SSR 82-3c: SECTION 210(j)(2) (42 U.S.C. 410(j)(2)) -- EMPLOYER-EMPLOYEE RELATIONSHIP -- STATUS OF AIRLINE PILOTS

20 CFR 404.1007

SSR 82-3c

Selman v. Califano, 1A Unempl. Ins. Rep. (CCH) ¶ 17,474 (10th Cir 1980),

619 F.2d 881

LOGAN, Circuit Judge:

Richard J. Selman, Jr., an airline pilot for Eastern Air Lines, contests

his classification as an employee for purposes of the Social Security

laws. The Social Security Administration (SSA) refused to rule that he was

an independent contractor. After exhausting administrative remedies,

Selman sought review in district court, which affirmed the SSA's

determination and denied Selman's motion requesting a remand for the

purpose of taking additional evidence.

Selman makes the following contentions in his appeal to this Court: (1)

the SSA's findings are not supported by substantial evidence; and (2) the

district court abused its discretion in denying the motion to remand for

additional evidence. In addition, he has asked that our decision on his

appeal be delayed until a new contract currently being negotiated between

the Air Line Pilots Association and Eastern Air Lines (Eastern), can be

submitted to this Court.

The applicable section of the Social Security Act, 42 U.S.C. § 410(j)

defines "employee" as anyone who has such a status under the "usual common

law rules," referring to the master-servant concepts developed under the

law of agency. A number of factors have been utilized in determining

whether a person is an "employee" rather than an independent contractor.

20 C.F.R. § 404.1004(c) states the main element of the test as employer

right to control and direct not only the result to be achieved by the

person, but also the means by which the result is achieved. The right to

discharge and whether the employer furnishes the tools and the place of

work are also important factors, indicative of an employer-employee

relationship. Id . Other factors noted in United States v.

Silk , 331 U.S. 704. [67 S.Ct. 1463, 91 L.Ed

r

right to control and direct not only the result to be achieved by the

person, but also the means by which the result is achieved. The right to

discharge and whether the employer furnishes the tools and the place of

work are also important factors, indicative of an employer-employee

relationship. Id . Other factors noted in United States v.

Silk , 331 U.S. 704. [67 S.Ct. 1463, 91 L.Ed. 1757] (1947), are the

opportunities for profit and loss, investment in facilities, permanency of

the relationship between employer and worker, the skill required in doing

the work and whether the service is an integral part of the employer's

business. Id . at 716. No one factor is controlling, however, and

the circumstances must be looked at in totality. Id . at 716,

719.

The evidence submitted at the administrative hearing is uncontroverted

and consists mainly of the contract between Eastern and the Air Line

Pilots Association. [1] The

administrative law judge made the following pertinent findings of fact:

These findings are supported by substantial evidence, as discussed below,

and are therefore conclusive. See 42 U.S.C. § 405(g). We also hold that

these findings show employee status as a matter of law.

It is difficult to understand why Selman seeks reclassification to

independent contractor status, which would push his social security taxes

up to 8.1% from the current 6.13% on the first $25,900 of annual earnings.

See I.R.C. §§ 1401, 3101. Nevertheless, he persists and attacks the

findings of the SSA; we therefore deal with his contentions.

dings show employee status as a matter of law.

It is difficult to understand why Selman seeks reclassification to

independent contractor status, which would push his social security taxes

up to 8.1% from the current 6.13% on the first $25,900 of annual earnings.

See I.R.C. §§ 1401, 3101. Nevertheless, he persists and attacks the

findings of the SSA; we therefore deal with his contentions.

First, Selman emphasizes that in flying an airplane he must exercise

independent judgment in many instances and otherwise the Federal Aviation

Administration (FAA), not Eastern, controls how he flies the plane. The

use of independent judgment, and the accompanying loss of some control by

the employer, is a characteristic of all professional services.

Professionals are not automatically excluded from employee status,

however, unless they are engaged in an independent business in which they

offer their services to the public. 20 C.F.R. § 404.1004(c)(2). Selman

does not fall into this category because he is prohibited by contract from

flying professionally for anyone but Eastern and the national guard or

military reserve.

Recognizing that special considerations are required in determining the

status of professional persons, courts have found an employee relationship

by virtue of the degree of control present in areas outside those in which

professional judgment must be exercised. See Cody v. Ribicoff , 289

F.2d 394 (8th Cir. 1961) (doctor found an employee); Flemming v.

Huycke , 284 F.2d 546 (9th Cir. 1960) (same). The evidence here shows

Eastern had the right to control most nonprofessional facets of the

employment relationship

loyee relationship

by virtue of the degree of control present in areas outside those in which

professional judgment must be exercised. See Cody v. Ribicoff , 289

F.2d 394 (8th Cir. 1961) (doctor found an employee); Flemming v.

Huycke , 284 F.2d 546 (9th Cir. 1960) (same). The evidence here shows

Eastern had the right to control most nonprofessional facets of the

employment relationship. The contract contains the following provisions:

Pilots cannot fly for others or engage in any business activities adverse

to Eastern's interests; the number of hours a pilot can fly per month is

limited; training and proficiency checks are required by Eastern and may

exceed those required by the FAA; Eastern sets up the flight schedules and

may require a pilot to take a flight when no pilot has bid for it; and

Eastern can discipline and discharge a pilot, subject only to certain

requirements of notice, hearing and appeal.

It is uncontroverted that the FAA extensively regulates how the pilot is

to fly the plane. Since both the airline and the pilot are subject to the

regulations, and therefore neither completely controls the means by which

the job is accomplished, this fact is at least neutral. There is evidence,

however, that Eastern retains the right to control the details of the

work, subject to the FAA regulations.

An Eastern pilot's base pay is computed per hours of flying time; this

amount is then varied according to the type of plane, the time of day, and

the number of miles flown. A minimum monthly pay is guaranteed.

Consequently, Selman's income is not directly affected by the

profitability of his or the airline's activities. He can, of course, make

more money by working more hours, but this is not "profit" in the sense

that independent professionals profit by establishing fees that exceed

their costs of providing services to clients or patients.

of miles flown. A minimum monthly pay is guaranteed.

Consequently, Selman's income is not directly affected by the

profitability of his or the airline's activities. He can, of course, make

more money by working more hours, but this is not "profit" in the sense

that independent professionals profit by establishing fees that exceed

their costs of providing services to clients or patients.

It is clear that Eastern furnishes the vast majority of the "tools"

required by an airline pilot, and has made the investment in the aircraft

and the terminal, booking and administrative facilities. Selman furnishes

his own uniform, a flight bag and a tool kit, which are minimal by

comparison. Although Selman has "invested" by obtaining training and a

pilot's license, this is also true of essentially all people who work in a

skilled occupation or profession, whether they serve as employees or

independent contractors. Eastern also furnishes the place of work, the

airplane; that it does not own, but leases, some airplanes and terminals

is irrelevant.

There is extensive evidence that the relationship between Eastern and the

pilots is contemplated as a permanent one. The contract provides for

longevity pay rates, vacations, seniority provisions, leaves of absence,

sick leave, promotions, life insurance and pension plans. These types of

benefits are inconsistent with the one-job relationship existing between

an employer and an independent contractor. That the pilots' contracts are

usually for two-year terms does not affect the intended permanency of the

relationship.

It is common sense that an airline pilot possesses a high degree of

technical skill, but that skill is standard among all pilots. We agree

with the administrative law judge that this factor is neutral.

tionship existing between

an employer and an independent contractor. That the pilots' contracts are

usually for two-year terms does not affect the intended permanency of the

relationship.

It is common sense that an airline pilot possesses a high degree of

technical skill, but that skill is standard among all pilots. We agree

with the administrative law judge that this factor is neutral.

The findings in favor of employee status, supported as they are by the

record, provide a sound and unassailable basis for the employee

classification. There can be no doubt that Selman would be considered the

servant of Eastern under the common law rules referred to in 42 U.S.C. §

410(j).

Selman filed a motion under 42 U.S.C. § 405(g) in the district court for

remand to consider the following additional information: a prospectus on

Eastern Air Lines Profit Sharing Plan; the 1977 to 1979 contract between

Eastern and the Air Line Pilots Association; the FAA flight information

and procedure manual; and a notification of a limited partnership

available to employees for the purpose of owning an airplane leased to

Eastern. The district court judge denied the motion because the evidence

was merely cumulative. We have examined the proffered evidence and agree

it is mostly cumulative and, to the extent it contains any new

information, would not affect the result. Therefore, we affirm the denial

as within the district court's discretion.

ble to employees for the purpose of owning an airplane leased to

Eastern. The district court judge denied the motion because the evidence

was merely cumulative. We have examined the proffered evidence and agree

it is mostly cumulative and, to the extent it contains any new

information, would not affect the result. Therefore, we affirm the denial

as within the district court's discretion.

Selman has filed a motion in this Court requesting we delay consideration

of his appeal until he can submit a copy of the new pilots' employment

contract currently being negotiated with Eastern. He argues that the

information this contract contains -- additional wage variables for a

pilot's ability to conserve fuel -- is significant concerning the factor

of whether he can profit from his own endeavors. This contract apparently

is not yet a part of the employment relationship; at least it was not at

the time of the motion. We must decide the appeal on the record made

below. We cannot consider new evidence proffered at this level, except to

determine whether the case should be remanded under 42 U.S.C. § 405(g).

The new contract, as represented to us, would not affect the result in

this case. The motion to delay our consideration is denied.

The judgment is AFFIRMED.

[1] This contract was in effect

from January 1975 through 1977. The 1977 to 1979 contract was not entered

into evidence at the administrative level, and the district court refused

to remand for reconsideration in light of the new contract. That this

specific contract is no longer in effect does not invalidate the evidence

for our purposes on review.