Employer Status Determination

RailTex Trac Company, Inc.

This is the decision of the Railroad Retirement Board regarding the

status of RailTex Trac Company, Inc. (RTCI) as an employer under

the Railroad Retirement and Railroad Unemployment Insurance Acts.

The status of RTCI has not previously been considered.

This decision is based on information provided by Ms. Julie

Herbort, Tax Manager, of RailTex Service Company. RailTex Service

Company is 100% owned by RailTex, Inc. RailTex, Inc. has been

determined not to be an employer under the Acts. See B.C.D. No.

95-25, March 16, 1995. RailTex, Inc. also owns several railroad

carriers subject to the Interstate Commerce Act.

RTCI was incorporated on January 24, 1991. RTCI began operations

on April 1, 1991. RTCI has 18 employees all of whom are engaged in

providing construction and maintenance services on property owned

by railroads. This work includes the replacement of ties and

crossings and the tamping and brooming of the track. All of the

revenues of RTCI are derived from track replacement and maintenance

operations. RTCI performs this service for several railroads which

were listed in an attachment to a letter from Ms. Herbort dated may

24, 1995. All of the listed railroads are affiliates of RailTex,

Inc. The vast majority of RTCI' s revenues are derived from the

maintenance services it performs for its affiliated railroads.

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

§ 231(a) (1) (i)), defines a covered employer as to include "any

express company, sleeping-car company, and carrier by railroad,

subject to subchapter I of chapter 105 of title 49" of the United

States Code. There is no evidence suggesting that RTCI is an

employer within this subsection.

However, section 1(a) (1) of the Railroad Retirement Act further

defines a covered employer as:

(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), 1(b) and 1(d)(1) of the Railroad Unemployment

Insurance Act (RUIA) (45 U.S.C. §§ 351(a), (b) and (d)(1)) contain

substantially similar definitions, as does section 3231 of the

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

The evidence of record shows that RTCI is under common control with

the railroad employers as defined in section 1(a) (1) (i) of the

BCD 1995-81 BA # 9841
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RailTex Trac Company, Inc.

Railroad Retirement Act as it is owned and controlled by RailTex, 

Inc. which also owns several covered rail employers. Thus the

question presented is whether RTCI performs any service in

connection with rail transportation. If RTCI does perform any 

service in connection with rail transportation, it will be

considered an employer under the Acts. This question has been

addressed in many decisions of the Board and in numerous decisions

by the United States Courts of Appeals.

As noted earlier, RTCI provides construction and maintenance of

railroad trackage for its affiliated railroads. This service

includes the replacement of ties and crossings and includes tamping

and brooming the track. In Railroad Retirement Board v. Ducuesne

Warehouse Co.. 149 F. 2d 507 (D.C.Cir. 1945), aff'd 326 U.S. 446,

the United States Court of Appeals for the District of Columbia

Circuit held that a warehouse corporation owned by a railroad and

engaged in loading and unloading railroad cars and other handling

of property transported by railroad, and in other activities which

enabled the railroad to perform its rail transportation more

successfully, was performing "services in connection with" the

transportation of property by railroad and therefore an employer

under the Railroad Unemployment Insurance Act. The Court quoted

approvingly from the opinion of the Board that the carrier

affiliate coverage provision includes services which are an

integral part of or closely related to the rail transportation

system of a carrier. The Board stated that the provision includes

within its coverage carrier affiliates engaged in activities which

are themselves railroad transportation or which are rendered in

connection with goods in the process of transportation, and also 

carrier affiliates engaged in activities which enable a railroad to

perform its rail transportation. Examples of the activities

include maintenance and repair of way and equipment, and activities

which enable a railroad to operate its rail system more

successfully and to improve its services to the public such as

auxiliary bus transportation, dining facilities, and incidental

warehousing services.

More recently, the United States Court of Appeals for the Seventh

Circuit, in Livingston Rebuild Center. Inc. , v. Railroad Retirement

Board. 970 F.2d 295 (7th Cir. 1992) , found that a company

affiliated with a rail carrier employer, engaged in the business of

repairing and rebuilding rail cars and engines and which derived

25% of its revenue from its affiliated railroad, was performing a

service in connection with transportation by rail. See also,

Railroad Concrete Crosstie Corporation v. Railroad Retirement

Board. 709 F. 2d 1401 (11th Cir. 1983), wherein the Eleventh Circuit

found the manufacture and provision of crossties to be a service in

connection with railroad transportation.
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RailTex Trac Company, Inc.

Finally, section 202.7 of the Board's regulations (20 CFR 202.7)

states that a service is in connection with rail transportation if

such service "is reasonably directly related, functionally or

economically, to the performance of obligations which a company or 

person or companies or persons have undertaken as a common carrier

by railroad...."

Based on a review of the evidence of record, the Board's

regulation, and the various court decisions applying section

1(a) (1) (ii) of the Railroad Retirement Act, it is the determination

of the Board that the maintenance of way service provided by RTCI 

is reasonably related to the fulfillment of the common carrier

obligations of its affiliated railroads and, therefore, that these

services are a service in connection with the transportation of

passengers or property by railroad. Therefore, RTCI is an employer

under the Acts as of the date ‘ " ' ~ ‘ ~ L,

1991.

V. M. speaKman, Jr.