The 1948 DRGW Rule Book, which probably would have been the version in effect at the time of the photo, pretty much says the same thing.
“Rule 19 – The following signals will be displayed, one on each side of rear of train as markers, to indicate the rear of train:
-by day, marker lamps not lighted or yellow flags……”
There is no other reference to using yellow flags other than as wayside signals for speed restrictions. If the train is being shoved backwards for a distance, I am guessing the trainman is using the flag to assist the engine crew with being able to see his hand signals as the trainman controls the move. It looks like the locomotive is a ways away and visibility for hand signals would be poor, even if you had someone relaying signals from another location between the caboose and engine.
MD Ramsey