IPLOYER STATUS DETERMINATION

New Jersey Transit Corporation

New Jersey Transit Rail Operations Corporation

New Jersey Transit Management Information System Department

This is the decision of the Railroad Retirement Board regarding the status of New Jersey Transit

(NJ Transit) and New Jersey Transit Management Information System Department (NJT MIS)

as employers under the Railroad Retirement and Railroad Unemployment Insurance Acts (the

RRA and RUIA), and regarding the continuing status of New Jersey Transit Rail Operations 

(NJT Rail), and the status of the employees of these entities, under the Acts. NJT Rail has been

found to be a covered employer. NJ Transit itself has previously been determined not to be an

employer covered by the Acts (see Legal Opinion L-83-59). The status of NJT MIS as an

independent entity - not part of NJ Transit - has not previously been considered by the Board.

The evidence shows that NJ Transit is an instrumentality of the State of New Jersey, charged 

pursuant to the New Jersey Public Transportation Act fNew Jersey Statutes Annotated § 27-25-1

et sea.) with the operation and improvement of a coherent, efficient and effective transportation

system for New Jersey. NJ Transit manages funding and designs, maintains, and sets fares for

public bus and rail transportation in New Jersey.

Transit conducts actual public transportation operations through two subsidiary public 

Corporations. The first subsidiary corporation, New Jersey Transit Bus Operations (NJT Bus),

was formed in 1980 to assume passenger service formerly provided by several private motor bus 

operators. NJT Bus currently operates approximately 2,000 buses in 20 of the 21 counties in

New Jersey, with approximately 4,400 employees. In 1983, NJT Bus was determined not to be

a covered employer (Legal Opinion L-83-59.)

New Jersey Transit Rail Operations was created as a subsidiary of NJ Transit to operate

commuter rail service which was transferred from Conrail on January 1, 1983, pursuant to

section 1136 of the Northeast Rail Service Act of 1981 (95 Stat. 647). NJT Rail currently

operates 11 commuter lines over 400 miles of track, with approximately 3,300 employees. NJT 

Rail was determined to be a covered employer as of July 6, 1982, the date it first hired 

employees preparatory to assuming its rail commuter obligations 

(Legal Opinion L-83-59).

In 1990, the Office of Inspector General of the Railroad Retirement Board (OIG) conducted an

audit of NJ Transit and NJT Rail to determine the accuracy of compensation and service reports 

filed for 1988. In Audit Report 91-07, issued January 30, 1991, the OIG found generally that 

NJ Transit and NJT Rail properly administered responsibilities imposed by the RRA and RUIA. 

However, the OIG identified two instances where NJ Transit did not report to the Board

individuals whom the OIG believed could be considered covered employees under the Acts. The

G referred this matter to the Board’s Director of Research and Employment Accounts with 

suggestion that a status determination be made.

BCD 1995-75.1
2

Initially, the OIG found that the NJT Management Information System Department (MIS) within 

NJ Transit, which performs the combined electronic data processing functions for NJ Transit,

NJT Rail and NJT Bus, performed significant services for NJT Rail. Moreover, certain MIS

employees who spent the majority of their time on NJT Rail matters were listed in the internal

NJT Rail telephone directory in the same manner as employees of NJT Rail. Additional 

information supplied subsequent to issuance of OIG Audit 91-07 establishes that MIS was

constituted in 1982 within NJ Transit as a result of information problems encountered with

acquisition of the bus lines in 1980. No employees were transferred later from Conrail as part

of the assumption by NJT Rail of Conrail commuter service pursuant to the Northeast Rail

Service Act. Most of the approximately 95 employees of MIS work in the NJ Transit

headquarters building at One Penn Plaza in Newark. Within the organizational structure of MIS, 

however, a group of 23 employees and one contractor comprise an MIS "Rail Unit" located in

the NJT Rail office at 1160 Raymond Boulevard in Newark. While only 10 percent of staff time

of the entire MIS is devoted to work for NJT Rail, an average of 60 percent of the staff time

of MIS Rail Unit is devoted to work for NJT Rail, and nine employees devote 100 percent of

their time to rail work. NJ Transit explains that the MIS Rail Unit is located at the NJT Rail

Office, and listed in the NJT Rail Directory, "so as to provide them easier access to NJ Transit

Rail users and vice versa."

In addition to employees in the MIS Rail Unit, the OIG noted that several individuals had been

."ansferred from NJ Transit to positions in NJT Rail, but had been retained on the NJ Transit

^^payroll system to continue these individuals’ participation in the New Jersey public employee 

pension system. NJ Transit has provided information regarding the following individuals or 

summarized below:

Name

Dates

Title Start End

VP/GM Rail operations 12-01-88 04-25-90

DOM-Engineering,

Facilities & Security

03-01-89 01-10-91

DGM-Development &

Construction

02-29-88 06-01-90

Director, Performance

& Program Analysis

12-29-88 11-20-89

Asst. Director -

MIS - Rail

06-02-86 01-01-87

Subsidiary Director MIS 01-01-87 10-29-90

Special Assignment-Rail 03-20-89 07-20-89
3

Name Title Start End

Special Assignment-Rail 03-00-89 03-00-90

Special Assignment-Rail 03-20-89 07-20-89

Special Assignment-Rail 03-20-89 07-20-89

Mgr., Marketing Programs 12-01-86 02-04-91

Supvr., Customer Service

Penn Station

08-06-84 Present

Marketing Coordinator 02-09-87 04-03-90

Asst. ControllerSpecial Projects

05-01-87 07-01-91

^ction 1(a)(1) of the Railroad Retirement Act (RRA) (45 U.S.C. § 231(a)(1)), insofar as

Pievant here, defines a covered employer as:

(i) any express company, sleeping-car company, and carrier by railroad,

subject to 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 (other than trucking service, casual service, and the casual operation

of equipment and facilities) in connection with the transportation of passengers

or property by railroad * * *.

A recent decision of the United States Court of Appeals for the Federal Circuit regarding a claim

for refund of taxes under the RRTA held that a parent corporation which owns a rail carrier

subsidiary is not under common control with the subsidiary within the meaning of §3231. Union

Pacific Corporation v. United States. 5 F. 3d 523, (Fed. Cir., 1993). The facts in the Union

Pacific case are analogous to those presented by NJ Transit. Accordingly, the Board finds that

New Jersey Transit, including the MIS division, is not and has never been an employer covered

by the RRA and the RUIA because it is not under common control with its rail carrier

subsidiary.
4

However, this conclusion leaves open the question of whether the MIS Rail Unit and certain

other individuals on the payroll NJ Transit should be considered employees of NJ Rail for

purposes of receiving credit under the Acts administered by the Board. In this regard, section 

1(b) of the Railroad Retirement Act and section 1(d)(1) of the Railroad Unemployment Insurance

Act both define a covered employee as an individual in the service of an employer for

compensation. Section 1(d) 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)).

Finally, section l(k) of the RRA explicitly defines the term employee to include an officer of

an employer. Sections 1(a), 1(b) and 1(d) of the (RUIA) (45 U.S.C. §§ 351(a), (b) and (d))

contain substantially similar definitions, as does section 3231 of the Railroad Retirement Tax Act

(RRTA), (26 U.S.C. § 3231).

The evidence is that the MIS "Rail Unit" is located in the NJT Rail office. An average of

60 percent of the staff time of MIS Rail Unit is devoted to work for NJT Rail, and nine

employees devote 100 percent of their time to rail work. The MIS Rail Unit employees are 

listed in the NJT Rail directory, "so as to provide them easier access to NJ Transit Rail users 

and vice versa." In the opinion of a majority of the Board, these facts indicate that while

nominally on the payroll of NJ Transit, the MIS Rail Unit employees meet the definition of

employee as specified in paragraph (B) by performing professional services on NJT Rail

premises which were integrated into Rail’s operations. Consequently, a majority of the Board

finds that the individuals working in the MIS Rail Unit perform service to NJT Rail, a covered

employer which is creditable under the Acts.

Finally, as noted above, the OIG identified several individuals who maintained positions with

NJT Rail but remained on the payroll of NJ Transit. These individuals may be categorized with

few exceptions as filling executive or managerial positions, including the Vice President and

General Manager of NJT Rail. Corporate officers are employees under section 1 (k) of the RRA.
5

The Vice President and General Manager, and the three Directors of Engineering, Development, 

and Performance are corporate officers of NJT Rail. Accordingly, the Board finds that these

four individuals are employees of NJT Rail, and finds that their service and compensation should

be reported as creditable under the RRA and RUIA.

The remaining listed individuals cannot be considered corporate officers. Hence, their service 

may be found to be creditable employee service only if they meet the general definition of

employee under the Acts under section 1(d)(1) of the RRA. It is the opinion of the Board that

the manager of marketing programs, supervisor of customer services, assistant controller, special

projects, and marketing coordinator are employees since they are or were rendering professional 

or technical services to NJ Rail and are or were by the nature of their services clearly integrated 

into the staff and operations of NJT Rail. The Assistant Director, MIS-Rail, is included in the

group of employees in MSI-Rail unit who would be covered as discussed above.

With respect to the remaining listed employees, the evidence shows that they were with NJ Rail

for a very short period of time on special assignment from NJ Transit and the Board finds the

evidence insufficient to support a conclusion that they were employees of NJT Rail.1 It is

therefore the determination of the Board that service performed by these employees for NJT Rail

is not covered employee service under the Railroad Retirement and Railroad Unemployment 

tsurance Acts, which must be reported to the Board.

Attachment

‘The Board notes that none of the affected individuals has filed a request for an amendment

|/ith respect to the amount of service or compensation to be credited pursuant to section 260.2

rof the Board’s regulations (20 CFR 260.2).
OPINION FROM |

ON THE COVERAGE OF THE NEW JERSEY TRANSIT COMPANIES

I agree with the employer status determination of New Jersey 

Transit (NJ Transit) and New Jersey Transit Management 

Information System Department (NJT MIS) as employers under 

the Railroad Retirement and Railroad Unemployment Insurance

Acts, and the status, determination of the employees of these

entities. I disagree, however, with the finding that NJ

Transit, including the MIS division, is not and has never 

been a covered employer because it is not under common

control with its rail carrier subsidiary. Rather, I believe

that it should not be covered because it is not principally 

engaged in service or operation in connection with railroad

transportation. I note no other objections to the status

determination.
Dissent of |

Management Member

Coverage Determination

New Jersey Transit Corporation

New Jersey Transit Rail Operations Corporation

New Jersey Transit Management Information System Department

I hereby dissent from that portion of the Board's decision finding employees of the 

New Jersey Transit Management Information System Department to be employees of

New Jersey Transit Rail Operations Corporation. I do not believe adequate facts were 

presented to support a finding that the employees' activities were integrated into the

activities of the rail unit. An important element of this finding should have included some 

’nalysis of the type of activities that were integrated into the rail operation. Additionally, 

^he grounds for finding the employees' work to be of a "professional" nature are not set

forth in the determination.