Employer Status Determination

Employee Status Determination

JAN 0 7 2003

Training Consulting Connection

This is the decision of the Railroad Retirement Board regarding the

status of the Training Consulting Connection (TCC) as an employer

under the Railroad Retirement and Railroad Unemployment Insurance

Acts.

TCC was founded in 1991 and holds itself out as specialists in

organization and staff development. It has a client list of approximately 

80 companies, one of which is a railroad, Union Pacific Railroad

Company. Under a contract with Union Pacific it supplies individuals, 

who it regards as independent contractors, to train Union Pacific

employees in Remote Control Locomotive technology. This technology

enables a railroad employee to operate a locomotive with a hand-held

device. It is used in switching yards only, to break up and re-form

trains, and generally not where there are crossings. Where there are

crossings, the device must have a camera associated with it. There is

no evidence that TCC is affiliated with a railroad.

There are nine individuals with whom TCC has contracted to provide

this training to Union Pacific. All of them are former Union Pacific

employees. The technology in which they are training Union Pacific

employees is new to railroads in the United States (although apparently

it has been in use in Canada for some time). Accordingly, the work

these individuals performed for Union Pacific is generally different than

that they are performing for TCC.

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 carrier by railroad subject to the jurisdiction of

the Surface Transportation Board under Part A of subtitle

IV oftitle 49, United States Code;
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Training Consulting Connection

(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 (45

U.S.C. §§ 351(a) and (b)) contain substantially similar definitions, as 

does section 3231 of the Railroad Retirement Tax Act (26 U.S.C. §

3231).

TCC clearly is not a carrier by rail. Further, the available evidence

indicates that it is not under common ownership with any rail carrier

nor is it controlled by officers or directors who control a railroad.

Therefore, TCC is not a covered employer under the Acts.

This conclusion leaves open, however, the question whether the 

individuals who perform work for TCC under its arrangements with rail

carriers should be considered to be employees of those railroads rather

than independent contractors. 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 RRA 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
Training Consulting Connection

(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.

The evidence submitted shows that the work of the nine individuals is

not performed under the direction of any Union Pacific employee or

employees, but is performed under the terms of their contracts with

TCC; accordingly, the control test in paragraph (A) is not met. Moreover 

under an Eighth Circuit decision consistently followed by the Board, the

tests set forth under paragraphs (B) and (C) do not apply to employees 

of independent contractors performing services for a railroad where

such contractors are engaged in an independent trade or business. See

Kelm v. Chicago, St. Paul, Minneapolis and Omaha Railway Company.

206 F. 2d 831 (8th Cir. 1953).

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

TCC is an independent contractor. Courts have faced similar

considerations when determining the 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.g., Aparacor, Inc, v. United States, 556 F. 2d 1004

(Ct. Cl. 1977), at 1012; and whether the contractor engages in a

recognized trade; e.g.. Lanigan Storage & Van Co. v. United States, 389

F. 2d 337 (6th Cir. 1968) at 341. While these may be rather close

questions in cases such as this one, where the contractor does not have

permanent employees but rather hires individuals on a per job basis, it
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is apparent that TCC is in the business of providing services to many 

customers, only a very small percentage of which are connected to the

rail industry. The record indicates that TCC is engaged in a recognized

trade or business. Accordingly, it is the opinion of the Board that TCC

is an independent business.

Because TCC 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 the individuals who contract with TCC to provide services

to Union Pacific are not employees of Union Pacific and that the

services they provide to Union Pacific are not covered under the Acts.

Training Consulting Connection

CherrybT. Thomas

V. M. Speakman, Jr.

rome F. Kever