Employer Status Determination

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Marietta Industrial Enterprises, Inc.

(doing business as Dock Side, Inc.)

This is the decision of the Railroad Retirement Board with respect

to the status under the Railroad Retirement and Railroad

Unemployment Insurance Acts of Marietta Industrial Enterprises,

Inc. (doing business as Dock Side, Inc.) (MIE).

The following is based on information provided in letters dated

November 13 and December 27, 1991, and March 20 and May 28, 1992,

from Mr. Thomas L. Rose, Controller/Treasurer of MIE, and on

information obtained by the Railroad Retirement Board in connection

with its employer status determination as to Little Kanawha River

Rail, Inc. (LKRR).

LKRR was held on July 25, 1990, to be a rail carrier employer

covered under the Acts effective August 1, 1989, the date on which

it began conducting rail operations. Although Mr. Rose has stated

that "LKRR is owned by individuals who have less than 75% ownership

of MIE" , he now advises that MIE is owned in equal shares by W.

Scott Elliott, Burt M. Elliott, R. Grant Elliott, and Cheryl L.

Rose, while LKRR is owned in equal shares by W. Scott Elliott, Burt

M. Elliott, and R. Grant Elliott. Accordingly, exactly 75 percent

of the ownership of MIE owns 100 percent of LKRR. In his letter of

December 27, 1991, Mr. Rose stated that the line in question serves

"Ames Tools, AB Chance, Badger Lumber, Dock Side and CSX." In his

letter of November 13, 1991, Mr. Rose stated that LKRR has no

employees and the line is operated by MIE employees. Four to six

such employees "may work on the railroad in any given pay period."

The work "might require two hours/day or less." In addition there

are many days "that the railroad does not operate." MIE and LKRR

have the same address and telephone number.

In his most recent letter, Mr. Rose states that MIE has 125

employees and that its operations include:

* Warehousing and JIT programs for local industry[.]

* Metals Division which crushes, sizes, packages and

quality controls Ferro Alloys, Bauxite, etc.

* Trucking division which supports JIT programs,

Metals Division, Plastics Division & Limestone.

* Wholesale and Retail of Limestone and related

aggregates. *

* Plastics Division which grinds, screens, packages

and quality controls plastic and rubberized material

for local industries.

BCD 1995-20
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Marietta Industrial Enterprises, Inc.

* Plastics Recycling Division which separates, grinds,

cleans, extrudes, and quality controls recycled plastics.

* River Division which loads and unloads coal and coke

materials along the Ohio, Kanawha & Little Kanawha Rivers

for various industry. [This] Division also supports two

harbor towboats.

* Construction division which does rip-rap work along

the rivers for the railroad, industry, and private

property owners. This division is also involved in boat

ramp construction for various municipalities.

Mr. Rose also indicates as follows:

More than 80 percent of LKRR's operations take place on

a private siding that has been constructed so that

coke/coal can be unloaded from river barges directly into

rail cars. The only services offered to any outside

companies are the occa [s] ional switching of cars for A. B.

Chance and O. Ames Company.

Section 1(a) (1) of the Railroad Retirement Act defines the term

"employer," in pertinent part, as follows:

The term "employer" shall include--

(i) any express company, sleeping-car company, and

carrier by railroad, subject to subchapter I of chapter

105 of Title 49;

(ii) any company which is directly or indirectly

owned or controlled by, or under common control with, one

or more employers as defined in paragraph (i) of this

subdivision, and which operates any equipment or facility

or performs any service (except trucking service, casual

service, and the casual operation of equipment or

facilities) in connection with the transportation of

passengers or property by railroad, or the receipt,

delivery, elevation, transfer in transit, refrigeration

or icing, storage, or handling of property transported by

railroad * * *."

Section 202.5 of the Board's regulations (20 CFR 202.5) defines a

company under common control with a carrier as one controlled by

the same person or persons who control a rail carrier. From the

information provided by Mr. Rose, it is clear that a controlling

interest in MIE (three of four owners of MIE) owns 100 percent of
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Marietta Industrial Enterprises, Inc.

LKRR. Accordingly, MIE is under common control with a railroad

employer by reason of its commonality of ownership with LKRR.

The question then becomes whether MIE performs a service in

connection with railroad transportation. Section 202.7 of the

regulations (20 CFR 202.7) defines a service in as connection with

railroad transportation if it is reasonably directly related,

functionally or economically, to the performance of rail carrier

obligations. Since MIE's rail-related service is the actual

operation of LKRR' s train, it is clear that that service is

reasonably directed related, functionally or economically, to the

performance of rail carrier obligations.

Section 202.6 of the regulations of the Board, implementing the

casual service exception contained in section 1(a)(1)(ii) of the

Railroad Retirement Act, quoted above, provides that:

The service rendered or the operation of equipment

of facilities by a controlled company or person in

connection with the transportation of passengers or

property by railroad is ’ casual' whenever such service or

operation is so irregular or infrequent as to afford no

substantial basis for an inference that such service or

operation will be repeated, or whenever such service or

operation is insubstantial. [20 CFR 202.6.]

While there is no direct information available as to the amount of

income generated by services provided by MIE in connection with

rail transportation, in view of LKRR's gross income being less than

two percent of MIE's gross income ($180,000.00 as compared with

$10,308.938.00) it must be inferred that the services rendered by

MIE for LKRR clearly constitute an insubstantial portion of the

operations of MIE. On this basis, the Board concludes that the

services being performed by MIE for its rail carrier affiliate are

casual, and accordingly, that MIE is not an employer under the

Acts. Cf Rev. Rul. 84-91, 1984-1 C.B. 203, which held that the

performance of services in connection with rail transportation was

casual where the activities in question constituted less than 4% of

the related company's activities.

II.

Another issue in this case is whether the employees of MIE

performing services for LKRR should be regarded as employees of

LKRR while performing the services in question. Section 1(b) of

the Railroad Retirement Act and section 1 (d) of the Railroad

Unemployment Insurance Act both define a covered employee as an

individual in the service of an employer for compensation. Section
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Marietta Industrial Enterprises, Inc.

1(d)(1) of the Railroad Retirement Act further defines an

individual as "in the service of an employer" when:

(i)(A) he is subject to the continuing authority of the

employer to supervise and direct the manner of rendition

of his service, or (B) he is rendering professional or

technical services and is integrated into the staff of

the employer, or (C) he is rendering, on the property

used in the employer's operations, personal services the

rendition of which is integrated into the employer's

operations; and

(ii) he renders such service for compensation * * * .

Section 1(e) of the Railroad Unemployment Insurance act contains a

definition of service substantially identical to the above, as do

sections 3231(b) and 3231(d) of the Railroad Retirement Tax Act (26

U.S.C. § § 3231(b) and (d)) .

The focus of the test under paragraph (A) is whether the individual

performing the service is subject to the control of the servicerecipient not only with respect to the outcome of his work but also

in the way he performs such work.

A rail carrier subject to the Interstate Commerce Act is under a

duty to provide locomotives and cars to transport the public's

property as part of its operation as a carrier. The law of agency

recognizes that certain duties owed to third parties are so

essential under the law that responsibility for their proper

performance must be retained by the principal or employer. See

Restatement (Second) of Aaencv § 214. The Board believes that

operation of train service is a function so essential to the

statutory duty of a rail carrier to provide rail transportation

that the carrier must retain the power to direct and control the

individuals who conduct the service. Cf. Annotation, What

Employees are Enaacred in Interstate Commerce within the Federal

Employers' Liability Act, 10 A.L.R. 1184 (1921) , at 122 0-122 6 ; and

Annotation, Who is an Employee in Interstate Commerce within

Federal Employers' Liability Act as Amended in 1939. 10 A.L.R. 2d

1279, 1296 (1950), (both discussing liability of the railroad for

injuries to locomotive engineers, firemen, brakemen and

conductors). Finally, regulations of the Board provide that where

an individual is subject to the direction and control of an

employer, the employee relationship is established "irrespective of

whether the right to supervise and direct is exercised." See

20 CFR 203.3(b).
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Marietta Industrial Enterprises, Inc.

The individuals provided to LKRR by MIE act as crew for the trains

which LKRR must run in satisfaction of its rail carrier obligation.

LKRR must retain ultimate control of the performance of its service

as a common carrier. Accordingly, it is the determination of the

Board that service performed by employees of MIE as crew for LKRR

trains is creditable as service as employees of LKRR under the

Railroad Retirement and Railroad Unemployment Insurance Acts.

V. M: Speakman, Jr.

Jerome F. Kever