FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
BLUE LAKE RANCHERIA; BLUE LAKE
RANCHERIA ECONOMIC DEVELOPMENT
No. 10-15519
CORPORATION,
Plaintiffs-Appellants,
D.C. No.
3:08-cv-04206-SC
v.
OPINION
UNITED STATES OF AMERICA,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of California
Samuel Conti, Senior District Judge, Presiding
Argued and Submitted
July 11, 2011—San Francisco, California
Filed August 11, 2011
Before: Procter Hug, Jr., Barry G. Silverman, and
Susan P. Graber, Circuit Judges.
Opinion by Judge Silverman
10701
10704 BLUE LAKE RANCHERIA v. UNITED STATES
COUNSEL
Frank R. Lawrence, Kathleen M. Niles, Jonathan E. Strouse
(argued), and Zehava Zevit of Holland & Knight LLP, Los
Angeles, California, for the plaintiffs-appellants.
John A. DiCicco, Kenneth L. Greene, Patrick J. Urda, and
Gilbert S. Rothenberg (argued) of the United States Depart-
ment of Justice, Tax Division, Washington, DC, for the
defendant-appellee.
OPINION
SILVERMAN, Circuit Judge:
Blue Lake Rancheria, an Indian tribe, seeks a refund of
Federal Unemployment Tax Act taxes paid by Mainstay Busi-
ness Solutions, an employee leasing company wholly owned
by the Tribe. Section 3306(c)(7) of Title 26 of the United
States Code excepts from the definition of “employment”—
and thus exempts from the payment of employment tax—
”services performed in the employ of an Indian tribe, or any
instrumentality” of a tribe. We hold today that this exception
does not apply where a tribe is merely a “statutory employer”
—in essence, nothing more than a paymaster. The exception
granted by § 3306(c)(7) applies only where a tribe is the
common-law employer. However, undisputed facts show that
Mainstay was, indeed, the common-law employer of the
workers at issue here and, therefore, was entitled to the spe-
cial tax treatment Congress saw fit to grant to Indian tribes.
I. Background
Blue Lake Rancheria is a 53-member, federally recognized
Indian tribe located in Humboldt County, California. In May
BLUE LAKE RANCHERIA v. UNITED STATES 10705
2003, the Tribe established Mainstay Business Solutions as a
for-profit business owned by and operated for the benefit of
the Tribe. Mainstay provided employee leasing and temporary
staffing for small- and medium-sized businesses located in
California, Hawaii, and Nevada. Mainstay contracted with
each of its clients to hire the client’s employees as its own and
then “lease” those employees back to the client. The client
supervised the leased employees on a day-to-day basis, but
Mainstay paid their wages, provided benefits, and performed
other human resources functions. According to Mainstay, this
arrangement allowed the client to free itself from H.R.
responsibilities and focus on its business, and resulted in bet-
ter benefits for employees. During the years at issue in this
case (2003 and 2004), Mainstay paid wages for approximately
39,000 workers.
Mainstay reported and paid $722,047.77 in FUTA taxes for
2003 and $1,283,892.86 for 2004. Mainstay later filed claims
for refunds with respect to these tax payments, asserting that,
as a tribally owned business entity, it was exempt from FUTA
tax liability under 26 U.S.C. § 3306(c)(7).1 Having received
no formal response from the IRS regarding the refund claims,
the Tribe filed suit in the Northern District of California. The
complaint sought a full refund of the FUTA taxes paid by
Mainstay for 2003 and 2004 ($2,005,939), plus statutory
interest.
The Tribe and the United States filed cross-motions for
summary judgment. The district court granted the United
States’ motion for summary judgment and denied the Tribe’s
motion. The court held that § 3306(c)(7)’s exception for ser-
vices performed “in the employ of” an Indian tribe applies
only where the tribe is a common-law employer. The court
further held that the Tribe failed to present facts sufficient to
1
Unless otherwise indicated, all statutory references are to Title 26 of
the United States Code.
10706 BLUE LAKE RANCHERIA v. UNITED STATES
establish that Mainstay was the common-law employer of the
workers in question.
The Tribe now appeals. We have jurisdiction under 28
U.S.C. § 1291.
II. Discussion
A. Standard of Review
The first question presented by this case—the scope of
§ 3306(c)(7)’s exception from “employment”—is one of stat-
utory interpretation, which we review de novo. See Idaho
Farm Bureau Fed’n v. Babbitt, 58 F.3d 1392, 1399 (9th Cir.
1995).
The second question—whether Mainstay is the common-
law employer of its leased employees—is a mixed question of
law and fact. See Chin v. United States, 57 F.3d 722, 725 (9th
Cir. 1995) (citing Prof’l & Exec. Leasing, Inc. v. Comm’r,
862 F.2d 751, 753 (9th Cir. 1988)). Where a case turns on a
mixed question of law and fact and, as here, the only disputes
relate to the legal significance of undisputed facts, “the con-
troversy collapses into a question of law suitable to disposi-
tion on summary judgment.” Thrifty Oil Co. v. Bank of Am.
Nat’l Trust & Sav. Ass’n, 322 F.3d 1039, 1046 (9th Cir.
2003). We review de novo the district court’s decision on
cross-motions for summary judgment. Trunk v. City of San
Diego, 629 F.3d 1099, 1105 (9th Cir. 2011).
B. Scope of § 3306(c)(7)’s Exception
[1] This case requires us to interpret § 3306(c)(7), which
excepts “services performed in the employ of” an Indian tribe
from the definition of “employment” for purposes of FUTA.
Statutory interpretation begins with the text of the statute
itself. See Brock v. Writers Guild of Am., W., Inc., 762 F.2d
1349, 1353 (9th Cir. 1985). The plain meaning of a statute
BLUE LAKE RANCHERIA v. UNITED STATES 10707
controls where that text is unambiguous. See Green v.
Comm’r, 707 F.2d 404, 405 (9th Cir. 1983).
Subtitle C of the Internal Revenue Code governs employ-
ment taxes on individuals and their employers. See
§§ 3101-3510. Subtitle C includes the Federal Insurance Con-
tributions Act (Chapter 21, §§ 3101-3128), FUTA (Chapter
23, §§ 3301-3311), and provisions regarding income tax with-
holding (Chapter 24, §§ 3401-3406). FUTA funds the joint
federal-state unemployment insurance program by imposing
an employment tax:
There is hereby imposed on every employer (as
defined in section 3306(a)[2]) for each calendar year
an excise tax, with respect to having individuals in
his employ, equal to . . . 6.2 percent . . . of the total
wages (as defined by section 3306(b)) paid by him
during the calendar year (or portion of the calendar
year) with respect to employment (as defined in sec-
tion 3306(c)).
§ 3301. The FUTA tax applies only to the first $7,000 an
employer pays to each employee during the year.
§ 3306(b)(1). Employers may take a credit against the tax for
amounts paid to state unemployment funds, reducing the
minimum effective FUTA tax rate to 0.8%. § 3302.
2
Section 3306(a) defines “employer” as “any person who (A) during
any calendar quarter in the calendar year or the preceding calendar year
paid wages of $1,500 or more, or (B) on each of some 20 days during the
calendar year or during the preceding calendar year, each day being in a
different calendar week, employed at least one individual in employment
for some portion of the day.” § 3306(a)(1). The parties do not make any
arguments based on this definition, and its primary purpose appears to be
providing a limited exclusion from FUTA for very small employers. See
Cencast Servs., L.P. v. United States, 62 Fed. Cl. 159, 178 (2004) (noting
that, prior to a 1970 amendment, the term “employer” had been defined
solely in terms of the number of persons in the employ of the employer
for a certain period of time, and that the amendment was intended to nar-
row the scope of the “small employer” exception).
10708 BLUE LAKE RANCHERIA v. UNITED STATES
[2] Central to this case is FUTA’s definition of “employ-
ment.” Section 3306(c) defines “employment” as, in relevant
part, “any service, of whatever nature, performed after 1954
by an employee for the person employing him, irrespective of
the citizenship or residence of either.” § 3306(c). FUTA
incorporates by reference the definition of “employee” from
FICA, § 3121(d), which defines the term in relevant part as
“any individual who, under the usual common law rules appli-
cable in determining the employer-employee relationship, has
the status of an employee.” See § 3306(i) (referring to
§ 3121(d)).
Section 3306(c) contains a number of exceptions to the def-
inition of employment. See § 3306(c)(1)-(21). Services falling
under one of these exceptions are not considered “employ-
ment” and, therefore, do not give rise to FUTA tax liability.
Among § 3306(c)’s exceptions is the governmental and tribal
employer exception, which excludes from “employment”
service[s] performed in the employ of a State, or any
political subdivision thereof, or in the employ of an
Indian tribe, or any instrumentality of any one or
more of the foregoing which is wholly owned by one
or more States or political subdivisions or Indian
tribes . . . .
§ 3306(c)(7).
[3] This case turns on the interpretation of § 3306(c)(7)’s
exception from “employment” of services performed “in the
employ of” an Indian tribe. The government argues—and the
district court agreed—that this exception applies only where
a tribe is the common-law employer of a worker; the Tribe,
on the other hand, contends that the phrase “in the employ of”
also covers situations where a tribe is only the statutory
employer. A “common-law employer” is the employer under
the general common law of agency. See Cmty. for Creative
Non-Violence v. Reid (CCNV), 490 U.S. 730, 740 (1989). In
BLUE LAKE RANCHERIA v. UNITED STATES 10709
contrast, a “statutory employer” is merely a paymaster—“the
person having control of the payment of . . . wages,” where
“the person for whom [an] individual performs or performed
. . . services does not have control of the payment of the
wages for such services.” § 3401(d)(1).
The Tribe asks us to hold that an Indian tribe or instrumen-
tality thereof is exempt from paying FUTA taxes whenever it
acts as a statutory employer—in other words, whenever it
controls the payment of wages for services performed for
another entity. To support this argument, the Tribe relies pri-
marily on the Supreme Court’s decision in Otte v. United
States, 419 U.S. 43 (1974), which extended the application of
§ 3401(d)(1)’s definition of “employer” to the context of
FICA. In Otte, a bankruptcy case, the Supreme Court had to
decide whether priority claims for wages earned prior to an
employer’s bankruptcy, but paid by the trustee after the incep-
tion of bankruptcy proceedings, were subject to withholding
of income and FICA taxes. 419 U.S. at 44. Section 3402(a)
requires “every employer making payment of wages” to “de-
duct and withhold [income tax] upon such wages,” and
§ 3102(a) provides that “[FICA tax] shall be collected by the
employer of the taxpayer, by deducting the amount of the tax
from the wages as and when paid.” Otte, the bankruptcy
trustee, argued that he did not have to withhold income or
FICA taxes because he was not the “employer” and because
the claim payments were not “wages.” 419 U.S. at 49. The
Court rejected these arguments, pointing to § 3401(d)’s defi-
nition of “employer”:
For purposes of this chapter, the term “employer”
means the person for whom an individual performs
or performed any service, of whatever nature, as the
employee of such person, except that—(1) if the per-
son for whom the individual performs or performed
the services does not have control of the payment of
the wages for such services, the term “employer”
10710 BLUE LAKE RANCHERIA v. UNITED STATES
(except for purposes of subsection (a)[3]) means the
person having control of the payment of such
wages[.]
§ 3401(d); 419 U.S. at 49. The Court explained that this defi-
nition “obviously was intended to place responsibility for
withholding at the point of control.” 419 U.S. at 50. On its
face, § 3401(d)’s definition of “employer” applies only to
Chapter 24, governing income tax withholding. See § 3401(d)
(“For purposes of this chapter, the term employer means
. . . .” (emphasis added)). Although FICA is a different chap-
ter, and although FICA does not contain any equivalent defi-
nition of “employer,” the Court held that the trustee was also
responsible for withholding FICA taxes because “th[e] term
[employer] is not to be given a narrower construction for
FICA withholding than for income tax withholding.” 419 U.S.
at 51. As the trustee, Otte controlled the payment of the wage
claims, and therefore had responsibility as the § 3401(d)(1)
statutory employer for withholding income and FICA taxes.
Id.
Following Otte, courts have further extended the applica-
tion of § 3401(d)(1)’s definition, concluding that a statutory
employer is responsible not only for withholding income tax
and the employee’s portion of FICA tax, but also for paying
FUTA tax and the employer’s portion of FICA tax. See Wins-
tead v. United States, 109 F.3d 989, 991 (4th Cir. 1997);
Melamed v. United States (In re Laub Baking Co.), 642 F.2d
196, 199 (6th Cir. 1981); Evans v. IRS (In re Sw. Rest. Sys.,
Inc.), 607 F.2d 1237, 1240 (9th Cir. 1979); United States v.
Ennis (In re Armadillo Corp.), 561 F.2d 1382, 1386 (10th Cir.
1977).
As previously noted, FUTA imposes a tax on “every
3
Section 3401(a) defines “wages” for purposes of Chapter 24 as “all
remuneration . . . for services performed by an employee for his employ-
er.”
BLUE LAKE RANCHERIA v. UNITED STATES 10711
employer . . . with respect to having individuals in his
employ, equal to [a percentage] of the total wages . . . paid by
him during the calendar year with respect to employment.”
§ 3301. FICA uses nearly identical wording. See § 3111. In
holding that a statutory employer is responsible for paying
FUTA and FICA taxes, neither Otte nor its progeny relied on
any specific phrasing in those sections. Instead, the extension
of § 3401(d)(1)’s definition of “employer” appears to rest on
a practical concern: “When it finally comes to the point of
deducting from the wages earned that part which belongs to
the United States and matching it with the employer’s share
of FICA taxes, the only person who can do that is the person
who is in ‘control of the payment of such wages.’ ” Sw. Rest.
Sys., 607 F.2d at 1240.
Although the extension of § 3401(d)(1)’s definition of
employer does not derive from any specific text found in
FUTA, the Tribe argues that under Otte and its progeny, the
phrase “in his employ” in § 3301 encompasses both statutory
and common-law employers. The governmental and tribal
exception uses a nearly identical phrase, excepting from “em-
ployment” services performed “in the employ of” an Indian
tribe. § 3306(c)(7). The Tribe argues that “in the employ of”
should mean the same thing as “in his employ”; in other
words, if a statutory employer has workers “in his employ”
for purposes of liability under § 3301, then those workers
should be considered “in the employ of” the statutory
employer for purposes of § 3306(c)(7)’s exception.
It is true that “in his employ” and “in the employ of” are
practically identical, and “[i]t is a normal rule of statutory
construction that identical words used in different parts of the
same act are intended to have the same meaning.” Comm’r v.
Keystone Consol. Indus., Inc., 508 U.S. 152, 159 (1993) (cita-
tions and internal quotation marks omitted). But Otte and its
progeny never expressly held that the specific phrase “in his
employ” refers to the statutory employer; instead, the
Supreme Court held that the term “employer” should not be
10712 BLUE LAKE RANCHERIA v. UNITED STATES
given a narrower construction for FICA withholding purposes
than for income tax withholding purposes. Otte, 419 U.S. at
51; see also § 3102(a) (providing that the employee’s portion
of FICA “shall be collected by the employer of the taxpayer,
by deducting the amount of the tax from the wages as and
when paid.”). So Otte and its progeny defined “employer,”
but not “in his employ.”
[4] We conclude that the cases extending § 3401(d)(1)’s
definition of “employer” to FICA and FUTA merely hold that
a statutory employer has responsibility for reporting and
remitting those taxes; these cases do not change the fact that
FUTA liability arises out of the common-law employment
relationship. At least one court has already held that there is
no basis for further extending § 3401(d)(1)’s definition of
“employer.” See Cencast Servs., L.P. v. United States, 62 Fed.
Cl. 159, 180 (2004) (declining to extend § 3401(d)(1)’s defi-
nition of “employer” for purposes of calculating “total wages”
paid under FUTA and FICA and, instead, looking to the
common-law employers to calculate wages). In other words,
it is the common-law employment relationship that triggers
the FUTA tax; Otte and its progeny merely hold that the statu-
tory employer must pay that tax for the practical reason that
responsibility for reporting, withholding, and paying employ-
ment taxes should be centralized with the entity that controls
the payment of wages. See Sw. Rest. Sys., 607 F.2d at 1240
(“No one other than the person who has control of the pay-
ment of the wages is in a position to make the proper account-
ing and payment to the United States.”).
[5] We hold that § 3306(c)(7)’s exception unambiguously
applies only where an Indian tribe acts as a common-law
employer. The context of the exception—a subparagraph of
the definition of “employment,” which incorporates the
common-law element through the use of the term “employee”
—compels this interpretation. Because we conclude that
§ 3306(c)(7) is not ambiguous, we do not apply the canon of
construction requiring courts to resolve statutory ambiguities
BLUE LAKE RANCHERIA v. UNITED STATES 10713
in favor of Indians. See South Carolina v. Catawba Indian
Tribe, Inc., 476 U.S. 498, 506 (1986) (“The canon of con-
struction regarding the resolution of ambiguities in favor of
Indians . . . does not permit reliance on ambiguities that do
not exist; nor does it permit disregard of the clearly expressed
intent of Congress.”).
Similarly, because we conclude that § 3306(c)(7) is not
ambiguous, we need not rely on legislative history as an aid
to interpretation. See Green, 707 F.2d at 405. In any event, the
legislative history is not particularly illuminating in this case.
Nothing in the legislative history of either FUTA or
§ 3401(d)(1) suggests that the phrase “in the employ of,” as
it appears in § 3306(c)(7), was meant to encompass statutory
employment relationships. Nor does the history of
§ 3306(c)(7) support such a conclusion. Prior to 2000,
§ 3306(c)(7) excepted only services performed in the employ
of a State or any political subdivision thereof. Congress
amended § 3306(c)(7) in 2000 by inserting “or in the employ
of an Indian tribe” to the exception. The House Conference
Report on the amendment states:
Both non-profit organizations and State and local
governments are not required to pay FUTA taxes.
Instead they may elect to reimburse the unemploy-
ment compensation system for unemployment com-
pensation benefits actually paid to their former
employees. Generally, Indian tribes are not eligible
for the reimbursement treatment allowable to non-
profit organizations and State and local govern-
ments. . . . However, H.R. 5542 provides that an
Indian tribe (in [sic] including any subdivision, sub-
sidiary, or business enterprise chartered and wholly
owned by an Indian tribe) is treated like a non-profit
organization or State or local government for FUTA
purposes (i.e., given an election to choose the reim-
bursement treatment).
10714 BLUE LAKE RANCHERIA v. UNITED STATES
H.R. Conf. Rep. 106-1033, at *1000 (2000). The House Con-
ference Report demonstrates that Congress intended for
Indian tribes to be treated like states and other political subdi-
visions with respect to FUTA tax, but it does not follow that
Congress intended the governmental and tribal employer
exception to extend to situations where either a state or an
Indian tribe was a statutory employer, but not a common-law
employer.
[6] We note the Tribe’s argument that the IRS itself
adopted the Tribe’s interpretation of § 3306(c)(7) in a private
letter ruling. See I.R.S. Priv. Ltr. Rul. 9237023 (Sept. 11,
1992). But private letter rulings may not by used or cited as
precedent, so this ruling does not influence our decision.
§ 6110(k)(3); see also Lucky Stores, Inc. v. Comm’r., 153
F.3d 964, 967 n.5 (9th Cir. 1998) (“Taxpayers other than
those to whom such rulings . . . were issued are not entitled
to rely on them.”). The Tribe also argues that the district court
erred in citing five pre-Otte revenue rulings for the proposi-
tion that the IRS has historically focused on the common-law
employer as the relevant employer for purposes of calculating
FUTA liability. The rulings were all issued before Otte and
assumed that because FICA and FUTA did not contain a defi-
nition of employer like that found at § 3401(d)(1), a statutory
employer is never the employer for FICA or FUTA purposes.
See S.S.T. 154, 1937-1 C.B. 332; Rev. Rul. 54-471, 1954-2
C.B. 348; Rev. Rul. 57-145, 1957-1 C.B. 332; Rev. Rul. 57-
316, 1957-2 C.B. 626; and Rev. Rul. 69-316, 1969-1 C.B.
263. We question the continued viability of these rulings post-
Otte, but we need not rely on them because we find
§ 3306(c)(7) to be unambiguous when read in context of
FUTA’s definition of “employment.”
Finally, the Tribe cites a decision by the California Unem-
ployment Insurance Appeals Board as supporting its interpre-
tation of § 3306(c)(7). In that decision, the administrative law
judge concluded that Mainstay was eligible to pay into the
state unemployment fund using a reimbursement method
BLUE LAKE RANCHERIA v. UNITED STATES 10715
instead of a contribution method. Like the district court, we
decline to follow the ALJ’s decision, which was based on
Mainstay’s status as a “leasing employer” or “temporary ser-
vices employer” under California Unemployment Insurance
Code section 606.5, not on any interpretation of § 3306(c)(7).
FUTA contains no provision analogous to section 606.5.
While it is true that employers are eligible to elect reimburse-
ment financing in California only if they are exempt under
§ 3306(c)(7), the ALJ’s decision contains no analysis of the
federal statute and therefore provides no persuasive support
for the Tribe’s argument.
C. Mainstay’s Relationship With Its Leased Employees
Having held that § 3306(c)(7)’s exception applies only
where an Indian tribe or its instrumentality is a common-law
employer, we must determine whether Mainstay qualifies for
the exception. The parties do not dispute the facts underlying
this determination; only the legal significance of those facts
is at issue.
In CCNV, the Supreme Court listed a number of factors to
be considered in determining whether an individual is a
common-law employee:
In determining whether a hired party is an employee
under the general common law of agency, we con-
sider the hiring party’s right to control the manner
and means by which the product is accomplished.
Among the other factors relevant to this inquiry are
the skill required; the source of the instrumentalities
and tools; the location of the work; the duration of
the relationship between the parties; whether the hir-
ing party has the right to assign additional projects
to the hired party; the extent of the hired party’s dis-
cretion over when and how long to work; the method
of payment; the hired party’s role in hiring and pay-
ing assistants; whether the work is part of the regular
10716 BLUE LAKE RANCHERIA v. UNITED STATES
business of the hiring party; whether the hiring party
is in business; the provision of employee benefits;
and the tax treatment of the hired party.
490 U.S. at 751-52 (footnotes omitted). No one factor is
determinative. Id. at 752. Treasury regulations also provide a
test for determining the existence of a common-law employ-
ment relationship:
Generally [the legal relationship of employer and
employee] exists when the person for whom services
are performed has the right to control and direct the
individual who performs the services, not only as to
the result to be accomplished by the work but also as
to the details and means by which that result is
accomplished. That is, an employee is subject to the
will and control of the employer not only as to what
shall be done but how it shall be done. In this con-
nection, it is not necessary that the employer actually
direct or control the manner in which the services are
performed; it is sufficient if he has the right to do so.
The right to discharge is also an important factor
indicating that the person possessing that right is an
employer. Other factors characteristic of an
employer, but not necessarily present in every case,
are the furnishing of tools and the furnishing of a
place to work, to the individual who performs the
services.
Treas. Reg. § 31.3306(i)-1(b).
[7] The multi-factor tests articulated in CCNV and Trea-
sury Regulation § 31.3306(i)-1(b) are directed at determining
whether an individual is an employee or an independent con-
tractor. Most of the cases applying this test involve a simple
two-party relationship: worker and hiring party. As we have
observed, “the assessment of the triangular relationship
between worker, temporary employment agency and client is
BLUE LAKE RANCHERIA v. UNITED STATES 10717
not wholly congruent with the two-party relationship involv-
ing independent contractors.” Vizcaino v. U.S. Dist. Court,
173 F.3d 713, 723 (9th Cir. 1999). The employee—
independent contractor dichotomy is not at play in such a situ-
ation. A worker may be a common-law employee of both the
agency and the client; the two are not mutually exclusive. Id.
[8] Applying the CCNV factors to the undisputed facts
presented here, we conclude that Mainstay was a common-
law employer of its leased employees.4 Although the client,
not Mainstay, supervised the leased employees on a day-to-
day basis, the employees were required to comply with Main-
stay’s employment policies regarding such issues as smoking,
telephone use, timekeeping, and breaks. In this sense, the
leased employees were subject to the will and control of both
Mainstay and the client company. Moreover, Mainstay set the
level of compensation and had ultimate responsibility for pay-
ing employees—if a client failed to pay Mainstay’s invoice,
Mainstay paid the employees’ wages from its own bank
account. Mainstay treated the leased employees as its own for
tax purposes, issuing W-2 forms, withholding and remitting
income taxes, and paying the employer portion of FICA taxes.
Mainstay provided employment benefits, including health
insurance, life insurance, and a 401(k) retirement plan. Under
its contracts with clients, Mainstay retained the rights to
recruit, screen, and hire employees for assignment at clients’
businesses; to terminate employees; to administer all unem-
ployment claims; and to reassign employees to other clients
if necessary. On several occasions, Mainstay defended against
lawsuits brought by present or former employees arising out
of their employment. All of these factors lead us to conclude
that Mainstay was a common-law employer of its leased
employees. The fact that Mainstay did not furnish tools or that
the employees did not render their services on Mainstay prop-
4
We need not, and do not, decide whether the leased employees were
also common-law employees of the client companies.
10718 BLUE LAKE RANCHERIA v. UNITED STATES
erty is not sufficient to tip the balance away from this conclu-
sion.
III. Conclusion
[9] Services performed “in the employ of an Indian tribe”
are excepted from FUTA’s definition of “employment” by
§ 3306(c)(7) only where a tribe or its instrumentality is a
common-law employer of the worker performing the services.
Because Mainstay was a common-law employer of its leased
employees during the years in question, it was not required to
pay FUTA taxes with respect to those employees. We reverse
and remand with instructions to enter judgment for the Tribe.
REVERSED and REMANDED.