Employer Status Determination

Transportation Certification Services, Inc. (TCS)

This is the decision of the Railroad Retirement Board regarding the

status of Transportation Certification Services, Inc. (TCS), as an

employer under the Railroad Retirement and Railroad Unemployment

Insurance Acts.

TCS provides training and other services to the rail industry and

to other, non-rail, companies. Training services provided include

locomotive engineer certification (centralized paperwork management

only); engineer, trainman, and yardman training, hazardous 

materials operating rules training, etc. TCS also offers

orientation to railroad operations; a derailment analysis and

prevention course; signal and communication consulting; human 

resources consulting; and representation in connection with labor

relations and legal issues. It also has provided consultant 

services for the aviation industry and the film industry. TCS is

a privately held corporation which is not affiliated with a

railroad. It has four employees and occasionally uses outside 

independent contractors.

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 eguipment 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) 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).

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

evidence indicates that it is not under common ownership with any

rail carrier nor controlled by officers or directors who control a

railroad. Therefore, TCS is not a covered employer under the Acts.

This conclusion leaves open, however, the guestion whether the

persons who perform work for TCS under its arrangements with rail

carriers should be considered to be employees of those railroads

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rather than of TCS. 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 and 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 servicerecipient not only with respect to the outcome of his work but also

the way he performs such work.

The evidence submitted shows that TCS's work consists of the

provision of many different consultant services for many different

clients and that the service is performed under the direction of

TCS; 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 

TCS 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; see e. g.

Aparacor. Inc, v. United States, 556 F. 2d 1004, 1012 (Ct. Cl.,

1977); and whether the contractor engages in a recognized trade;

see e.g. Lanigan Storage & Van Co. v. United States. 389 F. 2d 337,

341 (6th Cir., 1968). In the instant case, where the contractor

contracts with many companies (there are over 30 railroads listed
on TCS's sample list of clients) to provide a variety a recognized 

consultant services such as training and legal representation; 

accordingly, it is the opinion of the Board that TCS is an

independent business.

Because TCS is an independent contractor, TCS is not a covered 

employer within the meaning of paragraphs (B) and (C).

Accordingly, it is the determination of the Board that service 

performed by employees of TCS is not covered under the Acts.