B.C.D. 02-8

Employer Status Determination

Employee Status Determination

JAN 3 1 2002

Lake County of Oregon Board of Commissioners

Ray Simms

This is the decision of the Railroad Retirement Board regarding whether

the services performed by Mr. Ray Simms and the Lake County Board of

Commissioners for Lake County Railroad, L.C.R., constitute employee 

service under the Railroad Retirement and Railroad Unemployment

Insurance Acts, or whether Lake County Board of Commissioners should

be an employer under those Acts. Lake County Railroad was held to be

an employer under those Acts effective November 1, 1997 (B.A. No. 2785).

In a letter dated October 19, 2001, Mr. William D. Barry, Chairperson,

Lake County Board of Commissioners, advises that Lake County has

owned the railroad since 1985. From 1985 through October 1997, the

railroad was operated by Great Western Railway of Oregon, Inc.1

Effective November 1, 1997, Lake County assumed direct responsibility

for management and operations of the railroad. At that time, the Great

Western Railway had two employees who became employees of Lake 

County Railroad.

Also at that time, Mr. Ray Simms, Assistant to the Board of

Commissioners, became Chief Executive Officer of the railroad. He was 

assigned the responsibility for day-to-day oversight of the operations.

Approximately 30 percent of his time is spent on railroad operations.

The Finance Department of the Lake County Board of Commissioners

manages county cash and disbursements of approximately $27 million for

this year. Of this amount, railroad operations represent $550,000.00.

The railroad pays the county a monthly administrative fee of 3.5 percent

of monthly revenue for financial services.

1 Formerly an employer under the Acts (B.A. No. 2770). Coverage of Great Western Railway was terminated

November 1, 1997.
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Lake County of Oregon Board of Commissioners

Ray Simms

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

Section l(a)(l)(ii) of the Railroad Retirement Act provides that a

company is a covered employer if it meets two criteria: if it provides

"service in connection with" rail transportation and if it is owned by or

under common control with a rail carrier employer. Clearly, the Lake

County Board of Commissioners meets both of these criteria. However, 

section 202.6 of the regulations of the Board, implementing the casual

service exception contained in section 1(a)(1)(h) of the Railroad

Retirement Act, provides that:

The service rendered or the operation of equipment or

facilities by a controlled company or person in connection

with the transportation of passengers or property by railroad

is 'casual' whenever such service or operation is so irregular

or infrequent as to afford no substantial basis for an

inference that such service or operation will be repeated, or

whenever such service or operation is insubstantial. (20

CFR 202.6)
Lake County of Oregon Board of Commissioners

Ray Simms

In the opinion of the Board, the service provided by the Lake County

Board of Commissioners is so small and also is such a small percentage of

the Board of Commissioners’ total operations, that it constitutes casual

service. Accordingly, Lake County Board of Commissioners is not an

employer under the Acts administered by the Board.

This conclusion leaves open, however, the question of whether the

persons in the Finance Department of the Lake County Board of

Commissioners who perform work for the railroad should be considered

to be employees of the railroad. 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 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 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-recipient

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

the way he performs such work.
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Lake County of Oregon

Ray Simms

Board of Commissioners

The evidence submitted shows that the Finance Department’s work is

performed under a contract with the railroad, and that the railroad

provides no direction regarding the performance of that work. 

Accordingly, the control test in paragraph (A) is not met. The tests set

forth under paragraphs (B) and (C) go beyond the test contained in

paragraph (A) and would hold an individual to be a covered employee if

he is integrated into the railroad's operations even though the control

test in paragraph (A) is not met. The record in this case does not

indicate that the employees of the Finance Department are integrated

into the operations of the Lake County Railroad. Accordingly, the

employees of the Finance Department are not employees of the railroad.

However, in regard to Mr. Sims, section 203.2 of the Board’s regulations

provides that “An individual shall be an employee whenever * * * (d) he is

an officer of an employer.” (20 CFR 203.2). Accordingly, Mr. Sims, who is

the Chief Executive Officer of the railroad, is an employee of the railroad.

Mr. Barry requests that, if Mr. Sims is held to be an employee of the

railroad, the effective date of the decision be this calendar year for the

reasons that Lake County has acted in good faith2; that Mr. Sims is fully 

vested in the Oregon Public Employees Retirement System so that

retroactive effect of the Board’s ruling would negatively affect his 

retirement benefits within that system; and the work involved in

correcting records retroactively involving a number of different benefit

systems will be considerable. In response to this request, the Board finds

that the service of Mr. Sims is creditable under the Railroad Retirement

Act beginning in 2001 and the Board waives retroactive liability for

contributions under the Railroad Unemployment Insurance Act.

However, the Board does not have authority to adjudicate Lability for

taxes under the Railroad Retirement Tax Act, which is administered by

the Internal Revenue Service.

2 Lake County became aware ofthe issues examined in this decision when Ms. DeEtta Vincent, Finance Director of

Lake County, attended a regional reporting training seminar recently held in Portland, Oregon.
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Lake County of Oregon Board of Commissioners

Ray Simms

Accordingly, it is the decision of the Board that the Lake County Board of

Commissioners is not a covered employer under the Acts; that the

services performed by employees of the Finance Department of the Board 

of Commissioners for Lake County Railroad are not creditable under the 

Acts; and that services performed by Mr. Sims for the Lake County 

Railroad are being performed as an employee of the Lake County 

Railroad effective January 1, 2001, and consequently that that service is

creditable under the Railroad Retirement and Railroad Unemployment

Insurance Acts.

Cherry! T. Thomas

-(/VW

V. M. Speakman, Jr

0Jerome F. Kever

U OsT