B.C.D. 04-4

Employer Status Determination

Columbia National Group Inc.

Columbia Iron and Metal Company

CR Construction Company

FEB 0 5 2004

This is the decision of the Railroad Retirement Board regarding the status of Columbia

National Group Inc. (National Group), Columbia Iron and Metal Company (Iron and Metal),

and CR Construction Company (CR Construction) as employers under the Railroad

Retirement and Railroad Unemployment Insurance Acts. The status of these companies 

has not previously been considered.

The evidence is that Iron and Metal and CR Construction are wholly owned subsidiaries of

National Group. Iron and Metal purchases steel products from International Steel Group,

an unrelated company which is successor to LTV Steel. CR Construction performs track

maintenance and rail car repair. CR Construction began operations July 23, 1993, and

employs between 30 and 70 individuals during the year. CR Construction has provided its

services to large class I railroads such as Norfolk Southern (BA 9408) and CSX

Transportation (BA 1524), and to short lines such as Midland Terminal (BA 4266) and Ohio

Central Railroad (BA 3362). Currently, approximately 70 percent of CR Construction’s

business activity and revenues derive from one contract with the ISG Cleveland Works

Railway, a covered rail carrier employer (BA 4276), which is owned by International Steel

Group. CR Construction owns a variety of general construction equipment such as pick-up

trucks, “bobcat” tractors, and hydraulic jacks and jackhammers. It also owns specialized

rail equipment such as hi-rail trucks, ballast regulators, spike pullers and drivers, and rerailers. National Group provides CR Construction with a repair facility and office and yard

space. Cleveland Works Railway also provides office shop and repair space for work done

for that company.

CR Construction repairs track and rail cars for Cleveland Works Railway as a

subcontractor to Iron and Metal, which has the primary contract with the Railway.

According to the General Manager of Iron and Metal, this arrangement would allow Iron

and Metal, in the event of financial difficulties encountered by International Steel Group, to

net payments due for its purchases of steel products against receivables owing for its track

and rail car repairs. A copy of both the primary contract between Iron and Metal and the

Railway, and of the subcontract between Iron and Metal and CR Construction are in

evidence. The general contract, dated June 3, 2002, states at appendix A that Iron and

Metal agrees to “provide all labor, tools, supplies, and supervision necessary to construct,

maintain and repair tracks, right of way and freight cars including ancillary services such as

signal maintenance, welding, weed spray, rail defect detection, etc.” Article I of the

contract states that all work is to be performed “at the l[nternational] Sfteel] Gjroup] job site

located in Cleveland, Ohio.” Article VIII of the contract requires that the work must meet

“OSHA, FRA, and AAR standards”, and that the contractor indemnify the Railway from

damages and claims arising from the work. The final numbered paragraph 4 of the general

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Columbia National Group Inc.

Columbia Iron and Metal Company

CR Construction Company

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contract appendix states that the contractor’s labor rates are billed directly, without markup, to Railway. The subcontract between CR Construction and Iron and Metal summarizes 

CR Construction’s duties as “All of the work and fulfill all of the responsibilities of the

contract on behalf of the contractor." Neither National Group, nor Iron and Metal nor CR

Construction is affiliated through equity ownership or through common directors or

corporate officers with any rail carrier.

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

relevant here, defines a covered employer as:

(i) any carrier by railroad subject to the jurisdiction of the Surface

Transportation Board under part A of subtitle IV of title 49, United States

Code;

(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 * * *.

Sections 1(a) and 1(b) of the Railroad Unemployment Insurance Act (RUIA), 45 U.S.C.

351(a) and (b), contain substantially similar definitions, as does section 3231 of the

Railroad Retirement Tax Act (RRTA), 26 U.S.C. 3231.

National Group, Iron and Metal, and CR Construction are clearly not carriers by rail.

Further, there is no evidence that any of the three companies is under common ownership 

with any rail carrier or controlled by officers or directors who control a railroad. National

Group, Iron and Metal, and CR Construction are therefore not covered under the Acts as

rail carrier affiliate employers. They meet no other definition of a covered employer under

the Acts. The majority of the Board finds that National Group, Iron and Metal, and CR

Construction are not covered employers.

This conclusion leaves open, however, the question whether the persons who perform rail

maintenance and rail car repair work for CFTConstruction as the subcontractor of Iron and

Metal with Cleveland Works Railway should be considered to be employees of the railroad

rather than of CR Construction. Section 1 (b) of the RRA and section 1 (d)(i) of the RUIA

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

compensation. Section 1 (d) of the RRA further defines an individual as "in the service of
Columbia National Group Inc.

Columbia Iron and Metal Company

CR Construction Company

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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 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 test 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 with respect to the way he performs such work.

As noted above, Iron and Metal and CR Construction contract with Cleveland Works 

Railway. The general contract which CR Construction has agreed to fulfill provides that CR

Construction will furnish labor, materials, cranes, trucks, machines and tools necessary to

repair track and rail cars. CR Construction further agrees to carry liability insurance and to

name Railway as an additional insured. The individuals performing the agreed services

are supervised by CR Construction employees. Railway compensates CR Construction, 

not its employees, for the contract services.

A majority of the Board finds that the foregoing evidence shows that CR Construction 

employees work under the directions of CR Construction staff; accordingly, the control test

in paragraph (A) is not met. The tests set forth under paragraphs (B) and (C) go beyond

the test contained in paragraph (A) and would hold an individual to be a covered employee

if he is integrated into the railroad's operations even though the control test in paragraph

(A) is not met. However, under an Eighth Circuit decision consistently followed by the

Board, these tests do not apply to employees of independent contractors performing

services for a railroad where such contractors are engaged in an independent trade or

business. Kelm v. Chicago, St. Paul, Minneapolis and Omaha Railway Companw- 206 F.

2d 831 (8th Cir. 1953),

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

an independent contractor. Courts have faced similar considerations when determining the
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Columbia National Group Inc.

Columbia Iron and Metal Company

CR Construction Company

independence of a contractor 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.q., Aparacor, Inc, v.

United States. 556 F. 2d 1004 (Ct. Cl. 1977), at 1012; and whether the contractor engages

in a recognized trade; e.q., Laniqan Storage & Van Co. v. United States. 389 F. 2d 337 (6th

Cir. 1968, at 341). CR Construction clearly has a sizable investment in equipment. In the

view of a majority of the Board, the fact that CR Construction maintains track and rail cars

on the premise of the railroad is not determinative, since the Board has in the past found 

other companies performing work of this nature to be independent of the railroad. See,

e.g., B.C.D. 01-11, Heavy Railroad Excavations, Inc., and B.C.D. 03-74, DOT Rail Service,

Inc. (maintenance of way) and Railcar Repair of the South, B.C.D. 95-101 (car repair).

Finally, CR Construction provides its services to the rail industry as a whole, as evidenced

by its list of current and prior customers. A majority of the Board finds that CR

Construction consequently meets the test for independent contractor status, and

individuals performing service under its contract with Iron and Metal are employees of CR

Construction rather than employees of Steel Works Railway. Kelm, supra.

Accordingly, it is the determination of a majority of the Board that service performed by

employees of CR Construction Company is not covered employee service under the

Railroad Retirement and Railroad Unemployment Insurance Acts.

V. M. Speakman, Jr., (Dissenting opinion attached)
Dissent of V. M. Speakman, Jr.

Employer Status Determination

Columbia National Group Inc.

Columbia Iron and Metal Company

CR Construction Company

We would find that the employees ofCR Construction Company (hereinafter CR) who

perform track maintenance and car repair for the ISG Cleveland Works Railway (BA

3362) (hereinafter Railway) should be considered statutory employees ofthe Railway by

virtue ofsection 1 (d)( 1 )(i)(C) ofthe Railroad Retirement Act. Specifically, we would

find that these employees render personal services on the property used in the carrier’s

operations which are integral to the carrier’s operations. While not necessarily

disagreeing with the above, the Majority finds that Section l(d)(l)(i)(C) does not apply

because CR is an independent contractor and cites the Kelm case in support ofits

decision

In our view Kelm. to the extent it is good law, should not apply in this case for the

following reasons. First, it is a stretch to say the CR is independent. As stated in the 

Majority’s decision, that although CR has other contracts, 70% ofits revenue is derived 

from its contract from Railway. Furthermore, its contract with Railway is open-ended

and ongoing. This should reasonably lead one to the conclusion that without its contract 

with Railway, CR would not continue as a going concern.

Furthermore, although not stated in the Majority’s decision, are the facts that the services

provided by CR for Railway are performed on a continual basis by the same employees, 

many ofwhom had been former employees ofRailway. Thus, we have a contractor who

is economically dependent on a carrier who, on an ongoing basis performs traditional

railroad services for the carrier on carrier property, with employees who were formerly 

covered under the RRA. We can be forgiven ifwe are puzzled as to why these

employees are not considered by the Majority to be “rendering, on the property used in

the employer’s operations, personal services, the rendition ofwhich is integrated into the

employer’s operations”.

The Board Coverage Decisions relied upon by the Majority are not, in my view,

controlling. Heavy Railroad Excavations, B.C.D. 01-11, dealt with a company which 

bound and removed used railroad ties for a carrier. Such services are in the nature of

scavenger services and one could reasonably conclude that, as such, they are not 

professional or technical services nor are they an integral part ofthe carrier’s operations 

Thus, sections l(d)(l)(i)(B) and (C) would not arguably apply.
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Rail Car Repair ofthe South, BCD. 95-101, involved three affiliated companies.

Rail Car Repair ofthe South, as its name suggests, repaired and refurbished rolling stock. 

All work was done on carrier property. These employees were found common law 

employees ofthe carrier for whom they performed services since they were supervised by

an employee ofthat carrier. Thus, the issue ofwhether Rail Car was an independent

contractor did not have to be reached. A similar result was reached with respect to

Arkansas Motive Power Services.

The third company involved in that decision was Arkansas Railroad Contractors, Inc.,

which did repair, maintenance, and construction oftracks, beds, rights-of-way, bridges,

and structures of commonly located upon railroad rights-of-way. However, employees of

that company performed an estimated 70-80% oftheir work for non-railroads; thus,

sections l(d)(l)(i)(B) and (C) really do not come into play

In conclusion, we would find that employees ofCR who, on continual basis, perform car

repair and track maintenance for Railway to be deemed employees ofRailway.

V. M. Speakman, Jr.

Date