BCD 1995-26

Interstate Quality Services, Inc. d/b/a Interstate Reloads, Inc.

Decision on Reconsideration

Issued February 24, 1995

No G-215 Available

BA # 4647
Notice No. 95-26

B.C.D. No. 95-26

Employer Status Determination

Interstate Quality Services, Inc.

doing business as Interstate Reloads, Inc.

This is the decision of the Railroad Retirement Board regarding the

status of Interstate Quality Services, Inc., doing business as

Interstate Reloads, Inc., (Reloads) as an employer under the

Railroad Retirement and Railroad Unemployment Insurance Acts. In

a decision dated December 17, 1991, the Board's Deputy General

Counsel determined that Reloads had been an employer under the

Railroad Retirement and Railroad Unemployment Insurance Acts since

March 15, 1989 (R. 56-61)1. Reloads filed a timely request for

reconsideration of the prior decision.

The evidence on reconsideration is that Reloads was incorporated in

Illinois on March 15, 1989 (R. 16) as a wholly owned subsidiary of

Iowa Interstate Railroad (Iowa Interstate) (R. 21) . Iowa

Interstate, which operates as a rail carrier between Blue Island,

Illinois and Council Bluffs, Iowa, has previously been determined

to be a covered employer under the Acts effective October 13, 1984 .

See Legal Opinion L-85-4 (R. 97) , and Iowa Interstate Railroad.

Ltd.. -- Lease and Operate -- Exemption. Finance Docket No. 30554,

49 Fed. Reg. 39245 (October 4, 1984) . Reloads owns five warehouses

on 33 acres of land in Blue Island (R. 80) which are served by one

railroad siding owned and serviced by an unrelated rail carrier, 

CSX Transportation.

Reloads uses its facility to load and unload freight from both

trucks and rail cars; to store freight which arrives by truck or

rail; to dispatch freight by rail or truck according to customer's

directions; and to arrange for delivery of received goods by truck

(R. 80) . Reloads also leases a small amount of its space to a

lumber wholesaler (R. 84) . In performing its freight handling

service, incoming freight is consigned to the customer's name in

care of Reloads, while outbound freight is consigned to the 

customer's name to consignee (i.e.. final destination) via Reloads

(R. 46) . The information provided by Reloads regarding its revenue

from each activity (R. 91-92) is summarized as follows:

References in this fashion are to pages of the Administrative

Record before the Board.
-2-

Interatate Quality Services, Inc.

doing business as Interstate Reloads, Inc.

TABLE ONE

RELOADS REVENUE

(Percent of Total)

Year Railcar

Handling

Warehouse

Storage

Truck

Unloading

Trucking Other

1989 49.6 2.9 9.1 36.0 2.4

1990 51.3 4.5 7.0 35.3 1.8

1991 54.5 12.2 3.1 22.9 7.4

1992 39.7 29.4 2.8 16.5 11.6

Reloads uses seven to nine individuals to perform its freight

handling service who are furnished by a temporary employment firm 

(R. 16). The status of these individuals as covered employees

under the Acts is the subject of a separate decision of the Board. 

Reloads has furnished information regarding the proportion of staff 

time devoted to loading and unloading freight hauled or switched by

Iowa Interstate, the proportion devoted to freight hauled or 

switched by other railroads, and proportion expended in other

activities (R. 90) . This information may be summarized as follows:

TABLE TWO

RELOADS STAFF ACTIVITIES

(Percent of Total)

Year Iowa

Line Haul

and

Switching

Other RR

Line Haul

and

Switching

Total

Rail-Related

Total

Non-Rail

1989 35.8 27.8 63.6 36.4

1990 39.0 31.1 70.1 29.9

1991 31.8 55.4 87.2 12.8

1992 36.7 50.5 87.2 12.8
-3-

Interstate Quality Services, Inc.

doing business as Interstate Reloads, Inc.

The definition of an employer contained in section 1 (a) of the

Railroad Retirement Act (45 U.S.C. § 231 (a)(1)) reads in part as

follows:

The term "employer" shall include--

(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 (except trucking

service, casual service, and the casual operation of

equipment or facilities) in connection with the

transportation of passengers or property by railroad,

or the receipt, delivery, elevation, transfer in

transit, refrigeration or icing, storage, or handling

of property transported by railroad * * *.

Section 1(a) of the Railroad Unemployment Insurance Act

(45 U.S.C. § 351(a)) provides a substantially identical

definition.

It is clear, and Reloads does not contest (R. 79), that it is

under common control with a rail carrier employer, in that it

is a wholly-owned subsidiary of Iowa Interstate, a rail carrier

employer under the Railroad Retirement and Railroad

Unemployment Insurance Acts. Thus, if Reloads performs a

"service in connection with" railroad transportation it is a

covered employer under the Acts. Reloads argues that it does

not perform such a service.

Section 202.7 of the Board's regulations explains that service

is in connection with railroad 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, or to the receipt, delivery,

elevation, transfer in transit, refrigeration or icing,

storage, or handling of property transported by

railroad.
-4-

Interstate Quality Services, Inc.

doing business as Interstate Reloads, Inc.

Section 202.6 of the Board's regulations defines service in 

connection with railroad transportation as casual when it is so

" irregular or infrequent" that it may be inferred that such

service will not be repeated or where such service is

insubstantial.

In the initial determination that Reloads was a covered

employer, the Deputy General Counsel found that 60 percent of

Reloads' business constituted loading carload freight for

shippers on Iowa Interstate (R. 60) . Relying on Railroad

Retirement Board v. Duquesne Warehouse Co.. 326 U.S. 446,

(1946) , the Deputy General Counsel determined that this 

activity constituted a service in connection with railroad

transportation. On appeal to the Board, Reloads argues that 

the additional information it has furnished establishes that 

Reloads' activities and operation are so unlike those of

Duquesne that Reloads does not engage in a service in

connection with railroad transportation in the manner of 

Duquesne.

Initially, Reloads contends (R. 87-88) that it conducts nothing

like the proportion of business with Iowa Interstate that

Duquesne Warehouse did with the Pennsylvania Railroad. As

summarized by table two above, in 1989 and 1990 Reloads

conducted about equal portions of its business with Iowa

Interstate and with other rail carriers, and in 1991 and 1992,

about twice as much work was done transferring freight for 

unrelated railroads as for Iowa Interstate. In contrast,

Duquesne Warehouse conducted 100 percent of its freight

transfer business for its railroad affiliate. 326 U.S. 449,

450. Because the proportion of staff time connected with Iowa 

Interstate shipments during the 1989-1992 period never exceeded

40 percent of the total, Reloads contends that it does not 

perform a service in connection with railroad transportation.

The Board does not agree.

The recent case of Livingston Rebuild Center. Inc. , v. Railroad

Retirement Board. 970 F. 2d 295 (7th Cir. 1992) , considered

whether a company which rebuilt locomotives and other rolling

stock performed a service in connection with railroad

transportation under the Acts. Livingston obtained about 95

percent of its business from railroads, but only about 25

percent of its business was with its affiliated rail carrier.

970 F. 2d at 296, 298.

The Board believes that the Livingston decision controls the 

outcome with respect to Reloads. The Board notes that the
-5-

Interstate Quality Services, Inc.

doing business as Interstate Reloads, Inc.

amount of service Reloads performed for the railroad industry

in general falls below the 95 percent figure in Livingston. and

the proportion of staff time and revenue attributable to

business with Iowa Interstate has declined slightly in 1991 and

1992. However, the amount of service Reloads performed for 

its rail carrier affiliate, Iowa Interstate, ranged from a low

of 31.8 percent to a high of 39 percent over the four years of

record, at all times exceeding the 25 percent level between

carrier and affiliate in Livingston. The evidence also shows

that the proportion of staff time from all railroad freight has

increased over the four years of record from 63 to 87 percent

of total, and the revenue increased for three of the four

years. The Board believes that the services Reloads performs

for both its rail affiliate and the railroad industry in 

general cannot be considered insubstantial.

Reloads also argues that it is distinguishable from Duauesne

because Reloads does not lie directly on the line of its

affiliated railroad (R. 88) . Thus, unlike the facility in 

Duauesne, Reloads does not have a rail connection with a rail

carrier. However, given the fact that a significant proportion

of freight handled by Reloads is destined for or received

through shipment on Iowa Interstate, the Board finds the lack

of a physical rail connection to the Iowa Interstate line is

not determinative.

Finally, Reloads argues that it does not perform a service in

connection with railroad transportation because unlike Duquesne

Warehouse, while some of the freight is transferred between

truck shipments, and other freight is transferred or stored

between rail and truck shipments, none is "in transit" freight

stored between freight movements by rail (R. 88-89). However,

black-letter law holds that a rail carrier's duty to protect

goods in its care does not end with the last rail movement, but

extends to storage of the goods for a reasonable time after

arrival while awaiting pick-up by the owner. 13 AM JUR 2d 

Carriers § 395 (Goods Awaiting Delivery, Generally). The

Interstate Commerce Act thus provides that the term

transportation includes storage of goods. 49 U.S.C.

10102 (25) (B) ; See also, Western Transit Co. v. A. C. Leslie &

Co. , 242 U.S. 448, 452, (1916); General American Transportation

Coro. v. Indiana Harbor Belt Railroad. 191 F. 2d 865, 871, (7th

Cir., 1951). As between 63 and 87 percent of Reloads' staff

time is devoted to handling goods shipped by rail, a

substantial proportion of goods which Reloads stores are

beginning or ending a rail shipment, and hence fall within the

compass of rail transportation within the Interstate Commerce
-6-

Interstate Quality Services, Inc.

doing business as Interstate Reloads, Inc.

Act. The Board is therefore persuaded that the warehousing

activities conducted by Reloads are sufficiently similar to

those conducted by Duquesne Warehouse as to constitute service

in connection with the transportation, transfer in transit, or

storage or handling of property transported by railroad in the

same fashion as those considered by the Supreme Court in

Duquesne.

Accordingly, upon reconsideration of the initial decision of

the Deputy General Counsel in Legal Opinion L-91-136, the Board

determines that Interstate Quality Services, Inc., doing

business as Interstate Reloads, Inc., is under common control

with a rail carrier and is performing a service in connection

with transportation, transfer in transit, or storage or

handling of property transported by railroad, and that such

service is not casual in nature.

Consequently, Interstate Reloads is an employer under the 

Railroad Retirement and Railroad Unemployment Insurance Acts

effective March 15, 1989, and must file the appropriate returns

of compensation and contributions as required under those Acts.

Glen L. Bower

Jerome F. Kever

(Dissenting)