5. The Treasury Department has ruled that the messages described in the preceding paragraph are exempt from Federal tax, provided the procedure outlined in the preceding paragraph is followed.

The above-quoted portion of the directive of August 11, 1941, clearly contemplates that the cost-plus-a-fixed-fee contractors be authorized to pledge the Government's credit for payment of the cost of the telegrams; that the telegraph companies be informed at the time of filing of the messages that payment therefor will be made from Government funds; and that the Government make payment of the charges directly to the telegraph companies. It is apparent that the procedure thus outlined differs in every material respect from the course followed by the contractor in the King & Boozer case, supra, and that the steps described by the directive are such as to warrant the conclusion that the contractor was acting directly in behalf of and as agent for the Government. It would seem, therefore, that the Government, rather than the contractor, would be obligated to pay the cost of transmitting telegrams filed in accordance with such procedure, and that payment of the Government rate would discharge the Government's obligation. Western Union Telegraph Co. v. United States, supra.

Even prior to the issuance of the directive of August 11, 1941, it appears that the War Department was of the view that the Government rate should apply to telegrams filed by cost-plus-a-fixed-fee contractors. See paragraph 21 of Fixed Fee Letter No. 1, issued September 21, 1940, by the Office of the Quartermaster General quoted in 21 Comp. Gen. 186, 187. While in some instances the Government made payment directly to the telegraph companies for telegrams filed by the contractors, in others the contractors paid the telegraph companies and were reimbursed by the Government-even in cases where the contractors had paid the full commercial rates-thus affording a strong inference that both the contractors and the Government considered that the contractors were primarily liable for the cost of transmitting the messages. Under such circumstances, and in line with the reasoning in the decision of the Supreme Court of the United States in the King & Boozer case, supra, the mere fact that the Government, in certain instances, made payment directly to the telegraph companies would not justify the application of the Government rate, the determining factor being whether the Government actually and legally was directly obligated to the telegraph companies. Cf. the Western Union Telegraph Co. case, supra. And in this connection it is noted that no definite action appears to have been taken, prior to August 11, 1941, to authorize the involved contractors to pledge the Government's credit for the cost of transmitting telegrams in connection with work under their contracts.

In view of the foregoing, and in the absence of a judicial determina

tion of the precise question here involved, I have to advise that payment for telegrams filed in conformity with the procedure contemplated by the above-quoted portion of the directive of August 11, 1941, should be made at the Government rate, only; and that any amounts withheld from the telegraph companies as the difference between the Government and the commercial rate on telegrams filed in accordance with such procedure may not now be paid. However, in instances where the filing of telegrams was not in accordance with such procedure that is, where the contractor was not specifically authorized to pledge the Government's credit for payment of the telegraph tolls and did not purport to do so-the contractor may be reimbursed for payments made at the commercial rate; and amounts heretofore withheld or collected from the telegraph companies as the difference between the Government and the commercial rate on telegrams filed under these circumstances and billed at commercial rates now may be paid or refunded, notwithstanding that the original payment of the Government rate may have been made by the Government. The decisions of this office to which your letter refers [21 Comp. Gen. 92; id. 186; and B-19726, B-19052, September 25, 1941] are modified accordingly.

With respect to the proposed directive providing for amendment of the contracts to constitute the contractors agents of the Government for the transmission of telegrams, it may be stated that the designation of the contractors as agents of the Government would not necessarily be controlling upon the question of agency. See J. B. McCrary Engineering Company v. White Coal Power Company, 35 F. (2d) 142, 146, and Young v. Fosburg Lumber Company, 60 S. E. 654, 16 L. R. A. (N. S.) 255, to the effect that the relationship between the parties to a contract is for determination largely upon the basis of their actions, and not solely upon the basis of conclusions of law which may be expressed in the terms of the contract. Similarly, it may be observed that in the King & Boozer case, supra, the Supreme Court of the United States did not content itself with an examination of the terms of the contract, but gave full consideration to the facts and circumstances of the case and stated that "The course of business followed in the purchase of the lumber conformed in every material respect to the contract." However, an amendment designating the contractor as an agent of the Government would constitute evidence of the intention of the parties in that respect and strengthen the Government's contention. Consequently, this office perceives no objection to the issuance of the proposed directive, which, also, continues in effect the procedure contemplated by the directive of August 11, 1941, discussed above.

(B-22290)

CIVILIAN EMPLOYEES OUTSIDE CONTINENTAL LIMITS OF UNITED STATES-LEAVE DIFFERENTIALS; PAYMENTS FOR RELINQUISHED VACATIONS

While under the leave-differential provisions of existing leave laws and regulations it is within the discretion of the War Department to grant its civilian employees stationed outside the continental limits of the United States annual leave at the rate of 26 days per annum, exclusive of Sundays and holidays, or at the rate of 30 days per annum, inclusive of Sundays and holidays, the granting of the leave and the rate of accrual should be upon the same basis.

A War Department field service employee within the purview of section 1 of Executive Order No. 8817, prescribing the rules and regulations under which payments are to be made pursuant to the act of June 3, 1941, for denied vacations, may not be compensated pursuant to the statute for any forfeitable leave accrued during the calendar year 1941 if the request for and denial of the leave occurred prior to the effective date, July 5, 1941, of the Executive order.

For purposes of payment under section 1 of Executive Order No. 8817, issued pursuant to the act of June 3, 1941, for the current-as distinguished from accumulated-leave that an employee would forfeit if he is required to forego his vacation, the 26 or 30 days, as the case may be, of annual leave which War Department employees stationed outside the continental limits of the United States accrue each year for 4 consecutive years, including the year current when the leave is taken, is to be classed as current leave only during the year in which it accrues. If a War Department "nonindustrial" civilian employee stationed outside the continental limits of the United States, who may accumulate a maximum of 104 days' annual leave, exclusive of Sundays and holidays, through 4 consecutive years, including the year current when the leave is taken, applies for and is denied during his fourth consecutive year of service the amount of annual leave, not to exceed 26 days exclusive of Sundays and holidays, he would forfeit at the end of that year, he may be paid for such leave, subject to the terms and conditions of section 1 of Executive Order No. 8817, issued pursuant to the act of June 3, 1941, authorizing payments for denied vacations as therein specified.

If a War Department "nonindustrial" civilian employee stationed outside the continental limits of the United States had, on January 1, 1941, accumulated 104 days' annual leave, exclusive of Sundays and holidays, for 4 consecutive years of service, he must be considered as having already forfeited 26 days' leave as of that date, none of which may be compensated for under the terms of section 1 of Executive Order No. 8817 issued pursuant to the act of June 3, 1941, authorizing payments for denied vacations as therein specified.

Comptroller General Warren to the Secretary of War, January 20, 1942:

There has been considered your undated letter, received here December 2, 1941, as follows:

Attention is invited to the copy of letter dated October 9, 1941, from the Commanding Officer, Hawaiian Ordnance Depot, Honolulu, Territory of Hawaii, through the Chief of Ordnance, Washington, D. C., and the request for information in paragraph 3, letter submitted by the Office of Chief of Ordnance to the Secretary of War under date of October 28, 1941. Your decision is respectfully requested on questions propounded therein.

In paragraph 2 of letter dated October 28, the following is submitted for

comment:

"In view of the rulings referred to, it would appear that while the War Department may administratively determine that leave for employees outside the continental limits of the United States should be computed at the rate of 26 days per annum, exclusive of Sundays and holidays, the rate of accrual should remain at 30 days per annum, including Sundays and public holidays, as outlined in War Department orders J of August 5, 1899, and circular A of

January 12, 1912, unless and until a further order is issued by the Department." This office concurs with the Chief of Ordnance in the statement as quoted above.

The referred-to letter of October 28, 1941, from the Chief of Ordnance to you, reads as follows:

Subject: Vacation pay for employees of the Field Service outside the continental limits of the United States who forego their vacations.

1. A copy of a letter addressed to this office by the Hawaiian Ordnance Depot is transmitted herewith.

2. It will be noted that annual leave for employees outside of the continental limits of the United States is based upon War Department orders J of August 5, 1899, and War Department circular A, January 12, 1912, rather than upon the Annual Leave Laws and Regulations of March 29, 1940. Paragraph 1 of circular A referred to provides in part as follows: "Unused annual leave of absence provided by the Department's circular J of August 5, 1899, shall accrue not to exceed 120 days counting Sundays and holidays for employees who are citizens of the United States and who are on duty in Alaska, the Philippines, or outside the limits of the United States * * In rendering a decision on a number of matters relating to leave of absence for civilian employees outside the continental limits of the United States (20 Comp. Gen. 114) the Comptroller General has held that it would be proper to grant such employees annual leave at the rate of 26 days per annum, exclusive of Sundays and holidays, but that the accrual on that basis would have to be limited to 104 days for four years, including the year current when the leave is taken. In the same decision it is held that "The general effect of this authority (section 5 of the Annual Leave Act) in the instant matter is to vest in the Secretary of War discretion to adopt leave regulations for employees stationed in the Philippine Islands comprising any of the features of either the administrative regulations-War Department circular A dated January 12, 1912-in force prior to January 1, 1936, effective date of the new leave acts, or the President's regulations issued pursuant to the Annual and Sick Leave Acts of March 14, 1936." In view of the rulings referred to, it would appear that while the War Department may administratively determine that leave for employees outside of the continental limits of the United States shall be computed at the rate of 26 days per annum, exclusive of Sundays and holidays, the rate of accrual should remain at 30 days per annum, including Sundays and public holidays, as outlined in War Department's orders J of August 5, 1899, and circular A of January 12, 1912, unless and until a further order is issued by the Department. Comment is requested on this point.

3. Whether leave for civilian employees outside the continental limits of the United States accrues at the rate of 30 days per annum, including Sundays and holidays, up to a maximum of 120 days, or at the rate of 26 days per annum, exclusive of Sundays and holidays up to a maximum of 104 days, the language of paragraph 1 of War Department Circular A providing that accrued leave shall not exceed 120 days, and the similar limit not to exceed 104 days in the event accrual is at the rate of 26 days per annum, appears to prevent any reimbursement for annual leave for a civilian employee outside the continental limits of the United States not classed as "industrial," as defined in paragraph 3d of letter of the Under Secretary of War of July 16, 1941, Subject, "Vacation Pay for Employees of the Field Service of the War Department Who Forego Their Vacations." In other words, nonindustrial employees within the continental limits of the United States governed by the Annual Leave Regulations of March 29, 1940, may accumulate annual leave not to exceed 60 days. They may also currently accrue in any calendar year not to exceed 26 additional days of annual leave, for which they may be compensated prior to losing such leave with the close of the current calendar year. On the other hand, it appears that employees occupying similar positions outside the continental limits of the United States may accrue leave only to a total of 120 days, including the current calendar year; after reaching that figure no further leave accrues to the employee so that he cannot be considered to have to his credit any leave for which he might be compensated under the provisions of section 1 of Executive Order 8817, July 5, 1941.

4. It is requested that this office be advised in this matter at an early date.

The referred-to letter of October 9, 1941, from the commanding officer, Hawaiian Ordnance Depot, Honolulu, T. H., to the Chief of Ordnance, reads as follows:

1. Reference Executive Order No. 8817, dated July 5, 1941. Advice is requested as to whether this order can be made to apply retroactively.

2. There are three possible dates from which the pay can be calculated for employees having already permanently forfeited leave as a result of excess accumulation which are as follows:

a. From date of receipt of the Executive Order No. 8817 in this office (August 4, 1941).

Inasmuch as section 1 of the Executive Order states "Such compensation shall be only for the portion of the requested leave which would otherwise be forfeited * * it would appear that only those requests submitted after the receipt in this office of the order (August 4, 1941) and the subsequent education of the employees could be considered.

b. From date of signing by the President (July 5, 1941).

Since section 7 states that "This order shall become effective immediately * *" it seems logical that all permanently forfeited leave due to excess accumulation resulting after July 5, 1941, be considered for payment of compensation.

c. From the first day of this calendar year (January 1, 1941).

The annual leave being calculated on the basis of the calendar year, there exists the possibility that all leave forfeited since January 1, 1941, might be rightfully compensated for by conscientious employees of this office who, having requested a vacation, were persuaded to postpone the taking of leave until a later opportune time.

3. A specific example might serve to clarify the question by presenting the three possibilities.

a. The employees of this office are given 2% days' leave credit for every month employed. The maximum that can be accrued is 104 days (from 4 years).

b. On January 1, 1941, employee A had accrued 104 days' leave. He did not submit a request for a vacation as he knew his services were urgently needed. Employee A has taken no leave during this calendar year. Our records show an accrued leave of 104 days on July 5, 1941, by which time he had permanently forfeited 13 days' leave.

c. On September 30, 1941, Employee A read the Executive Order No. 8817 and requested 26 days' annual leave or the compensation in lieu of the leave. His services cannot be spared without detriment to the national defense.

d. Under the provisions of section 1, Executive Order No. 8817, dated July 5, 1941, he can be given compensation in lieu of the annual leave.

e. Is this office to pay employee A

(1) For 26 days under interpretation of the Executive order stated in paragraph 2c this letter.

(2) For 13 days under interpretation stated in paragraph 2b.

(3) For 11 days under interpretation stated in paragraph 2a, or

(4) For 6 days which is the number of days which would be permanently forfeited after the employee requested leave.

4. The correct interpretations to be made from Executive Order No. 8817, dated July 5, 1941, are urgently needed so that the opportunities involved can be judiciously used. It is requested that the correct applications of the Order No. 8817, as outlined in paragraphs 2 and 3, be determined and that this office be notified by radio.

While the decision of August 26, 1940, 20 Comp. Gen. 114, cited in the letter of the Chief of Ordnance, considered the leave benefits of civilian employees of the War Department stationed in the Philippine Islands, the rules therein stated are applicable, also, to civilian employees of the War Department stationed in Hawaii-there being for noting that War Department circular A of January 12, 1912, quoted in the decision, is applicable to "employees who are citizens of the United States and who are on duty in Alaska, the Philippines,