated most fre• of several cases in this area. In June On November 27, 1947, the Treasury quently as 'the test' for deciding 1947 it handed down three decisions20 Department published a copy of the whether one who hires another is re• which involved the proper interpreta• proposed regulations in the Federal sponsible in tort for his wrongdoing. tion of employer-employee relation• Register pursuant to the provisions in But this formula has been by no ship under the Social Security Act. the Federal Administrative Procedure means exclusively controlling in the In these cases the Court, looking at Act. solution of other problems. And its the social purpose of the law, held that Final publication and issuance of simplicity has been illusory because it within the meaning and intent of so• both the Treasury and Federal Se• is more largely simplicity of formula• cial security legislation the employ• curity Agency regulations were sched• tion than of application. Few prob• ment relationship should be deter• uled for January. Shortly before the lems in the law have given greater mined on the basis of the worker's scheduled date, however, Senator Mil- variety of application and conflict in relationship in fact with the person likin, Chairman of the Senate Com• results than the cases arising in the for whom he performed services mittee on Finance, and Representa• borderland between what is clearly an rather than his technical relationship tive Knutson, Chairman of the House employer-employee relationship and under common law. All relevant fac• Ways and Means Committee, asked what is clearly one of independent, tors in a given relationship should be the Treasury Department to defer re• entrepreneurial dealing. This is true considered, the Court added, includ• leasing the regulations until Con• within the limited field of determining ing those recognized by common law. gress had time to study the question vicarious liability in tort. It becomes Relevant factors are the degree of further. Both the Treasury Depart• more so when the field is expanded to control that is or can be exercised over ment and the Federal Security Agency include all of the possible applications the individual in performance of serv• complied with the requests. of the distinction. ices, the permanency of the relation• ship, the skill required in the perform• Legislative History, 1948 "It is hardly necessary to stress ance of the work, the investment in the facilities for work, the integra• On January 15, 1948, Representa• 16Magruder v. Yellow Cab Co. (141 P. tion of the individual's work in the tive Gearhart of California introduced (2d) 324). House Joint Resolution 296 to "main• 17Glenn v. Standard Oil Co. (148 F. (2d) 51). 20 United States v. Silk (67 S. Ct. 1463), tain the status quo in respect of cer• 18 Glenn v. Beard (141 F. (2d) 376). Harrison v. Greyvan Lines, Inc. (67 S. Ct. tain employment taxes and social se• 19 United States v. Mutual Trucking Co. 1463), and Bartels v. (67 S. curity benefits pending action by Con• (141 F. (2d) 655). Ct. 1547). gress on extended social security cov- erage." As the title indicated, the acted to extend coverage under the not have to revise their unemploy• resolution was designed to amend the law. The charges were made that the ment insurance laws to conform to a definition of an employee in the So• administering agencies and the Su• narrower Federal position. cial Security Act and in the tax pro• preme Court had usurped the prerog• After considerable discussion, the visions of the Internal Revenue Code atives of Congress to extend coverage House passed the resolution by a vote relating to old-age and survivors in• to types of employment that Congress of 274 to 53.22 surance and unemployment insurance had never intended to be covered at The Senate first acted on House taxes, to exclude from coverage "(1) this time. It was also pointed out that Joint Resolution 296 on April 1 and 2, any individual who, under the com- many employers would have difficulty when the Committee on Finance, mon-law rules applicable in determin• determining actual earnings of sales• under the chairmanship of Senator ing the employer-employee relation• men and other workers covered by the Millikin, conducted public hearings ship, has the status of an independent proposed regulations. on the measure. Testimony was given contractor or (2) any individual ex- The report included a minority re• by representatives of several em• cept an officer of a corporation) who port opposing its adoption. The min• ployers, the American Federation of is not an employee under such com• ority report, issued by four members Labor, the Congress of Industrial Or• mon-law rules." The resolution, as of the Committee, contained state• ganizations, the Treasury Depart• introduced, would have made the tax• ments by the Acting Secretary of the ment, and the Federal Security ing provisions effective as though Treasury and the Federal Security Agency.23 they had been included in the In• Administrator opposing the change in On Senator Millikin re• ternal Revenue Code on February 10, the law on the grounds that it would ported an amended version of the 1939, the date the tax titles of the exclude some 500,000-750,000 persons measure24 for passage. Mr. Millikin's Social Security Act were repealed and whose coverage had been confirmed by Committee had eliminated the pro• reenacted as part of the Internal Rev• the Supreme Court decisions of 1947. vision that benefits adjudicated be• enue Code, and it would have made These agencies also believed that the fore January 1, 1948, would not be the benefit provisions retroactive to resolution would confuse rather than disturbed, and had substituted in its August 14, 1935, when the Social Secu• clarify the meaning of the term "em• place a more liberal provision pre• rity Act became law. This latter pro• ployee" since there is no generally serving "(1) wage credits reported to vision would have wiped out any wages accepted meaning of "usual common- the Bureau of Internal Revenue with posted to the social security accounts law rules." respect to services performed prior to for all individuals not employees un• House Joint Resolution 296 came up the enactment of this Act or (2) wage der the usual common-law rules; but for debate on the floor of the House on credits with respect to services per• the resolution provided that those February 27. The arguments ad• formed prior to the close of the first benefits that were adjudicated before vanced for and against the measure calendar quarter which begins after January 1, 1948, on the basis of wages were substantially those presented in the date of the enactment of this Act that would normally be excluded by the majority and minority reports of in the case of individuals who have this new definition, would not be dis• the Committee on Ways and Means. attained age 65 or who have died, turbed. Representative Gearhart and others prior to the close of such quarter, and The Committee on Ways and Means declared that the resolution would with respect to whom prior to the date of the House reported the resolution simply continue existing practices and of enactment of this Act wage credits on February 3, 1948, and recom• that Congress could extend coverage were established which would not mended its passage to stop the pro• to independent contractors at a later have been established had the amend• posed Treasury regulations from go• date. ment made by subsection (a) been in ing into effect. Otherwise, the report The opponents of the measure, led effect on and after August 14, 1935." 25 alleged, "endless confusion will result, by Representative Eberharter, argued The report which accompanied the existing rulings will be unsettled, and that the usual common-law definition amended resolution said: "2. The res• many types of relationship fixed by of an employee cannot be precisely de• olution would maintain the status contract will have to be reversed at fined. The alternative, they said, was under the act of those who, prior to a time when full emphasis should be to use the guides laid down by the the enactment of the resolution, have given to an increase of production Supreme Court to look behind any been given coverage by erroneous and distribution. The proposed regu• artificial facade that might be erected construction of the term 'employee' lations by changing the test in exist• in terms of control, and get at the ac• (as defined in the resolution) if social ing regulations for determining tual facts in individual cases. It would security taxes have been paid into the whether an individual is an employee be easier, they contended, to follow old-age and survivors insurance trust will require a review of existing con• the Court's guides than to follow a less fund with respect to the covered tractual arrangements, and result in liberal definition. Their main argu• services. extensive litigation."21 ment, however, was that three-quar• ters of a million persons should be al• 22 Congressional Record (daily edition), It was felt that common-law rules lowed to retain the rights to which Feb. 27, 1948, p. 1973. should apply at least until Congress they were legally entitled under the 23 Social Security Status Quo Resolu• Social Security Act. An added ad• tion, Hearings . . . on H. J. Res. 296. 21H. Rept. No. 1319, 80th Cong., 2d sess., 24 H. J. Res. 296, Calendar No. 1298. p. 2. vantage would be that States would 25 Ibid., pp. 2-3. "3. The resolution would assure committee, the Court realistically ap• first significant development was the continued benefits to those who will plied the usual common-law rules. approval of the Finance Committee's have attained age 65, and to the sur• But if it be contended that the Su• amendments.32 vivors of those who will have died prior preme Court has invented new law to the close of the first calendar quar• for determining an 'employee' under McFarland Amendment on Public ter which begins after the enactment the social security system in these Assistance of the act and who have coverage cases, then the purpose of this reso• Senator McFarland and 22 other under the system because of miscon• lution is to reestablish the usual com• Senators then introduced an amend• struction of the term 'employee' (as mon-law rules, realistically applied."29 ment to the resolution to revise the defined in the resolution) even though The Senate report also states: "If public assistance provisions of the So• social security taxes have not been we were compelled to interpret these cial Security Act to increase Federal paid by them or in their behalf."26 remarks of the Court we would say, grants to the States for the needy The Committee had added another in untechnical and summary fashion aged and blind and for dependent subsection to the resolution which re• and without aiming at complete ex• children. Senator McFarland pointed quires the Federal Security Adminis• position, that the lower courts and out that increased living costs necessi• trator to estimate the total amount of administrative agencies were told: tated larger grants for these groups. benefits that have been and will be Don't be fooled or unduly influenced He explained that under his amend• paid but which would not have been by the form of the arrangement to ment the Federal Government would paid had the resolution been part of which you must apply the Social Se• put up $15 of the first $20 of the aver• the Social Security Act. The subsec• curity Act. Look to the real sub• age assistance payment made to the tion also provides that the aggregate stance. Illuminate the usual com• aged and the blind and would match amount of such benefits as estimated mon-law control tests by regard for all the balance of the payments on a 50-50 by the Administrator be authorized the pertinent facts. This requires basis up to a maximum on individual to be appropriated to the old-age and that all of the realities that will lead payments of $50 a month.33 The Mc• survivors insurance trust fund. you to the truth must be consulted Farland amendment raised the Fed• The Finance Committee's report is and weighed along with all other sig• eral matching provisions for depend• significant because it places a more nificant indicators of the real sub• ent children to three-fourths of the liberal interpretation on the resolu• stance of the arrangement. first $12 of the average payment per tion than was given in the report of "But this again should be said: If child and one-half the balance up to the House Ways and Means Commit• we have misinterpreted these decisions $27 for the first child and up to $18 tee. When the House later adopted of the Supreme Court, if we have in• for each additional child in the same the Senate amendments, it expressed correctly called the real moving prin• home. no disagreement with the Finance ciples of these cases, if the Treasury's Debate on the McFarland amend• Committee's interpretation.27 The re• interpretations and the proposed reg• ment and the resolution was con• port of the Finance Committee makes ulation based upon them are correct, tinued on , and the amendment it clear that the resolution would not then by this resolution we propose to was approved 77 to 2. The amended confine the meaning of the term "em• restore the usual common-law rules, resolution then passed the Senate by a ployee" to a restricted concept of realistically applied." 30 vote of 74 to 6. The House concurred master and servant. The report says: At another point in the report the in the Senate amendment without a "The joint resolution would reaffirm following statement is made: "The record vote.34 the unbroken intent of Congress that major argument asserted by the Fed• the usual common-law rules, realis• eral Security Agency against the Presidential Veto tically applied, shall continue to be pending joint resolution is that the used to determine whether a person resolution intends* to reenact the past On June 14 the President trans• is an 'employee' for purposes of ap• restrictive decisions of the lower Fed• mitted to Congress a message vetoing plying the Social Security Act."28 The eral courts. In the words of the Fed• House Joint Resolution 296.35 report also declares: "The pending eral Security Administrator: 'What The President first attacked this resolution would not disturb the ex• disturbs me the most about House narrowing of the definition of "em• isting Treasury regulation which Joint Resolution 296 is this line of ployee." "Despite representations to construes the term 'employee' in the decisions ... As nearly as we can the contrary," he warned, "sections 1 Social Security Act harmoniously judge ... it seems to be the inten• and 2 of this resolution would exclude with the usual common-law rules. tion of the sponsors of the resolution from the coverage of the old-age and "The pending resolution will main• to reenact the restrictive court deci• survivors insurance and unemploy• tain the moving principles of the de• sions I have referred to . . .' This ment insurance systems up to 750,000 cisions of the United States Supreme argument is based upon false prem• employees, consisting of a substantial Court in the Silk, Greyvan, and Bar- ises." 31 portion of the persons working as com• tels cases where, in the opinion of your House Joint Resolution 296 was de- mission salesmen, life insurance sales- 26 S. Rept. 1255, 80th Cong., 2d sess., p. 2. bated in the Senate on . The 32 Congressional Record (daily edition), 27 Congressional Record (daily edition), June 3, 1948, p. 7207. June 4, 1948, p. 7388. 29 Ibid., p. 2. 33 Ibid., p. 7207 ff. See footnote 10. 28 S. Rept. 1255, pp. 1-2. Italics sup- 30 Ibid., p. 17. 34 Ibid., June 4, pp. 7305, 7306, 7388. piled. 31 Ibid., p. 18. 35 H. Doc. 711, 80th Cong., 2d sess. men, piece workers, truck drivers, fits when the need for expanding our rectly excluded, and many thousands taxicab drivers, miners, journeymen social insurance system is so great. of additional employees, depend al• tailors, and others. In June. 1947 the "Furthermore, if enacted into law, most entirely upon the manner in Supreme Court held that these em• this resolution would overturn the which their employers might choose to ployees have been justly and legally present sound principle that employ• cast their employment arrangements. entitled to social security protection ment relationships under the social Employers desiring to avoid the pay• since the beginning of the program in security laws should be determined in ment of taxes which would be the basis 1935. I cannot approve legislation the light of realities rather than on for social security benefits for their which would deprive many hundreds the basis of technical legal forms. In employees could do so by the estab• of thousands of employees, as well as so doing, it would make the social lishment of artificial legal arrange• their families, of social security bene• security rights of the employees di• ments governing their relationship

TABLE 4.—Additional cost to the Federal Government of the TABLE 5.—Percentage distribution of additional cost to the provisions in the 1948 amendments, by State and program 1 Federal Government of the provisions in the 1948 amendments, by State and program 1 Additional amount (in thousands) Percentage in• State Percentage distribution of crease over (ranked by average 1944-46 per Aid to additional amount from Fed• present expendi• capita income) Old-age depend• Aid to eral funds ture from Total assist• ent the blind State (ranked by Federal funds ance children average 1944-46 per capita income) Aid to Aid to Total, continental United Old-age depend• Aid to Old-age depend• States $184,401 $140,512 $40,010 $3,879 Total assist• ent chil• the assist• ent chil• ance dren blind ance dren Per capita income above United States average: New York 10,699 6,687 3,801 211 Total, continental California 12,690 11,035 1,233 422 United States 100.0 100.0 100.0 100.0 25.4 30.4 128 128 ------New Jersey 1,869 1,391 439 39 Per capita income above Connecticut 1,177 923 245 9 United States average: Delaware 120 77 35 8 New York 5.9 4.8 9.9 5.4 21.7 28.9 4,565 3,828 697 40 California 6.9 7.9 3.2 10.9 20.1 28.9 9,795 7,540 1,975 280 Nevada .1 .1 ------20.1 ----- District of Columbia 292 140 139 13 New Jersey 1.0 1.0 1.1 1.0 23.0 30.2 Rhode Island 787 533 245 9 Connecticut .6 .7 .6 .2 21.0 26.7 Delaware .1 .1 .1 .2 32.6 30.5 Massachusetts 6,274 5,300 899 75 Washington 2.5 2.7 1.8 1.0 19.2 29.7 8,508 7,337 968 203 Illinois 5.3 5.4 5.0 7.2 23.1 28.7 Maryland 1,339 709 602 28 District of Columbia .2 .1 .3 .3 23.6 31.7 Montana 861 653 182 26 Rhode Island .4 .4 .6 .2 24.0 30.9 7,385 5,463 1,833 89 Oregon 1,591 1,331 237 23 Massachusetts 3.4 3.8 2.3 1.9 20.8 28.6 9,083 5,323 3,760 Ohio 4.6 5.2 2.4 5.2 22.4 20.6 Maryland .7 .5 1.5 .7 26.9 30.8 Per capita income below United Montana .5 .5 .5 .7 22.4 30.0 States average: Michigan 4.0 3.9 4.8 2.3 23.1 30.0 Wisconsin 3,620 2,865 678 7? Oregon .9 .9 .6 .6 22.5 27.0 Indiana 3,880 3,027 739 114 Pennsylvania 5.0 3.8 9.6 ----- 25.1 28.4 283 235 41 7 Colorado 3,161 2,691 447 23 Per capita income below Idaho 814 630 172 12 United States average: South Dakota 903 730 160 13 Wisconsin 2.0 2.0 1.7 2.0 23.5 28.7 North Dakota 695 528 160 7 Indiana 2.1 2.2 1.9 2.9 26.8 29.2 1,752 1,448 273 31 Wyoming .2 .2 .1 .2 20.8 28.8 Kansas 2,644 2,133 458 53 Colorado 1.7 1.9 1.1 .6 23.9 28.1 8,807 6,935 1,872 ----- Idaho .4 .4 .4 .3 23.4 29.5 South Dakota .5 .5 .4 .3 27.0 31.3 Utah 986 701 276 9 North Dakota .4 .4 .4 .2 24.9 26.9 Maine 1,049 779 230 40 Nebraska 1.0 1.0 .7 .8 23.6 30.2 3,432 2,912 448 72 Kansas 1.4 1.5 1.2 1.4 24.2 30.9 Florida 4,986 3,406 1,413 167 Missouri 4.7 4.9 4.5 ----- 23.8 26.5 Vermont 449 361 77 11 27.3 Minnesota 3,941 3,265 614 62 Utah .5 .5 .7 .2 20.4 Arizona 934 642 253 39 Maine .6 .6 .6 1.0 23.8 29.6 New Hampshire 538 410 110 18 Iowa 1.9 2.1 1.1 1.9 22.4 27.6 Texas 13, 926 12,038 1,556 332 Florida 2.7 2.4 3.4 4.3 23.2 30.3 Virginia 1,591 982 538 71 Vermont .2 .3 .2 .3 25.9 28.8 Minnesota 2.1 2.3 1.6 1.6 22.7 29.8 West Virginia 2,452 1,317 1,082 53 Arizona .5 .5 .6 1.0 20.5 30.5 974 522 427 25 New Hampshire .3 .3 .3 .5 23.6 29.7 Oklahoma 7,954 5,752 2,046 156 Texas 7.5 8.6 3.8 8.6 27.5 34.2 Tennessee 4,605 3,030 1,462 113 Virginia .9 .7 1.3 1.8 42.2 37.7 Louisiana 4,718 3,298 1,324 96 Georgia 5,783 4,910 736 137 West Virginia 1.3 .9 2.6 1.4 39.5 33.7 North Carolina 3,661 2,560 914 187 New Mexico .5 .4 1.1 .6 25.5 29.1 Kentucky 4,379 3,085 1,181 113 Oklahoma 4.3 4.1 4.9 4.0 21.1 28.8 Alabama 4,861 3,790 1,006 65 Tennessee 2.5 2.2 3.5 2.9 39.5 30.9 South Carolina 2,710 1,961 671 78 Louisiana 2.6 2.3 3.3 2.5 36.8 36.7 Arkansas 3,676 2,760 820 96 Georgia 3.1 3.5 1.8 3.5 41.7 34.7 Mississippi 3,074 2,411 536 127 North Carolina 2.0 1.8 2.2 4.8 43.4 38.5 Kentucky 2.4 2.2 2.9 2.9 44.7 36.3 Alabama 2.6 2.7 2.4 1.7 40.1 39.1 1 Public No. 642 (H. J. Res. 296). Cost figures based on data. South Carolina 1.5 1.4 1.6 2.0 40.3 48.6 Arkansas 2.0 2.0 2.0 2.5 43.1 36.2 Mississippi 1.7 1.7 1.3 3.3 48.8 46.5 1 Public No. 642 (H. J. Res. 296). Cost figures based on March 1948 data. TABLE 6.—Additional cost to the Federal Government of the provisions in the 1948 lic assistance program which I have recommended many times. Never• amendments, by program1 theless, I am strongly in favor of in• Additional amount creasing the amount of assistance payments. Were it not for the fact Item Aid to Total Old-age dependent Aid to that the Congress still has ample op• assistance children the blind portunity to enact such legislation be• fore adjournment, I would be inclined Amount (in thousands) to approve the resolution in spite of my serious objections to sections 1 Total continental United States $184,401 $140,512 $40,010 $3,879 and 2. Speedy action on public as• 12 States with highest per capita income 56,904 44,919 10,676 1,309 12 States with lowest per capita income 48,847 35,396 12,205 1,246 sistance legislation is clearly possible. States with per capita income above national average 77,163 58,398 17,290 1,475 I note that section 3 of this resolution States with per capita income below national average 107,238 82,114 22,720 2,404 was adopted as an amendment on the Percent of national total floor of the Senate and passed by both houses in a single afternoon. 12 States with highest per capita income 31.0 32.0 26.7 33.7 Accordingly, I am placing this matter 12 States with lowest per capita income 26.5 25.2 30.5 32.1 States with per capita income above national average 41.8 41.6 43.2 38.0 before the Congress in adequate time States with per capita income below national average 58.2 58.4 56.8 62.0 so that the public assistance program will not suffer because of my disap• 1 Public No. 642 (H. J. Res. 296). Cost figures based on March 1948 data. proval of this resolution." with their employees. I cannot ap• never would have been enacted. To The President concluded his veto prove legislation which would permit allow them to prevail now would with a plea for more general improve• such employers at their own discretion threaten the very foundation of the ment of the social security program to avoid the payment of social security system. I cannot believe that the saying, "At the same time, I urge taxes and to deny social security pro• mere convenience of employers should again that the Congress should not be tection to employees and their fami• be considered more important than satisfied at this session merely to im• lies." the social security protection of em• prove public assistance benefits—ur• The President then rebutted the ar• ployees and their families. gent as that is. There are other guments advanced in favor of a more "It has also been urged that without equally urgent extensions and im• restricted meaning of the term "em• this resolution some persons would provements in our social security ployer." "The expressed purpose of receive credit toward old age and sur• system which I have repeatedly rec• the sponsors of this resolution," he vivors benefits for three or four past ommended. They are well under• said, "is to exclude from the coverage years during which contributions were stood and widely accepted and should of the Social Security Act persons not collected. If the elimination of be enacted without delay. who have the status of independent these credits had been the real pur• "Because sections 1 and 2 of this contractors, rather than that of em• pose of the resolution, it could readily resolution would seriously curtail and ployees. But no legislation is needed have been achieved without perma• weaken our social security system, I to accomplish this objective. Under nently excluding anyone from social am compelled to return it without my present law, as interpreted by the Su• insurance protection. approval." preme Court, only persons who are "If our social security program is to Several members of the House sug• bona-fide employees are covered by endure, it must be protected against gested upholding the President's veto our social security system. these piecemeal attacks. Coverage and passing a separate measure em• "Instead of clarifying the distinc• must be permanently expanded, and bodying the provisions for increasing tion between independent contractors no employer or special group of em• public assistance grants. On roll call, and employees, which is a difficult ployers should be permitted to reverse however, the veto was overridden 297 legal issue in many cases, this resolu• that trend by efforts to avoid a tax to 75.36 tion would revive the confusion which burden which millions of other em• After a brief debate in the Senate, has plagued the administration of the ployers have carried without serious where it also was suggested that the Social Security Act for so many inconvenience or complaint." public assistance provisions be passed years . . . Then the President turned to the in a separate measure, the resolution "It has been asserted that it would public assistance section of the bill. was passed over the veto by a vote of be difficult for employers to keep the "Section 3 of this resolution," he 65 to 12 and became Public Law No. necessary records and meet other re• stated, "contains provisions—com• 642 on June 14.37 quirements of the law with respect to pletely unrelated to sections 1 and 2— Two days later, Representative the employees affected by this resolu• for additional public assistance of $5 Eberharter introduced H. R. 6966, a tion. This is reminiscent of the ob• per month to the needy aged and bill "To restore the status quo in re• jections made in opposition to the blind and $3 per month to dependent spect of certain employment taxes and original Social Security Act in 1935. children. 36Congressional Record (daily edition), If such objections had prevailed in "These changes fall far short of the June 14, 1948, p. 8271. 1935, our social security program substantial improvements in our pub• 37 Ibid., p. 8368. social-security benefits pending action March 16.41 On April 2, the Subcom• curity Administrator to recruit for• by Congress on extended social secu• mittee on Labor Department and Fed• eign workers within the Western rity coverage."38 This bill would have eral Security Appropriations began Hemisphere and workers in Puerto repealed sections 1 and 2 of Public hearings on the appropriations.42 Rico for temporary agricultural em• Law No. 642, which amended the defi• The bill as reported out and passed ployment in the United States. It nition of employer-employee relation• by the House transferred the U. S. also authorizes the Administrator to ship, but would not have affected the Employment Service from the Depart• direct, supervise, coordinate, and pro• new public assistance provision of that ment of Labor to an independent bu• vide for the transportation of such act. reau of the Federal Security Agency workers from the places of recruit• The following day a similar bill, S. and there consolidated the Service ment to places of employment and 2883, was introduced in the Senate by with the unemployment insurance return them to places of recruit• Senator Hill, for himself and Senator functions of the Bureau of Employ• ment not later than , 1949. Sparkman.39 Neither the House nor ment Security. The result would No money was appropriated for car• the Senate bill was considered in com• have been to take the Bureau of Em• rying out the legislation,45 which is mittee before Congress recessed. ployment Security out of the Social effective only for the fiscal year 1949. Security Administration. U. S. Employment Service The Senate voted on June 3 to re• Exemption of Income for Aid to Transferred to Social Security tain the U. S. Employment Service in the Blind Vetoed Administration the Department of Labor.43 In con• H. R. 6818, a bill to amend title X ference, it was agreed to transfer the of the Social Security Act permitting Under the terms of the Supplemen• Employment Service to the Federal the States to exempt income up to tal Federal Security Agency Appro• Security Agency but to place the Em• $40 per month in determining need priation Act, 1949, the U. S. Employ• ployment Service in the Bureau of of applicants for aid to the blind, was ment Service was transferred per• Employment Security administered by passed by the House of Representa• manently, as of July 1, 1948, from the the Social Security Administration.44 tives on and the Senate on Department of Labor and became part The appropriations act also trans• , and vetoed by the President of the Bureau of Employment Security ferred to the Federal Security Admin• on July 2. No public hearings were of the Social Security Administration. istrator certain functions and funds held on the bill in either house, nor The appropriation act transfers the previously handled by the Commis• was there a record vote on the bill in relevant functions of the Secretary of sioner for Social Security. The act either house. Labor to the Federal Security Admin• also reduced very substantially the H. R. 6818 provided that additional istrator to be "performed by him or, appropriations available to the Com• language be added to paragraph (8) under his direction and control, by missioner for over-all management, in section 1002 (a) of the Social Se• such officers and employees of the personnel, research, and information• curity Act, which now reads "that the Federal Security Agency as he may al services. State agency shall, in determining designate." need, take into consideration any The appropriation bill, H. R. 6355, Importation of Farm Labor other income and resources of an in• became law on , after having S. 2767, a bill to provide assistance dividual claiming aid to the blind." been vetoed by President Truman on in the recruitment and distribution The language which would have been June 14.40 The veto was overridden of farm labor for the increased pro• added by H. R. 6818 was as follows: by a vote of 238 to 161 in the House duction, harvesting, and preparation "except that the State may, in de• and 72 to 17 in the Senate. for market of agricultural commodi• termining income and resources of an H. R. 6355 was reported out in the ties to meet domestic needs and for• individual, disregard any payments, House on April 28 and, after debate, eign commitments, became law on not in excess of $40, received in any passed on the following day by a vote July 3 (Public Law 893). calendar month by an individual for of 271 to 35. Consideration of the ap• The law authorizes the Federal Se- services performed by him." The propriations for the U. S. Employment effect of this provision would be to Service, the Bureau of Employment 41 See Gladys R. Friedman, "Reorganiza• tion Plan No. 1 of 1948: Legislative His• enable States to determine the eligi• Security, and related appropriations tory and Background," Social Security bility and amount of assistance a for the Federal Security Agency was Bulletin, , pp. 15-21. blind person is to receive without re• delayed until final action had been 42 The Supplemental Federal Security gard to the first $40 a month of in- taken on the President's Reorganiza• Agency Appropriation Bill for 1949, Hear• ings Before the Subcommittee of the Com• tion Plan No. 1 of 1948, which provided mittee on Appropriations, House of Repre• 45 Supplemental Hearing on Supple• for transferring the Bureau of Em• sentatives . . ., pp. 208 ff. mental Federal Security Appropriation ployment Security to the Department 43 There was no record vote in the Sen• Bill for 1949, Hearings Before the Sub• of Labor. The President's Plan was ate. Congressional Record (daily edi• committee of the Committee on Appropri• finally turned down by Congress on tion), June 3, 1948, pp. 7187-90. ations, United States Senate . . . on H. R. 44 The Conference Report was adopted 6355, , 1948. Second Deficiency by both houses on June 9. There was Appropriation Bill for 1948, Hearings Be• 38 Ibid., June 16, 1948, p. 8708. no record vote in the Senate. In the fore the Subcommittee of the Committee 39Ibid., , 1948, pp. 8794-5. House a vote of 228 to 137 was taken on on Appropriations, United States Sen• 40 H. Doc. 714, 80th Cong., 2d sess. "the previous question." ate .. . on H. R. 6935, pp. 135-137. come he may have from his own similar treatment for individuals who sound principles on which it is based labor. Such action by a State is not are not blind." would seriously hinder further prog• possible under the present provisions. H. R. 6818 was introduced by Rep• ress in the development of a sound and The report of the House Commit• resentative Reed of New York, Chair• comprehensive social security pro• tee 46 stated the purpose of the bill as man of the Subcommittee on Social gram . . . follows: Security of the House Committee on "There is another fundamental ob• "This bill is designed to liberalize Ways and Means. An earlier bill— jection to this bill. The aid to the existing law with respect to payments, H. R. 6211, introduced by Mr. Reed on blind program in title X of the Social by the States, to the needy blind . . . April 12—and an identical bill—S. Security Act, like the other public as• The limit of $40 conforms to the limit 2590, introduced by Senator Ives on sistance programs provided in that recently recommended in another bill April 30—provided for a mandatory act, was designed and intended to with respect to so-called permissive exemption of $500 a year on income provide financial assistance at a de• monthly earnings of beneficiaries un• and of $2,000 on property and optional cent minimum of subsistence to those der the old-age and survivors insur• exemptions above such amounts. An• unable to provide for themselves. ance program. other bill, S. 1491, providing that Necessarily payments under these "Enactment of the bill should pro• States may exempt income with re• programs must be made on the basis vide a much needed encouragement spect to blind persons, was introduced of a finding as to the need of each to blind individuals to become useful by Senator Martin on June 23, 1947.47 individual for assistance, and for such and productive members of their Several bills providing for exemption a finding to be realistic and equitable community. The States, of course, of income in the public assistance to all alike, it must be based on a con• will determine whether such encour• titles of the Social Security Act have sideration of each individual's earn• agement is to become an actuality, by been introduced in Congress since the ings from employment and of any electing to avail themselves of the op• act was amended in 1939 to prohibit other resources available to him. To. such exemptions.48 disregard an individual's income in portunity extended to them in this determining the extent of his need bill, to disregard certain income in In vetoing the bill, President Tru• for assistance negates the principle of the measurement of need. The Fed• man declared: "I believe that this bill providing assistance on the basis of eral Government cannot properly par• is unsound in principle, would not ac• need. Once this principle has been ticipate in the blind-aid program to complish the ostensible purpose for breached, grave questions arise as to the extent of compelling adoption of which it was enacted, and would do a logical stopping place to changes any particular test in determining serious damage to our social security of this character short of converting the need for assistance. program. This bill is contrary to the public assistance payments into flat, "The underlying objectives of the most important principle on which noncontributory pensions." bill are in line with recommendations our entire public assistance program made to your committee from time to is based—relief of need. If it became time by witnesses appearing in behalf law it would inevitably operate un• Railroad Social Security of the blind at hearings on social se• fairly against those needy blind who curity revisions. They have urged, are unable to work and who have no Programs and your committee earnestly be• other sources of income. It would On June 23, the President approved lieves, that blind individuals should actually lead to reductions in the as• H. R. 6766, a bill amending the rail• be given every possible incentive to sistance payments of thousands of road retirement and unemployment pursue useful occupations. blind persons who are most in need of insurance laws. The amendments "Aid to the needy blind, in the assistance and whose payments are (Public No. 744) increase by 20 per• judgment of your committee is not in even now far below that necessary to cent virtually all old-age and disabil• the same category with aid programs sustain them at a decent standard of ity retirement annuities and pensions for the aged, or for other needy indi• living. Payments to these most needy and survivor annuities paid pursuant viduals. The needy blind are under recipients would have to be reduced in to a joint and survivor election (but a double handicap. Their opportuni• order to make available the funds re• not annuities for other survivors); ties for gainful employment are quired for the increased payments to guarantee that every employee who sharply reduced and their necessary those able to earn and who would be contributes to the system will ob• expenditures are increased by the benefited by this bill. The most com• tain in benefits, either for himself need for special books, for special pelling reason for disapproval of this or for his survivors or a designated medical treatment in some cases, for bill is my firm belief that the un- beneficiary, an amount at least equal employment of guides and readers to the taxes he paid, plus an al• 47 See statements favoring "further lowance in lieu of interest; and re• and purchase of special appliances liberalization in the law so that blind per• duce the employer's contribution for and equipment. As with concessions sons may have every encouragement to be and special provisions for the blind self-supporting" by Senator Ives and Sen• unemployment insurance by estab• in other laws, this bill is not regarded ator Martin during Senate consideration lishing a system of experience rating of H. R. 6818. Congressional Record (daily based on the size of the railroad un• by your committee as a precedent for edition), June 18, 1948, pp. 8931-32. employment insurance fund. As 48 For an explanation of the 1939 long as the unemployment reserve is 46H. Rept. 2253, 80th Cong. 2d sess. amendment, see H. Rept. 728 on H. R. 6635, See also S. Rept. 1727. 76th Cong., 1st sess., p. 32. $450 million or more, the rate is to be TABLE 7.—Illustrative monthly old-age and Interstate Foreign Commerce, and by ployees would not recommend. Nev• disability retirement benefits under the 1948 amendments to the Railroad Retire• Senator Taft, Chairman of the Sen• ertheless, by considering all the pro• ment Act, (Public No. 744) 1 ate Committee on Labor and Public visions as a unit, both management Welfare, and 12 other Senators from and employees are in agreement that Years of railroad both parties. the bill represents a fair solution to employment "It was pointed out to the commit• the immediate problems concerning Average monthly earnings tee by the representatives of manage• this legislation and recommend that 10 20 30 40 3 ment and labor in the railroad indus• the bill be enacted." try," the report accompanying the Table 7 Indicates illustrative retire• $50: Regular formula $12 $24 $36 $48 bill50 explained, "that the terms Minimum 2 36 50 50 50 ment benefits payable under the 100: Regular formula 21 42 63 84 agreed upon must be considered as a amended law. The amendments also Minimum 2 36 60 ------unit. The bill contains some provi• have the effect of increasing disability 200 36 72 108 144 sions which, standing alone, manage• annuities but do not affect the amount 300 48 96 144 192 ment would not recommend and oth• of benefits to widows, children, or ers which, standing alone, the em- parents under the survivorship provi• 1 The amounts shown in the table are subject to reduction in the case of nondisabled male employees 50 sions added in 1946. retiring at ages 60-64 after 30 or more years of service. H. Rept. 2154, 80th Cong., 2d sess., p. 2. They are also subject to reduction if the retiring em• ployee had made a joint and survivor election. 2 In the case of an individual having a "current connection with the railroad industry," and not less than 5 years of service, a minimum monthly retire• ment benefit is payable equal to the least of (a) $60, (b) $3.60 multiplied by the years of service, and (c) the average monthly earnings. 3 An annuity based on more than 30 years of service is payable only when the entire period of service credited is performed after 1936. 1/2 of 1 percent; the rate then increases 1/2 of 1 percent for each $50 million by which the reserve is less than that amount, reaching the maximum rate of 3 percent if the reserve falls below $250 million. The law also provides that, out of the unemployment con• tributions collected, an amount equal to two-tenths of 1 percent of pay rolls is to be allocated to the unemploy• ment administration fund. The bill was the result of a compro• mise between representatives of rail• road management and labor. Rail• road labor had supported proposed legislation for increasing benefits while railroad management was sup• porting proposed legislation reducing contributions or repealing certain benefits.49 During the closing days of •the session, agreement was reached on a compromise bill, and passage was as• sured when the legislation was intro• duced by Representative Wolverton, Chairman of the House Committee on 49See Amendment to Railroad Unem• ployment Insurance Act, Hearings on S. 670 Before a Subcommittee of the Com• mittee on Labor and Public Welfare, United States Senate . . . June 23 and 24, 1947; Railroad Retirement, Hearing on H. R. 6766 Before the Committee on Inter• state and Foreign Commerce, House of Representatives . . . , 1948; Rail• road Unemployment Insurance, Hearings on H. R. 5711 Before the Committee on Ways and Means, House of Representa• tives . . . June 2, 1948.