Board Coverage Decision

2012-09

Employee Status Determination

Issued March 15, 2012

No G-215 Available
B.C.D. 12-9 March 15, 2012

EMPLOYEE STATUS DETERMINATION

XXX-XX-6553 WEB

Background

This case was initiated by the Office of the Inspector General (OIG) in October

of 2008, based upon a hotline complaint dated October 14, 2008 (Evidence 1 of

investigative file). The complaint identified WEB, as being an individual who was

receiving an annuity through the U.S. Railroad Retirement Board (RRB) while still

employed by the United Transportation Union (UTU), a covered employer, which

would be in violation of the Railroad Retirement Act (45 USC 231 et seq). The

subsequent OIG investigation revealed that no formal inquiry was ever made to

trie Office of General Counsel regarding a iegai opinion nor was a decision

issued by the three-member Board regarding Mr. HI employment status. The

OIG investigation did reveal an advisory letter from the Office of the Labor

Member that explained that based upon the information given to that office,

Mr. employment appeared to be self-employment; however, the letter also 

gave general legal recommendations to Mr. ^regarding steps to take to clarify

his self-employment status. The record indicates that the suggested steps were

not taken by Mr.J

The OIG investigation was completed and forwarded June 29, 2011 for review

by the Office of General Counsel.

Applicable Law and Regulations

Section 1 (b) of the RRA (45 U.S.C. § 231 (b)) defines the term "employee” to

mean any individual in the service of one or more employers for compensation.

Section 1(d)(1) of the RRA provides that an individual is in the service of an

employer if;

(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.

(45 U.S.C. § 231 (d)(l)(i)).

Section 1(e) of the RUIA (45 U.S.C. § 351(e)) contains essentially the same

definition.

Section 203.3(a) of the RRB’s regulations provides that an individual is performing

service for an employer if:

(1) He is subject to the right of an employer, directly or

through another, to supervise and direct the manner in which his

services are rendered; or
(2) In rendering professional or technical services he is

integrated into the staff of the employer; or

(3) He is rendering personal services on the property used in

the operations of the employer and the services are integrated into

those operations.

Section 216.23(c) of the Board's regulations (20 CFR §216.23(c)) defines selfemployment as "work performed in an individual’s own business, trade or

profession as an independent contractor, rather than as an employee.” That

section further states that an individual is not self-employed if the business for

which he performs service is incorporated. Section 216.23(c) also explains that

whether an individual performing services is an employee depends upon the

degree to which the recipient of services controis the individual’s work. Section

216.23(c) then sets out factors that will be considered in determining whether an

individual performs services as an employee or as an independent contractor.

Some indicia pointing to the existence of an employer/employee relationship

are the performance of work on the employer's premises, execution of a

contract for continuing services over a long or indefinite period, devotion of

substantially all of a person's working time to such service, the performance of

duties similar in many respects to those previously performed as an employee,

training a successor in the duties of the individual's former job, and periodic

payment of regular remuneration rather than payment for a specific result or

work product.

Indicia pointing to the existence of a self-employed, independent contractor

status are the setting up of an office or the performance of the work in places

not connected with the employer's premises, performance of similar services for

persons other than the employer, freedom as to the amount of time to be

expended in rendering a particular service, agreements or arrangements for the

performance of specific services of limited duration on a particular project, and

payments for a particular result to be accomplished rather than regular

remuneration on the basis of time worked.

Discussion

A majority of the Board finds that Mr. ^Bcase turns on a basic analysis of

whether his current employment more heavily favors the indicia that indicate he

is a contractor or whether his current employment more heavily favors the

indicia that he is an employee of the employer. The record reflects that Mr. B

set up a corporation named "Rail Consultants, Inc." to portray himself as an

expert in the field of labor-management negotiations (Tab C pages a-1 and a2). The corporation has an office separate from the employer’s property (Tab A

page A-8). Mr. 1 reports that he does not work a set schedule and does not

keep regular hours, but only works when a negotiation is needed (see Tab C

pages b-1 through b-4). A majority of the Board finds that these factors weigh in

favor of Mr. employment being that of an independent contractor which

would not violate the terms of receiving a benefit under the Railroad Retirement

Act.
However, the record also reflects several factors that indicate the Mr. B is not an

independent contractor and is actually still performing duties essentially as an

employee of a covered railroad employer. To begin, Mr. (himself related that

he only does negotiation work when John Nadalin, UTU Director of Strategic

Planning, advises him to go to a location to attempt to negotiate a contract

with a non-represented railroad or non-represented group of individuals (Tab C

page b-4). Mr.( also explained in the record that he is paid a flat fee per

month and does not receive an hourly fee for his negotiation services (Tab C

page b-3). The record also indicates that the negotiations Mr. (conducts are

essentially the same negotiations he performed while still employed with the UTU,

the only difference is his authority to officially “sign-off” on a negotiated

contract (Tab C page b-4). Mr. ( is currently conducting his business with the

UTU without a written contract and without specific terms as to the duration of

the arrangement (Tab C pages b-1 through b-3). The record does not provide

any indication that Mr. advertises his sen/ices to the public at large and he

admits that his work with the UTU is his corporation's sole source of business (Tab

C page b-4). The record also indicates that Mr. ^(consulting work is the sole

source of revenue for the corporation he created. Finally, even when Mr. | is

contacted by a group of non-represented employees at the volition of the

employee group, Mr.( explained that before he can go out and begin a

negotiation with the employee group, he must receive clearance from Mr.

^^^■(see Tab C page b-5).

A majority of the Board finds that the factors indicating that Mr. (is essentially 

continuing his employment with his railroad employer are more numerous and

more indicative of the type of employment relationship Mr. 1 has with the

employer. The record is undisputed that Mr. | has no terms as to the duration of

his contract with the employer and receives regular monthly remuneration

instead of wages for hours worked. Mr. (clearly is under the direct supervision of

Mr. ^|^(and only performs service or travels when instructed by Mr.(

Additionally, the "corporate veil" which Mr. (sought to set up for himself is easily 

pierced by the twin factors that Mr. ^( sole source of revenue is his consulting

work for the UTU and the fact that he does not advertise to the public at large

nor hold himself out as available to consult for any other union other than the

UTU.

Mr. (made many references to the fact that he contacted the Office of the

Labor Member for approval of his work situation. A majority of the Board finds

that although he did seek advice from the Office of the Labor Member, the

Office of the Labor Member never issued any formal decision or opinion to Mr. B.

The counsel to the Labor Member’s Office did provide Mr. (with a letter (see

Tab B Evidence 13) that accurately summarized his (Mr. (() own description of

his work and the letter provided further suggestions of what Mr. (could do to

strengthen his argument that he is an independent contractor; however, a

majority of the Board notes that Mr. ( did not alter his relationship with the

employer as suggested by the Office of the Labor Member. Further, the Office

of the Labor Member never held itself out as giving a “blessing" for this type of

employer-employee relationship. The record indicates that the Office of the

Labor Member was providing information for Mr. (to review or advice for Mr. |

to follow, neither of which rises to the level of an "approval" as claimed by Mr.
The investigative record reflects that, in reality, much of the advice was not

followed.

In summary, a majority of the Board finds that Mr. ^employment situation more

closely resembles that of an employee of the United Transportation Union. The

record indicates that he is integrated into the functions of the employer and the

employer directs the manner and location of his services. Further, he is receiving

regular monthly remuneration for his services instead of a contracted wage per

hour of work. Finally, his work is essentially the same as his work prior to

retirement. These factors indicating an employee-ennployer relationship

outweigh the factors that would otherwise indicate that Mr.(is an independent

consultant.

Decision

Upon review, a majority of the Board finds that Mr. ^|is functioning as an

employee of the United Transportation Union within the definitions of employee

in sections 1 (d) (1) (i) (A) and 1 (d) (1) (i) (B) of the RRA from his official retirement in

October of 2006 to the present. Furthermore, a majority of the Board finds that

the services performed by Mr. |for the United Transportation Union are within

the definitions of employee in sections 1 (d)(1)(A) and 1 (d)(1)(i)(B).

Original signed by:

(Dissenting opinion attached)
Dissenting Opinion of Walter A. Barrows

Docket Item No. ll-CO-0051

WEB

Under the Railroad Retirement Act, no annuity may be paid for any month an

annuitant is in compensated service as an employee for an employer covered

under the Act. Thus, if a carrier or union wants to make use of the services of

one of its retired employees, the services must be performed as an independent

contractor. Often, however, the distinction between an employee and an

independent contractor, particularly with respect to an individual performing

consulting services through his own business, is not easily discernible. Often the

result depends more on the form of the relationship than on the substance of

the services.

My colleagues correctly cite section 1 (b) of the Act as the framework under

which to analyze Mr. ^(situation. In order to meet the definition of employee

under this section an individual must meet the common law test of an

employee, that is, he must be subject to the supervision of the service-recipient

with respect to the method and manner of his services or, failing that test, he

must be performing personal services which are integrated into the servicerecipient's staff and operations.

Clearly, Mr.(does not meet the common law test. He negotiates contracts

with small carriers and employees represented by the UTU. He is not supervised

with respect to the manner in which he does his work. It is the end result which is

important. In this regard, he operates no differently than a retained lawyer or

mediator. The fact that he does not choose his assignments is irrelevant. The

service-recipient generally determines the task and retains the independent

contractor to assist in completing the task.

Neither does Mr.( meet the statutory tests for employees found in the Act.

Although he is rendering professional services to the UTU, he does not perform

them on UTU property and such services are not integrated into the staff or

operations of the UTU. He has not set hours; no permanent office space. He

works on an assignment-only basis and presumably can decline an assignment.

He neither directs nor supervises UTU employees. He does not take part in any

employee benefit program offered by the UTU.

Finally, I note that there was nothing surreptitious about post-retirement

relations with the UTU. There was no design or scheme here to evade the postemployment restrictions in the Act. Both Mr. (and the UTU made every effort to

ensure they were complying with the law.

For the above reasons, I dissent.

Original signed by: