Employer Status Determination

Bankhead Enterprises, Inc.

This is the decision of the Railroad Retirement Board regarding the

status of Bankhead Enterprises, Inc. (BEI) as an employer under the

Railroad Retirement and Railroad Unemployment Insurance Acts.

BEI was formed by a merger on December 22, 1986 of the following

companies: 1) Kehely & Company, Inc., 2) Bankhead Asphalt Paving,

Inc., 3) All South Supply Company, Inc., 4) Bankhead Railway

Welding, Inc., 5) Bankhead Systems and Controls, Inc., and 6)

Railtrack Services, Inc.. According to BEI all BEI stock is owned

by Glen Taylor.

The business operations of BEI may be generally divided into

railroad and non-railroad concerns. The non-railroad operations

are conducted by Bankhead Welding Service (general welding),

Bankhead Transportation Equipment (automobile carrier trailer 

manufacture), Bankhead Asphalt Paving (street and parking lot

paving), and Bankhead Asphalt Trucking (construction material 

delivery) . BEI had four divisions that have performed, at least in

part, or are performing work for a carrier. 1) Bankhead Railway

Services, 2) Railtrack Services, 3) Bankhead Maintenance Company,

and 4) Bankhead Railway Welding. BEI's principle business is

welding and asphalt paving.

Bankhead Railway Services

Bankhead Railway Services, Inc. (BRS) for the period 1985 through 

1990 had a contract to run the intermodal operations at the Norfolk

Southern Railroad (NSR) Inman yard terminal. The intermodal 

operations included BRS personnel who performed crane operations, 

groundmen, truck drivers, mechanics, and clerical functions. A

contract dated 9/13/85 between BRS and NSR includes the following:

BRS will supply personnel, equipment, parts and supplies 

for the intermodal facility,

- BRS will provide all paperwork and administrative

functions,

- BRS will conduct equipment inspections and track 

maintenance records,

- NSR does not have any authority to directly supervise BRS

employees,

- The contract can be terminated by either party with 60

days notice,

BCD 1995-54
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Bankhead Enterprises, Inc.

- BRS agrees to furnish a detailed accounting of the

expenses of operation verified by a Certified Public

Accountant at the request of NSR,

- BRS shall require its employees to follow NSR rules while 

on NSR property,

- BRS agrees to cooperate with NSR for background checks of

BRS employees, drug testing, or other investigation at

the request of NSR,

- BRS will furnish certified urinalysis testing of BRS

employees to NRS prior to their coming onto NSR property,

- NSR can bar any BRS employee from NSR property for

various reasons,

- BRS is required to pay minimum wage of at least $6.50 per

hour,

- NSR will pay BRS $60,000 per month with an extra $8.47

for each lift in excess of 6,500,

The BRS employees involved in intermodal operations were found to

be employees of NSR for purposes of the Railway Labor Act by the

National Mediation Board in 1990 (17 NMB 153) due to the

supervision by NSR employees. In-Terminal Services, a non-covered

employer (Legal Opinion L-90-159) took over the intermodal 

operations in 1990.

BEI, through BRS, had a second contract to maintain the welding

shop located at Inman Yards. The welding operations involved 

approximately 20 employees who would weld 80 foot lengths of rail

into quarter mile lengths to be loaded on flat cars and transported

to other NSR locations. The employees glued crossing track and

switches together instead of just using bolts. They also did

ballast cleaning. A contract dated January 30, 1984, between BEI

and NSR includes the following:

- BEI will perform welding and mechanical maintenance work 

as ordered by NSR,

- BEI will provide all necessary equipment for welding,

- BEI will furnish (1) welder/foreman with truck and (4)

welders with trucks for which [BEI] will pay an hourly

rate and overtime rate,
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Bankhead Enterprises, Inc.

All overtime work must be authorized by NSR in advance,

All days will be considered work days except for holidays 

observed by NSR,

BEI employees must live in the Atlanta area,

A time clock will be punched daily by BEI workers and

verified by an NSR supervisor,

Time cards and production reports will be furnished to

NSR,

NSR reserves the right to extend the scope of the work 

covered under the agreement and the contractor must

perform the extra work,

The contract can be terminated by either party with 90

days notice.

Railtrack Services

Railtrack Services, Inc. (RSI) was acquired by BEI through an asset

purchase from the former operator in 1986. RSI hired the former

employees of the contractor. RSI performs continuous track welding 

and rail cropping for Consolidated Rail Corporation (Conrail). RSI

had approximately 44 employees working at the Harrisburg,

Pennsylvania, plant. The contract between RSI and Conrail provides 

in part:

- Conrail can terminate the contract on 10 days notice,

- RSI shall work as an independent contractor and be

subject to the general oversight of Conrail's Chief

Engineer-Maintenance of Way,

RSI is subject to audit by Conrail,

RSI agrees to accept responsibility for payment of all

employment taxes,

Conrail has a pre-emptive right to purchase RSI's

materials and equipment at fair market value in the event

of a sale of RSI,

For rail cropping services, Conrail agrees to pay actual

labor costs plus 10% for overhead, 38% for fringe

benefits, including extra pay for overtime,
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Bankhead Enterprises, Inc.

- Conrail agrees to pay for repair parts, maintenance parts

and expendable supplies,

- For rail welding, Conrail agrees to pay $17.25 for welds

made during the first 8 hours of a shift, and $23.29 for

welds made during overtime and weekends,

- For rail welding, RSI will submit invoices weekly, and

Conrail will pay as promptly as possible,

- RSI will observe the same holiday schedule as Conrail,

- RSI's work is open to inspection by Conrail inspectors at

all times,

- Conrail will lease work locations to RSI for $1 per year,

which are subject to inspection by Conrail inspectors at

all times,

RSI is to submit a daily production report signed by both 

the plant superintendent and Conrail's Chief EngineerMaintenance of Way.

Invoices for rail cropping services show that daily time sheets

signed by the RSI employees were submitted to Conrail. Invoices

for supplies show that RSI bills Conrail for the cost of supplies

plus ten percent for overhead.

Bankhead Maintenance Company

During the period 1985 through 1990, Bankhead Maintenance Company 

(BMC) , operating as a division of BEI, had eight teams of two

employees each assigned to eight different cities working on NSR

property performing electric welding on track switches. This work 

was performed by a different contractor prior to BMC obtaining the

contract. The contract dated December 15, 1981, between BMC and

NSR included the following:

- BMC will perform electric welding on rails, frogs,

railroad crossings, switch points, and other track

components as designated by NSR's Division Engineer,

BMC must submit daily reports to include crew

identification, hours worked, overtime, work performed,

truck odometer reading, signature of NSR representative,

and any other information as requested by NSR,

BMC must provide its own tools,
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Bankhead Enterprises, Inc.

- NSR will provide a minimum of 50 hours of work per crew 

per week,

- NSR will pay an hourly wage and overtime wage,

- BMC will observe NSR holidays,

- NSR will reimburse BMC for welding rods, gasoline, and

telephone calls,

- BMC will be responsible for meals and lodging, licensing,

insurance, maintenance, supplies, and equipment,

- BMC will submit monthly invoices for each gang,

- The agreement is cancelable upon 120 days notice.

Bankhead Railway Welding

Bankhead Railway Welding (BRW), a division of BEI, also performed

welding and other maintenance work under contract with NSR. BEI

stated this work was previously performed by a different 

contractor. An attorney for BEI, stated in a letter dated 

September 17, 1993, that approximately 10 BEI employees would 

perform welding and other mechanical maintenance work on railroad 

support equipment at the NSR rail plant at Inman Yard. The letter

stated the employees were working under the name Bankhead Welding

Service, however, a review of the invoices for the period states

the name as Bankhead Railway Welding. A review of BRW invoices

indicates that BRW performed the following work for NSR:

DATE INVOICE AMOUNT DESCRIPTION

11/26/86 1610 $12,817.47 Bonding joint

for the month

of October.

11/14/86 1614 2,883.29 Repairs to a

crossing in

BEI's shop.

11/19/86 1616 26,674.91 Ballast

cleaning for

October, less

cooks.

12/23/86 1647 8,514.68 Thermite

welding for

November.
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Bankhead Enterprises, Inc.

12/23/86 1666 10,096.06 Loading,

unloading,

warehousing,

and railroad

supervision.

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 express company, sleeping-car company, and 

carrier by railroad, subject to [the Interstate Commerce 

Act] ;

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(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 (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).

BEI clearly is not a carrier by rail. There is no evidence that

BEI is controlled by a carrier or by individuals who control a

carrier. Rather, the available evidence indicates that it is not

under common ownership with any rail carrier. Therefore, BEI is

not a covered employer under the Acts.

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

persons who perform work for BEI and its divisions under its

arrangements with rail carriers should be considered to be

employees of those railroads rather than of BEI. 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:
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Bankhead Enterprises, Inc.

(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 in

to 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 definition 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 in the way he performs such work.

As noted earlier, the NLRB/NMB found the employees of BRS to be

covered under the Railway Labor Act. The bargaining unit at issue

in the NLRB/NMB proceedings included individuals performing

intermodal freight handling at Gate 6 in the Inman Yard Terminal of

the Norfolk Southern in Atlanta, Georgia, under contract with BEI's

BRS. BRS characterized the employees working at Gate 6 as crane

operators, ground men, truck drivers, equipment mechanics, clerks,

shift supervisors, and division manager. All individuals 

performing these services were on BRS's payroll. Norfolk Southern 

supplied overhead cranes and all other equipment at this location,

excluding pickup trucks used to tow truck trailers on and off flat

cars. Work was assigned by BRS's five shift supervisors on site

without reference to BRS headquarters. Individuals working under 

the contract were required to comply with Norfolk Southern's rules.

Norfolk Southern (NSR) refutes the NLRB/NMB finding and points out

that pursuant to the contract referenced above BRS agreed to

furnish various vehicles and equipment; to perform loading and

unloading of containers and trailers; to under take certain 

equipment inspection and repair; and to perform all necessary

paperwork and administrative functions.

NSR denies the statement by BRS to the NMB that the railroad had

any control over the rate of pay of the individuals performing

service under the contract, stating that BRS hired, trained and

discharged the individuals providing the service under the

contract, and set the individuals' wages and fringe benefits. NSR

also denied that it could require Bankhead to discharge an
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Bankhead Enterprises, Inc.

employee, stating that it could only exclude an unsatisfactory

individual from NSR property. In addition, NSR states that its

supervisory employees did not communicate with individuals 

performing the contract service, but rather directed the result of

the service by informing the supervising Bankhead employee of

defects to be rectified. Finally, NSR states that following 

termination of the contract with BRS, NSR contracted with InTerminal Services for the operation of the Inman yard.1

Based on the evidence before it, the NMB concluded that "Norfolk

Southern exercises a significant degree of control over the BRS

division of BEI." 17 NMB at 158. The evidence on some issues of

fact is inconclusive. Both BRS and the railroad furnished tools

and equipment. BRS had direct control of the manner of performance 

through first level supervision, while Norfolk retained a more

remote control at a higher level. However, in the view of a

majority of the Board, other evidence points strongly to the

conclusion that the individuals were controlled by BRS. BRS

controlled wages and hours and whether the individuals were

assigned to the Inman Yard or another location. Moreover, that

Norfolk terminated the contract in favor of another firm,

previously determined not to be engaged in providing service

covered under the Acts, indicates that BRS performed an independent 

trade, and that the contract was entered at arms length.

On these facts, in the opinion of a majority of the Board, case law

supports a finding that the individuals in question were not

railroad employees. In two cases decided in 1948, the Eighth 

Circuit Court of Appeals found that contractors who transferred

shipments from damaged freight cars in railroad yards were not

employees of the respective railroads under language of the

Railroad Retirement Tax Act substantially identical to present 

paragraph (A) . See Reynolds v. Northern Pacific Railway. 168 F. 2d

934; and Reynolds v. Chicago, St. Paul, Minneapolis & Omaha 

Railway, 168 F. 2d 943.

Moreover, courts deciding cases under the Federal Employers'

Liability Act (FELA) have held individuals loading and unloading

trucks in rail yards under contract to be employees of the

contractor rather than the railroad. Because FELA defines the term

"employee" in much the same way as the Railroad Retirement Act, an

1 In-Terminal Services is a division of Mi-Jack Products 

Incorporated. In Legal Opinion L-90-159, the Deputy General

Counsel determined that In-Terminal Services was not a covered 

employer, and that work performed by In-Terminal on railroad 

property was not covered employee service under the Acts.
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Bankhead Enterprises, Inc.

employee, cases under FELA are useful in interpreting paragraph (A)

of the Railroad Retirement Act. Thus, in Fawcett v. Missouri 

Pacific Railroad Company. 242 F. Supp. 675 (W.D. La. 1965),

affirmed, 347 F. 2d 233 (5th Cir. 1965) , an employee of a truck

company affiliated with the railroad was killed on railroad 

property while loading truck trailers on a rail car. The court

found that where no railroad employee was present when the injury

occurred, and where the individual was not on the railroad payroll 

and was not subject to discharge by the railroad, the railroad did

not control the employees of the truck company. Similarly, in

Williams v. Chicago & Eastern Illinois Railroad. 300 N.E. 2d 766

(111. App., 1973), an individual driving a tractor used to pull

truck trailers on and off rail cars was not the railroad's employee 

under the FELA where he did not work with or under supervision of

the railroad's employees was hired and paid by the contracting

firm, and used the contractor's tractor on the railroad's property.

See also, Turpin v. Chicago, Burlington & Quincy Railroad Co.. 403

S.W. 2d 233 (Mo, 1966) , cert. den. 384 U.S. 1003 (1966) ; and Kelley 

v. Southern Pacific Co.. 419 U.S. 318 (1974).

The terminal freight service performed by BRS in the Inman Yard is

indistinguishable from that described in the Fawcett and Williams 

cases. Moreover, transfer of loaded containers is similar to

transfer of the freight itself performed by the contractor in the

Northern Pacific Railway and Chicago, St. Paul, Minneapolis & Omaha

Railway cases under the Railroad Retirement Tax Act.

Accordingly, in the view of a majority of the Board, the control

test in paragraph (A) is not met.

The definitions set forth under paragraphs (B) and (C), which are

broader than that contained in paragraph (A) , do not apply to

employees of independent contractors performing services for a

railroad if the 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) . This Eighth Circuit

decision has been consistently followed by the Board for over forty

years.

Thus, under Kelm the question remaining to be answered is whether 

BRS 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.a. , Aoaracor,

Inc, v. United States. 556 F. 2d 1004 (Ct. Cl., 1977) , at 1012; and
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Bankhead Enterprises, Inc.

whether the contractor engages in a recognized trade; e. a. , Laniaan

Storage & Van Co. v. United States. 389 F. 2d 337 (6th Cir., 1968,

at 341.

It is apparent that BRS is independently capitalized, and is

engaged in a recognized trade or business; accordingly, it is the

opinion of the Board that BRS is an independent business.

Because BRS engages in an independent business Kelm would prevent

applying paragraphs (B) and C) of the definition of covered

employee to this case. Accordingly, it is the determination of a

majority of the Board that service performed by employees of BRS is

not covered under the Acts.

The other contracts described in this decision do not differ

significantly from the BRS contract analyzed above. Therefore, a

majority of the Board finds that employees of BRS performing

welding services under contract with NSR, employees of RSI

performing welding services under contract with Conrail, and 

employees of BMC and BRW performing services for carriers under

contracts are not covered under the Acts.

z Glen L. Bower

V. M. Sj^eakman, Jri^iDissenting

opinion attached)

Kever

Attachment