B.C.D. 03-20 FEB 2 4 2003

EMPLOYER STATUS DETERMINATION

Watco Companies, Inc.

Watco Transportation Services

This is the determination of the Railroad Retirement Board concerning

the status of Watco Companies, Inc., and Watco Transportation

Services as employers under the Railroad Retirement Act (45 U.S.C.

§ 231 et seep) and the Railroad Unemployment Insurance Act (45 U.S.C.

§ 351 et seep).

Information dated August 30, 2002, from Watco Companies states that

Watco Companies was incorporated (as Generations Holdings, Inc.) on 

January 12, 1998 (the name was changed to Watco Companies on

December 1, 1999). On January 1, 2001, Watco, Inc.1, Watco

Switching2, and three other companies3 were merged into Watco

Companies. Watco Companies is described as a “privately held

corporation of four separate families none of whom own a majority or

controlling interest.” The business of Watco Companies is chiefly with

non-carrier companies including paper companies, smelting and mining

companies, petro-chemical companies, agricultural companies, steel

processing companies, and utilities. Four percent of Watco Companies’

employees perform work related to rail carriers, including rail car

repair, locomotive maintenance, major track repair, and warehousing

services. Watco Companies owns Watco Transportation Services.

1 Watco, Inc. performed rail car repair, locomotive repair and maintenance, locomotive leasing, track

repair and maintenance, and rail car management services. Most ofits business consisted ofrail-related

service for non-railroad companies. Ten percent ofits business was with railroads, and less than five

percent ofits business was with its affiliated railroad, Southeast Kansas Railroad. On April 29,1993, the

Board held that Watco, Inc., was not covered under the Acts.

2 Information dated August 17,1999, regarding Watco Switching states thatit was formerly a subsidiary of

Watco Companies providing repair of rail cars for private rail car owners.

3 Those three companies were Transerve, Inc., Quantum Rail Sendees, Inc., and Fastrac Railroad Services,

Inc. Transerve was sued by the Office of Inspector General ofthe Railroad Retirement Board on behalf of

the Railroad Retirement Board and the Internal Revenue Service for taxes and contributions due based on

work its employees performed for the affiliate railroads for the period 1996-2000. Since these companies

were merged into Watco Companies, and since any further liability for that period on the part of

Transerve is foreclosed by the judgment, the Board does not address the issue ofthe coverage ofthese

companies in this determination.

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Watco Companies, Inc.

Watco Transportation Services

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Information dated March 26, 2001, from Watco Transportation Services

indicates that operations began January 1, 2001. It owns six railroads,

Eastern Idaho Railroad, Inc. (B.A. No. 2768); Palouse River & Coulee 

City Railroad, Inc. (B.A. No. 2643); South Kansas and Oklahoma

Railroad, Inc. (B.A. No. 3880); Stillwater Central Railroad, Inc. (B.A.

No. 2878); Kansas and Oklahoma Railroad (B.A. No. 2797); and Timber

Rock Railroad, Inc. (B.A. No. 2877), all of which are employers under

the Acts. The operations of Watco Transportation Services included the

following provided for its subsidiary railroads: track maintenance,

locomotive maintenance, railcar repair and vehicle repair, and

management and marketing services. Watco Transportation Services is

wholly owned by Watco Companies, Inc.

Watco Companies is owned as follows: Charles R. Webb, 47.24 percent;

Richard B. and Stacy Webb, 25.20 percent; Gary L. and Susan Lundy,

23.56 percent; and C. Wayne and Glenda Sigley, 4.00 percent.

The directors of the above-companies are as follows: Watco Companies,

Richard B. Webb; Watco Transportation Services, Richard B. Webb and

Gary L. Lundy; Eastern Idaho Railroad, Richard B. Webb; South

Kansas and Oklahoma Railroad, Richard B. Webb and Gary L. Lundy;

Palouse River & Coulee City Railroad, Richard B. Webb; Stillwater

Central Railroad, Charles R. Webb, Richard B. Webb, Stacy L. Webb,

Gary L. Lundy, and Susan K. Lundy; Timber Rock Railroad, Richard B.

Webb, Gary L. Lundy, Donald M. Wilson, Deborah Moody, and Leslie

Elmore; and Kansas and Oklahoma Railroad, Richard B. Webb and

Gary L. Lundy.

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:
Watco Companies, Inc.

Watco Transportation Services

(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).

Watco Transportation Services is the sole shareholder of its affiliated

carriers, who are covered employers under the Acts. In turn, Watco 

Transportation Services is wholly owned by Watco Companies.

Therefore, Watco Transportation Services is under common control with

its affiliated carriers. The remaining question is whether Watco

Transportation performs services in connection with transportation to

its affiliated carriers. In performing track maintenance, locomotive

maintenance, railcar repair and vehicle repair, and management and

marketing services for its subsidiary railroads, Watco Transportation

Services is clearly performing services in connection with railroad

transportation. The Board therefore finds that Watco Transportation

Services is a covered employer under the Acts administered by the

Board effective January 1, 2001, the date as of which it came into

existence.
The next question is whether Watco Companies is a covered employer.

The evidence of record indicates that the business of Watco Companies

is chiefly with non-carrier companies and that only four percent of

Watco Companies’ employees perform work related to rail carriers. The

Board finds that this level of rail related work is insubstantial and is

thus “casual service” and is not service in connection with railroad

transportation. See 20 CFR 202.6. Because the Board finds that Watco

Companies does not perform service in connection with railroad

transportation, we do not address the issue of whether it is under

common control with one or more rail carrier employers. Accordingly, 

the Board finds that Watco Companies is not an employer under the

Railroad Retirement Act and the Railroad Unemployment Insurance

Act.

Watco Companies, Inc.

Watco Transportation Services

V. M. Speakman, Jr.

Jerome F. Kever