B.C.D. 03-77

Employer Status Determination

Quality Rail Services, LLC

OCT 2 2 2003

This is the decision of the Railroad Retirement Board regarding the status of Quality Rail

Services LLC (Rail Services) as an employer under the Railroad Retirement and Railroad

Unemployment Insurance Acts. The status of this company has not previously been

considered.

The evidence of record is that Rail Services was formed in Colorado in 1995 as a Limited

Liability Company, owned by Michael Gordon and Lawrence Moore. Rail Services

conducts three lines of business: mechanical services, support services and fuel services.

Mechanical services are described as cleaning and washing locomotives and rail cars at a

facility operated in co-operation with Chem Station of the Rockies Inc., and performing

running repairs, car inspections and wreck restoration at the customer’s site. Support

services are described by the company as lease of locomotive service trucks, service

trailers, rail car repair trucks, and “red streak” rail cars for transporting disabled rail

equipment.

In a letter dated May 29, 2003, Mr. David Miller of Rail Services described the principal

focus of the company as the fueling and servicing of railroad locomotives. Mr. Miller stated

that the company “does 100 percent of its business with the Burlington Northern Santa Fe

Railway” (BNSF). However, a February 2003 print-out ofthe company’s web site lists both

BNSF and Amtrak as fueling services clients. The web site also showed Xcel Energy,

Platte River Power Company, and Missouri Basin Electric Power Plant, as clients for

mechanical services; and support service clients as the BNSF, Amtrak, EEX Power

Systems, Terra Industries, Central Kansas Railway, and Yakima Steam Rail Museum.

The General Chairman of the National Conference of Firemen and Oilers of the Service

Employees International Union has provided a copy of a decision ofthe National Mediation

Board which recounts that on or about March 23, 2001, BNSF began substituting a Rail

Services fuel truck and driver for two fuel tanker trucks previously operated by BNSF

employees out of BNSF facilities at Alliance, Nebraska. A BNSF employee accompanied

the Rail Services driver, and the BNSF employee performed the locomotive fueling. The

decision found that while BNSF violated a notice requirement, its labor agreement with the

Firemen and Oilers did not prevent use of a sub-contactor as described. See: National

Conference of Firemen and Oilers. SEIU and Burlington Northern and Santa Fe Railway.

Public Law Board No. 6456, Award No. 1, May 9, 2002.

Copies of Rail Services forms for Spill Report, Locomotive Problem Report, Emergency

Refueling Report, and Contractor Site Inspection Checklist have been furnished. Each

form contains detailed questions directed to the Rail Services employee, and each form

directs that the report be made to Rail Services.
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Quality Rail Services, LLC

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

§351 (a) and (b) contain substantially similar definitions, as does section 3231 of the

Railroad Retirement Tax Act (RRTA), 26 U.S.C. § 3231.

Rail Services is clearly not a carrier by rail. Further, there is no evidence that Rail Services 

is under common ownership with any rail carrier or controlled by officers or directors who

control a railroad. Rail Services therefore is not a covered rail carrier affiliate employer. As

Rail Services meets no other definition of a covered employer under the Acts, the Board 

finds that Rail Services is not a covered employer.

This conclusion leaves open, however, the question whether the persons who perform

work for Rail Services under its arrangements with BNSF (and evidently Amtrak as well) 

should be considered to be employees ofthe railroad rather than of Rail Services. Section 

1(b) of the RRA and section 1(d)(i) of the RUIA both define a covered employee as an

individual in the service of an employer for compensation. Section 1 (d) 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 the rendition of which is integrated into the

employer’s operations; and
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Quality Rail Services, LLC

(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-recipient not only with respect to the outcome of his

work but also with respect to the way he performs such work.

There is no evidence regarding the manner of performance of any services forAmtrak. The

evidence with respect to the BNSF contract is that although the Rail Services employee

may be accompanied by a railroad employee, the Rail Services employee must report to

Rail Services. Accordingly, based on available evidence, 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.

Under an Eighth Circuit decision consistently followed by the Board, however, 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. 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 Rail Services 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; e.q.. Aparacor, Inc, v.

United States. 556 F. 2d 1004 (Ct. Cl. 1977), at 1012; and whether the contractor engages

in a recognized trade; e.q.. Laniqan Storage & Van Co. v. United States. 389 F. 2d 337 (6th

Cir. 1968, at 341). Rail Services clearly has a sizable investment in equipment. Moreover,

although the evidence is conflicting, the information from the company’s website indicates

that it offers its services to the general public, both railroads and private rail industry as

well. Consequently, a majority of the Board finds that Rail Services meets the test for

independent contractor status, and individuals performing service under its contracts are

employees of Rail Services rather than employees of a rail carrier for which Rail Services

provides its services. Kelm. supra.
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Quality Rail Services, LLC

Accordingly, it is the determination of a majority of the Board that service performed by

employees of Rail Services is not covered employee service under the Railroad Retirement

and Railroad Unemployment Insurance Acts.

Michael S. Schwartz

Qt

V. M.Speakman, Jr.

(Dissenting in part, separate dissenting

opinion attached)
Dissent of V. M. Speakman

Quality Rail Services, LLC

The principal focus of Quality Rail Services, LLC involves the fueling and servicing of

locomotives, according to the spokesman for the company. This individual stated that it

does 100 percent ofits business with the Burlington Northern Santa Fe Railway (BNSF)

although that fact is in dispute.

As recounted by the National Mediation Board, in March 2001, the BNSF began

substituting a Quality Rail Services fuel truck and driver for two fuel tanker trucks

previously operated by BNSF employee. Now, the Quality Rail Services employee is

accompanied by an employee ofthe railroad and avoids coverage, even though both are 

performing virtually the same services.

Accordingly, I would find the employees performing fueling and servicing of railroad

locomotives, who effectively displaced previously covered railroad workers, to be 

covered under the Railroad Retirement and Railroad Unemployment Insurance Acts.

V. M. Speakman, Jr.

10'(6'03

Date