EMPLOYER STATUS DETERMINATION

Rail-Term Corporation

APR 0 6 2010

This is the determination of the Railroad Retirement Board

concerning the status of Rail-Term Corporation as an employer

under the Railroad Retirement Act (45 U.S.C. § 231 et sea.) (RRA) and

the Railroad Unemployment Insurance Act (45 U.S.C. § 351 et seq.)

(RUIA). Rail-Term has not previously been held to be an employer

under the Acts.

Information about Rail-Term was furnished by John D. Heffner, 

counsel for Rail-Term. Rail-Term was incorporated March 3, 2000 and

began operations in mid-March 2000. It is entirely owned by RailTerm, Inc., a Canadian corporation. Rail-Term, Inc. is owned by 

Robert Wheeler, Geoffrey Chambers, and Francois Prenovost.

Seventy percent of Rail-Term’s business is spent in providing train 

dispatching services and 25 percent is spent on railroad-related

computer software development.

Rail-Term originally began operations in March 2000 as an intermodal

terminal operations consultant for Expressway Terminal, LLC, a

subsidiary of Canadian Pacific Railway in the United States. RailTerm disbanded that operation in June 2004 and terminated those

employees. Rail-Term has an affiliate established and based in

Canada (Centre Rail-Control Inc.) which performs train dispatching

services for seven Canadian short line and regional railroads and VIA

Rail Canada, which is Canada's passenger carrier.

Rail-Term performs services for Vermont Railway (BA 2114) and four of

its affiliates: Green Mountain Railway Company, Clarendon and

Pittsford Railroad (B.A. 2103), Washington County Railroad, and New

York & Ogdensburg Railway (BA 2272); and for Buffalo & Pittsburg 

Railroad, Inc . (BA 2249), and its affiliate Rochester & Southern

Railroad, Inc. (BA 2247). Twenty-five percent of Rail-Term's business 

time is spent doing train dispatching for Vermont Railway and its

affiliates and 50 percent for Buffalo & Pittsburgh and its affiliate.

BA # 9116
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Evidence in the coverage file indicates that Rail-Term entered into a

Dispatching Services Agreement with Vermont Railway on February

18, 2005 and with Buffalo & Pittsburgh on March 1, 2005.

Rail-Term provides its dispatching services from its dispatching office

in Rutland, Vermont. The dispatchers report to the Director of 

Operations of Rail-Term, who is employed by Rail-Term and is based

at the Rutland office. During Rail-Term’s initial operations in the

United States, Rail-Term temporarily utilized some individuals 

employed by two of its railroad clients. As of April 28, 2007, all of the

dispatchers were on the Rail-Term payroll.

The dispatchers receive their daily directions for train schedules,

operations, and restrictions from Rail-Term’s Director of Operations.

Rail-Term’s Director of Operations receives his daily directions from

Rail-Term’s customers' Operations Managers. Information

concerning changes in train operations follows the same channel.

Rail-Term owns its dispatching system. Dispatching is not done on 

carrier property. While Rail-Term’s carrier customers may visit RailTerm's facilities, they have no right to inspect those facilities. RailTerm and its customers do not use the train order method of

operations. Rail-Term’s computerized dispatching software

maintains train movement records in accordance with Federal

Railroad Administration (FRA) requirements.

Although Rail-Term does not direct the operating personnel of its

carrier customers, Rail Term’s dispatchers give the operating

personnel authority to occupy track. Rail-Term trains its dispatchers.

In response to a question that asked to what extent is any action of

the dispatcher imputed to the carrier, Rail-Term responded that it is a

third party service provider and is solely responsible for its actions.

The FRA will sanction Rail-Term, and not the carrier, if Rail-Term is

deemed responsible for a violation.
No evidence in the coverage file indicates that any railroad has a

financial interest in Rail-Term or that any individual owns a controlling

interest in Rail-Term and in a carrier. Similarly, the file contains no

evidence that an officer or director of Rail-Term is an officer or

director of a carrier.

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 of title 49, United States Code;

(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).

Because Rail-Term is neither owned by nor under common control

with a rail carrier, a majority of the Board finds that it does not fall

within the second definition of an employer under the Acts. 

However, for the reasons explained below, we find that Rail-Term is a

carrier employer under the Railroad Retirement and Railroad

Unemployment Insurance Acts.
It should be noted at the beginning of this discussion that this case

does not present to the Board for the first time the question of

whether an entity that provides dispatching for interstate railroad

operation is a covered employer under the Acts administered by the

Board. In our decision in B.C.D. 02-12, issued February 12, 2002, we

held that the dispatching department of the Southern California 

Regional Rail Authority (SCRRA) was a covered employer. Although

the evidence in that case demonstrated that the principle business 

of SCRRA was not rail service, the Dispatching Department was

found to be performing rail-related duties. That department was

thus segregated under section 202.3 of the Board's regulations and

found to be a covered employer effective October 1,2002. See

also our decision on reconsideration upholding the finding that

Herzog Transit Services, Incorporated is a covered employer with

respect to train dispatching over the rail line of Trinity Railway Express

in Texas (B.C.D. 09-53, October 28, 2009).

Train dispatching includes routing and tracking train progress and

coordinating the movement of one train with others. A train 

dispatcher handles two basic types of traffic: trains and

maintenance activities [Thomas White, Elements of Train Dispatching,

Vol. 2 “Handling Trains” 14 (2003)]. Train dispatchers issue specific

authority for maintenance of way activity, just as they do for trains

[Id. o. 14]. Dispatching concerns directing the movement of trains

and engines over the railroad through the use of clearances, train 

orders, manipulation of signals, switches, etc. While Rail-Term and its

customers do not use the train order method of operation, RailTerm's computerized dispatching software achieves the same goal

of directing the movement of trains and engines over the track of

Rail-Term's customers. Until properly dispatched, the engineer

cannot begin movement of the train. Because of the control that

dispatchers have over the motion of trains, dispatching is an

inextricable part of the actual motion of trains and thereby is an

inextricable part of fulfilling the railroad’s common carrier obligation.
Train dispatching is an essential element of safe train operation over

a rail line. Canadian Pacific Limited, et al. - Purchase and Trackage

Rights - Delaware & Hudson Railway Company. Surface

Transportation Board Finance Docket No. 31700 (Sub. No. 13)

December 4, 1998, (employer’s transfer of train dispatchers voided

due to adverse affect on rail safety). Because the safe operation of

trains depends on the work of the train dispatchers, dispatchers are

subject to the Hours of Service law enacted by Congress. See 49

U.S.C. § 21101 et sea. Section 21101 defines “dispatching service

employee" as follows:

... an operator, train dispatcher, or other train 

employee who by the use of an electrical or mechanical

device dispatches, reports, transmits, receives, or delivers 

orders related to or affecting train movements. [49 U.S.C.

§ 21101(2)].

Section 21105 limits the on duty hours of a dispatching service

employee [49 U.S.C. § 21105].

The Federal Railroad Administration, which is charged with the

responsibility to carry out the railroad safety duties imposed by the

Hours of Service law, has issued regulations that prescribe reporting

and record keeping requirements with respect to the hours of service

of certain railroad employees, including dispatchers [49 CFR Part 

228]. In addition, FRA regulations’ emphasize the control factor

present in the job of a dispatcher. Section 241.5 of those regulations

defines the word “dispatch" in pertinent part to mean:

(1) To perform a function that would be classified as

a duty of a "dispatching service employee," as that term

is defined by the hours of service laws at 49 U.S.C. 1

1 49 CFR Part 241, "United States Locational Requirement for Dispatching of

United States Rail Operations."
21101 (2), if the function were to be performed in the

United States. For example, to dispatch means, by the

use of an electrical or mechanical device -

(i) To control the movement of a train or other

on-track equipment by the issuance of a

written or verbal authority or permission 

affecting a railroad operation, or by

establishing a route through the use of a

railroad signal or train control system but not

merely by aligning or realigning a switch; or

(ii) To control the occupancy of a track by a

roadway worker or stationary on-track

equipment, or both; ...

Traditionally, the work of dispatching has been performed by 

employees of individual railroads.2 However, as is currently the

case with many other businesses, some railroads have made a

business decision to have dispatching done by a separate

entity that specializes in that field of work. Whether the work of

dispatching is done by individuals on the payroll of a railroad or

by individuals on the payroll of a separate entity, the work is

essentially the same: the dispatcher controls the movement of

the trains. Because no railroad can fulfill its common carrier

obligation unless its trains move, the work of the dispatcher is an

integral part of the operation of a common carrier. Thus,

because Rail-Term’s dispatchers have the ultimate control over

the movement of the trains of its rail carrier customers, the

2 It is noteworthy that the American Train Dispatchers Department of the

International Brotherhood of Locomotive Engineers is an AFL-CIO affiliated craft

union representing employees in the nation's railroad industry who operate and

dispatch trains and supply the electric power for those railroads which use 

electricity for train propulsion and signaling. It is also an employer covered by

the Railroad Retirement and Railroad Unemployment Insurance Acts (B.A. No.

8905).
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Board finds that Rail-Term is itself a rail carrier within the

definition of an employer under the Railroad Retirement and

Railroad Unemployment Insurance Act. Service for Rail-Term is

creditable beginning February 18, 2005, the date it first entered

into an agreement to provide dispatching services.

As the dissent suggests, there is an alternate theory that dispatching is

such an integral part of operating a railroad that it cannot be

contracted out to a third party that is outside of the control of the

railroad. Under this analysis Rail Term employees would be found to 

be employees of the railroads for which Rail Term provides dispatching

services.

Section 1 (b) of the Railroad Retirement Act and section 1 (d)(1) 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) of the Railroad Retirement Act 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

ii) he renders such service for compensation
Section 1 (e) of the Railroad Unemployment Insurance Act contains a

definition of service substantially identical to the above, as do sections

3231 (b) and 3231 (d) of the Railroad Retirement Tax Act (26 U.S.C. §§

3231(b) and (d)). While the regulations of the RRB generally merely 

restate this provision, it should be noted that section 203.3(b) thereof

(20 CFR 203.3(b)) provides that the foregoing criteria apply

irrespective of whether "the service is performed on a part-time basis *

* * ii

As the above definitions would indicate, the determination of

whether or not an individual performs service as an employee of a

covered employer is a fact-based decision that can only be made

after full consideration of all relevant facts. In considering whether

the control test in paragraph (A) is met, the Board will consider

criteria that are derived from the commonly recognized tests of

employee-independent contractor status developed in the

common law. In addition to those factors, in considering whether

paragraphs (B) and/or (C) apply to an individual, we consider

whether the individual is integrated into the employer’s operations.

The criteria utilized in an employee service determination are

applied on a case-by-case basis, giving due consideration to the

presence or absence of each element in reaching an appropriate

conclusion with no single element being controlling. Because the

holding in this type of determination is completely dependent upon

the particular facts involved, each holding is limited to that set of

facts and will not be automatically applied to any other case.

It should be noted that the tests set forth under paragraphs (B) and

(C), above, go beyond the test contained in paragraph (A) and

could 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. Under an Eighth Circuit decision consistently followed 

by the Board, these tests 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.
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206 F. 2d 831 (8th Cir. 1953). However, see also, Wabash Railroad

Co. v. Finnegan, 67 F. Supp. 94 (E.D. Mo. 1946), a railroad retirement

tax case where the court found that the nature of the services

performed for a railroad by its contractors was such that the railroad

could not surrender control and supervision in fact, even if it did so in

words. 67 F. Supp. at 100. The dispatching services provided by Rail

Term are analogous to the services provided by contractors in

Wabash Railroad Co. in that the dispatching services are of a

continuing nature and are so essential to the statutory duty of the rail

carriers to provide rail transportation that the carriers must retain the

power to direct and control the individuals who conduct the

dispatching service.

The Board has applied this principle in its decision with respect to the

coverage status of Rail-West, Inc. (B.C.D. 95-51). We noted in that

decision that: “The law of agency recognizes that certain duties

owed to third parties are so essential under the law that responsibility 

for their proper performance must be retained by the principal or

employer." See Restatement (Second) of Agency, § 214. In RailWest, we held that the individuals provided by Rail-West as crew to

operate the trains of the rail division of the Port of Tillamook Bay were

covered as employees of that rail division because the Port had to

retain ultimate control of the performance of its service as a

common carrier. In the case of Rail Term, because a railroad cannot

properly discharge its duties as a common carrier without

dispatching services, dispatching services fall under this same rule of

agency; i.e., they are so essential to the role of common carrier by

railroad that responsibility for their proper performance must be

retained by the railroad.

In addition, by the nature of the work that dispatchers perform, they

are integrated into the railroad’s operations. Without the services of

the dispatcher, the railroad’s trains cannot run. The job of a

dispatcher is as critical to the operation of a railroad as is that of a

locomotive engineer. Because dispatching is an inextricable part of

the railroad’s fulfilling its common carrier obligation, we find that the
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dispatchers who work for Rail Term could be considered to be

employees of each railroad for which Rail Term provides dispatching

services. Cf. B.C.D. 86-75, Genesee Valley Transportation Company,

Inc.

Under either analysis, dispatchers who work for Rail Term would be

considered to be covered employees under the Acts administered

by this Board.

erome F. Kever (Dissenting 

Opinion attached)
MANAGEMENT MEMBER KEVER’S DISSENT

RAIL-TERM COPORATION

A majority ofthe Board found Rail-Term to be a covered employer under the Railroad

Retirement Act (RRA) and the Railroad Unemployment Insurance Act (RUIA). While I

may agree with the majority that dispatching is an “inextricable part” ofrailroad

operations, I can not agree with the majority that Rail-Term is itself a carrier under our

Acts.

The Railroad Retirement Act (45 U.S.C . § 231 (a) (1)) (substantially the same as the

RUIA) defines a covered employer as:

(i) any carrier by railroad subject to the jurisdiction ofthe Surface

Transportation Board under Part A ofsubtitle IV oftitle 49; United States

Code;

(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....

The majority finds Rail-Term to be a covered employer under subsection (i) above.

Further, the majority cites Southern California Regional Rail Authority (SCRRA) B.C.D.

02-12 and Herzog Transit Services, Inc. B.C.D. 09-53 (Decision on Reconsideration -

Management Member Kever Dissenting) as precedent supporting their conclusion.

Because I do not believe that Rail-Term would be considered a carrier by the Surface

Transportation Board (STB) under Part A oftitle 49 and also do not find the above cited

decisions applicable to this case, I must dissent.

The Board’s decision outlines the nature of dispatching and its relationship to other

railroad operations. It also presents examples of how dispatching is regulated by federal

agencies including the Federal Railroad Administration. However, the decision does not 

provide a basis upon which Rail-Term could actually be found to be an entity regulated

under the jurisdiction ofthe STB. In American Orient Express Railway Company, v.

Surface Transportation Board, 484 F3d 554 (D.C. Circuit 2007) the Court did not disturb

the STB’s finding that an entity that did not own tracks or utilize its own employees for

movement ofpassenger trains could still be considered a railroad carrier where it

provided its own rail cars and contracted with AMTRAK to move its passengers. RailTerm may participate in directing car movements by dispatching, but it has not provided

rail cars nor participated in interchange agreements or other arrangements to move freight.
The majority decision also cites two prior Board decisions in SCRRA and Herzog Transit

Services as support for its determination. These decisions present facts very different

than the instant case since both applied factors from the Board’s decision in Railroad

Ventures, Inc. B.C.D. 00-47. In the initial Board decision on Herzog Transit Services,

B.C.D. 09-02, the Board summarized the SCRRA decision and concluded that since

SCRRA had assumed the responsibility for part ofthe railroad operations (dispatching

for both intrastate and interstate carriers) that it became covered consistent with the 

Railroad Ventures’ analysis. The Board’s initial determination ofHerzog goes on to

analyze Herzog Transit under the Railroad Ventures factors and concludes that Herzog, 

as operator for DART, became covered upon their assuming the dispatching function

which includes interstate passenger and freight trains. Unlike SCRRA and Herzog, RailTerm does not own track nor provide train operations over leased track as in Herzog’s

case. Providing dispatching services by SCRRA and DART/Herzog changed thencovered status because they owned track upon which interstate rail traffic moved along

with their intrastate commuter operations. This is a very different factual situation than

exists in Rail-Term.

While the majority certainly had the authority to fmd dispatching to be an integral part of

railroading that could not be contracted out similar to engineers and conductors (see RailWest, Inc. B.C.D. 95-51), the majority also chose to fmd Rail-Term itselfto be a carrier

which I do not believe is supportable under the Acts; therefore I dissent.

Note - Reference to the American Train Dispatchers Department ofthe International Brotherhood of

Locomotive Engineers in footnote (2) ofthe majority opinion is not relevant since rail unions are subject to

coverage under different statutory provisions than rail carrier employers under the RRA and the RUIA
RAILROAD RETIREMENT BOARD

844 NORTH RUSH STREET

CHICAGO, ILLINOIS 60611-2092

UNITED STATES OK AMERICA

APR 0 6 2010

Board Members:

MICHAELS. SCHWARTZ, Chairman

V.M. SPEAKMAN, JR, Labor Member

JEROME F. KEVER Management Member

Office of Division Counsel

Associate ChiefCounsel

(Tax Exempt and Government Entities)

Internal Revenue Service

1111 Constitution Avenue, N.W.

Washington, D.C. 20224

Attention: CC:TEGE:E0EG:ET1

Dear Sir or Madam:

In accordance with the coordination procedure established between the Internal Revenue Service

and this Board, I am enclosing for your information a copy of an opinion in which the Board has 

expressed its determination as to the status under the Railroad Retirement and Railroad

Unemployment Insurance Acts ofthe following:

Enclosure

cc: Mr. Dennis J. Scobie

Technical Advisor - Railroad Industry 

400 West Bay Street, Stop 4100 

Jacksonville, Florida 32202

bcc: ^general Counsel

Rail Term Corporation

Mr. John D. Heffner, PLLC

Attorney at Law

1750 K Street, N.W., Suite 200

Washington, DC 20006

Sincerely,

Beatrice Ezerski 

Secretary to the Board

Chief, Audit & Compliance Division
UNITED STATES OK AMERICA

RAILROAD RETIREMENT BOARD

844 NORTH RUSH STREET

CHICAGO, ILLINOIS GOBI 1-2DH2

APR 0 6 2010

Board Members:

MICHAEL S. SCHWARTZ, Chairman

V.M. SPEAKMAN, JR., Labor Member

JEROME F. KEVER, Management Member

Mr. John D. Heffner

Rail Term Corporation

Attorney at Law

1750 K Street, N.W., Suite 200

Washington, DC 20006

Re: Rail Term Corporation

Dear Mr. Heffner:

Enclosed is a copy ofthe Board’s determination regarding the coverage ofthe above-referenced

company as an employer under the Railroad Retirement Act (45 U.S.C. § 231 et. seg.) and the

Railroad Unemployment Insurance Act (45 U.S.C. § 351 et. seq.h

The Board's regulations provide that you may request reconsideration ofthe Board's decision in

this case. Any such request must be in writing and must be filed with this office within one year

following the date on which the initial determination was issued. (20 CFR § 259.3(a), 57 F.R. 

4366, February 5, 1992).

We will notify the Internal Revenue Service ofthe decision in this case.

Sincerely,

FOR THE B(MRD

Beatrice Ezerski

Secretary to the Board

Enclosure

bcc: General Counsel

Chief, Audit & Compliance Division