Status Determination

M^^^Psmpany, Inc.

This is the decision of the Railroad Retirement Board regarding the

status of MGM Company, Inc., as an employer under the Railroad

Retirement and Railroad Unemployment Insurance Acts.

MGM is an independently owned company which perform repairs to

intermodal equipment. It has 111 employees who work at several

locations. It has about 35 customers including The Atchison,

Topeka and Santa Fe Railway Company (ATSF).

MGM repairs intermodal equipment, including semi-trailers,

containers, and chassis; it also sells and repairs trailer tires. 

MGM began providing these services to ATSF in 1986 on a bid basis.

MGM's customers give their work requests to the manager or

appropriate shift foreman who then assigns the work to MGM's

employees. MGM derived less than 10 percent of its revenues from

ATSF during the period 1986-1990. For 1991-1994 MGM derived its

revenues as follows.

Section 1(a) (1) of the Railroad Retirement Act (45 U.S.C.

§ 231(a) (1)), insofar as relevant here, defines a covered employer

as :

(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 (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 * * *.

Sections 1(a) and 1(b) of the Railroad Unemployment Insurance Act

(45 U.S.C. §§ 351(a) and (b)) contain substantially similar

definitions, as does section 3231 of the Railroad Retirement Tax

-- (26 U.S.C. § 3231) .

is not a carrier by rail. There is no evidence that it is

ATSF

Business

Other Railroad

Business

Non-railroad

Business

1991

46%

63%

60%

51%

13%

1%

1%

1%

41%

36%

39%

48% .

BCD 1995-13
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MGM Company, Inc.

controlled by a carrier or by individuals who control a carrier.

Rather, the available evidence indicates that it is not under

common ownership with any rail carrier. Therefore, MGM is not a

covered employer under the Acts.

This conclusion leaves open, however, the question of whether the

persons who perform work for MGM under its arrangement with ATSF

should be considered to be employees of those ATSF rather than of

MGM. 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 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 in

to the staff of the employer, or (C) he is rendering, on

the property used in the employer's operations, personal

services and rendition of which is integrated into the

employer's operations; and

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

Section 1(e) of the RUIA contains a definition of service

substantially identical to the above, as do sections 3231(b) and

3231(d) of the RRTA (26 U.S.C. §§ 3231(b) and (d)).

The focus of the definition under paragraph (A) is whether the

individual performing the service is subject to the control of the

service-recipient not only with respect to the outcome of his work

but also in the way he performs such work.

The employees of MGM work at the direction of MGM supervisory

personnel, do not work alongside ATSF employees, and are not

trained or paid by ATSF. Accordingly, the control test in

paragraph (A) is not met. The definitions set forth under

paragraphs (B) and (C), which are broader than that contained in 

paragraph (A) , do not apply to employees of independent contractors

performing services for a railroad if the contractors are engaged

in an independent trade or business. Kelm v. Chicago. St. Paul,

Minneapolis and Omaha Railway Company, 206 F. 2d 831 (8th Cir.

1953) . This Eighth Circuit decision has been consistently followed

by the Board for over forty years.

Thus, under Kelm the question remaining to be answered is whether

MGM is an independent contractor. Courts have faced similar

considerations when determining the independence of a contractor
i

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MGM Company, Inc.

for purposes of liability of a company to withhold income taxes

under the Internal Revenue Code (26 U.S.C. § 3401(c)). In these

cases, the courts have noted such factors as whether the contractor

has a significant investment in facilities and whether the

contractor has any opportunity for profit or loss; e.a., Aparacor,

Inc, v. Uniced States. 556 F. 2d 1004 (Ct. Cl., 1977), at 1012; and

whether the contractor engages in a recognized trade; e. a. , Lanicran

Storage & Van Co. v. United States. 389 F. 2d 337 (6th Cir., 1968, 

at 341.

It is apparent that MGM is independently capitalized, and is

engaged in a recognized trade or business; accordingly, it is the

opinion of the Board that MGM is an independent business.

Because MGM engages in an independent business Kelm would prevent

applying paragraphs (B) and C) of the definition of covered

employee to this case. Accordingly, it is the determination of the

Board that service performed by employees of MGM is not covered

under the Acts.

'Glen L. Bower