EMPLOYER STATUS DETERMINATION

Linda Drunsic D/B/A/ Battenkill Business Services

This is the determination of the Railroad Retirement Board

concerning the status of Linda Drunsic D/B/A/ Battenkill Business

Services (BBS) as an employer under the Railroad Retirement Act (45

U.S.C. sec. 231 et seq.) (RRA) and the Railroad Unemployment

Insurance Act (45 U.S.C. sec. 351 et seq.) (RUIA).

BBS performed payroll and tax services for the Nashville & Eastern

Railroad Corporation (N & E), the Tenneken railroad Company, Inc.

(TENN) and the West Tennessee Railroad Corporation (WTRC).

Ms. Linda Drunsic was the owner and sole employee of BBS.

Effective January 1995, Ms. Drunsic has ceased operations as BBS

and has assumed a full time position with a bank. The payroll and

tax records were maintained and the work was performed at the

offices of Hohorst-Drunsic Transportation Company (HDTC). Since

January 1995, the payroll and tax matters have been handled by

employees of the various railroads. Ms. Drunsic is shown as an

administrative assistant to the President and Chief Operating

Officer of the N & E, TENN and the WTRC. The President of those

railroads is her husband, Mr. William J. Drunsic.

BBS was started in 1986 and had several clients besides the

railroads. However, for several years prior to January 1995 it

only provided service for the railroads. During that period BBS

did not have a separate telephone listing nor did it advertise.

Ms. Drunsic stated that advertising was done by word of mouth. Ms.

Drunsic spent about 16-25 hours a month on her work for the

railroads. She was paid a total of $5733.84 in 1991 and $5,626.82

in 1992. She was paid for the work she performed after she

submitted a bill like any other vendor. Ms. Drunsic also served as

a director of the N&E, as the designee, of her husband and was paid

$1500 in 1992.

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

§ 231(1) (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 * * *.

BCD 1995-49 
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Linda Drunsic D/B/A/ Battenkill Business Services

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

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

definitions.

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

evidence indicates that it is neither controlled by nor under

common ownership with any rail carrier nor controlled by officers

or directors who control a railroad. There is no evidence that BBS

is controlled by any of the carriers for which it performs services

unless the Board were to engage in a presumption that such control

is established by the fact that Ms. Drunsic is married to the

President and Chief Operating Officer of the railroads in question.

The Board will not engage in this presumption. Although Ms.

Drunsic's husband owns 25.5% of the stock of TENN and 35.1% of the

stock of WTRC and under the attribution rules of the Internal

Revenue Code(IRC) (§318 of the IRC) these holdings would be

attributed to Ms. Drunsic, the level of stock ownership is not

sufficient to establish Ms. Drunsic's ownership or control of these

railroads. See 20 CFR 202.4. Therefore, BBS would not be

considered to have been under common control with a carrier and

would not be a covered employer under the Acts.

This conclusion leaves open, however, the question whether Ms.

Drunsic, when performing services for the railroads, should be

considered to have been an employee of those railroads. 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 in

to 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-
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Linda Drunsic D/B/A/ Battenkill Business Services

recipient not only with respect to the outcome of his work but also

in the way he performs such work.

Based on the evidence before it, the Board finds that Ms. Drunsic

was not subject to control, supervision, and direction from the

railroads as to the manner of performance of her work.

Consequently, the control test of paragraph (A) is not met.

The tests set forth under paragraphs (B) and (C) would hold an

individual a covered employee if he is integrated into the

railroad's operations even though the control test in paragraph (A)

is not met. In practice, the Board in applying paragraphs (B) and

(C) has followed Kelm v. Chicago, St. Paul, Minneapolis and Omaha

Railway Company, 206 F. 2d 831 (8th Cir. 1953), and has not used

paragraphs (B) and (C) to cover employees of independent

contractors performing services for a railroad where such

contractors are engaged in an independent trade or business and the

arrangement has not been established primarily to avoid coverage

under the Acts.

The first question to be answered therefore is whether BBS itself

may be considered to have been a truly 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 an opportunity for profit or loss;

e.g. , Aoaraccr, Inc, v. United States, 556 F. 2d 1004 (Ct. Cl.,

1977), at 1012; and whether the contractor engages in a recognized

trade; e.g. Laniaan Storage & Van Co. v. United States, 389 F. 2d

337 (6th Cir., 1968), at 341.

The record establishes BBS was in the business of providing tax and

payroll services to customers other than the railroads. Although

some evidence points to a close relationship between the railroads

and BBS, it is the judgment of the Board that BBS was an

independent business not formed primarily to avoid coverage under

the RRA, RUIA, and the Railroad Retirement Tax Act. Accordingly,

under Kelm the Board finds the employee of BBS not to have been an

employee of the railroads under section 1(d) (1) (b) or section

1(d)(1)(c) of the RRA.
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Linda Drunsic D/B/A/ Battenkill Business Services

Based on the above discussion, the Board finds BBS not to be a

covered employer under the RRA and RUIA and also finds that the

employee of BBS, Ms. Linda Drunsic, was not a statutory employee of

any railroad for which she performed services under control.

Glen L. Bower