EMPLOYER STATUS DETERMINATION

Tryban Rail Service, Inc.

This is the decision of the Railroad Retirement Board regarding the

status of Tryban Rail Service, Inc. (TRSI), as an employer under

the Railroad Retirement and Railroad Unemployment Insurance Acts.

TRSI is an independent company which provides rail maintenance,

construction, and rehabilitation. TRSI has previously informed the

Board that it has 10 full time employees and that 90 percent of its

business derives from railroads. The balance is from repair of

private railways. TRSI has a contract with Lake State Railway, a

rail carrier employer, to provide all regular rail maintenance for

the railroad. Under the terms of the contract TRSI is to provide

9 qualified maintenance of way personnel. Since TRSI has only 10

employees, we can conclude that a substantial portion of TRSI's

business is with Lake Stafte Railway.

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 express company, sleeping-car company, and

carrier by railroad, subject to subchapter I of chapter

105 of Title 49;

(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 * * *.

Section 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).

TRSI clearly is not a carrier by rail. Further, the available

evidence indicates that it is neither controlled by nor under

common ownership with any rail carrier nor controlled by officers

or directors who control a railroad. Therefore, TRSI is not a

covered employer under the Acts.

This conclusion leaves open, however, the question whether the

persons who perform work for TRSI under its arrangements with the

Lake State should be considered to be employees of that railroad

rather than of TRSI. 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:

BCD 1995-78
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Tryban Rail Service, 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 the 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 test under paragraph (A) is whether the individual

performing the service is subject to the control of the servicerecipient not only with respect to the outcome of his work but also

in the way he performs such work.

Based on the evidence before it, the Board finds that although with

respect to the final outcome of the work Lake State exercises a

significant degree of control over the services performed for it by

TRSI employees, evidence does not establish that employees of TRSI

are subject to control, supervision, and direction from State Lake

as to the manner of performance of their work. Consequently, the

control test of paragraph (A) is not met.

Under paragraphs (B) and (C) an individual is a covered employee if

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

control test in paragraph (A) is not met. When the Board has

applied paragraphs (B) and (C), it has followed Kelm v. Chicago,

St. Paul, Minneapolis and Omaha Railway Company, 206 F. 2d 831 (8th

Cir. 1953) . Under Kelm paragraphs (B) and (C) are not used to

cover employees of independent contractors performing services for

a railroad where such contractors are engaged in an independent

trade or business and the arrangement has not been established

primarily to avoid coverage under the Acts.

The first question to be answered therefore is whether TRSI itself

may be considered to be 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 an opportunity for profit or loss;

e. a. . Aparacor, Inc, v. United States, 556 F. 2d 1004 (Ct. Cl.,

1977), at 1012; and whether the contractor engages in a recognized
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Tryban Rail Service, Inc.

trade; e.a. Laniaan Storage & Van Co. v. United States. 389 F. 2d

337 (6th Cir., 1968), at 341.

The record establishes TRSI is in the business of providing rail

maintenance, construction and rehabilitation to customers other

than Lake State. Under the contract with Lake State TRSI is

obligated "to provide all hand tools, power tools, automobiles,

trucks, vehicles, trailers and all other devises in such quantity

and with such capacities as necessary" and is "solely responsible

for the maintenance, repair, transportation and licensing" of this

equipment. The contract with Lake State also provides that the

performance of service is

at the risk of [TRSI] in every respect, and [TRSI] shall

be responsible for the Services until completed and

accepted by [Lake State], except that title to the

results of all Services covered by a request for partial

or full payment will pass to [Lake State] , or to such

other authority as appropriate, upon payment therefor by

[Lake State], free and clear of all liens, security

interests or encumbrances by [TRSI] or TRSI's

subcontractors.

Based on its review of the facts in this case and the contract

between TRSI and Lake State, it is the judgment of a majority of

the Board that TRSI is an independent contractor.

Turning to the other prong of the Kelm test, no facts which would

indicate that TRSI was formed primarily to avoid coverage under the

RRA, RUIA, and the Railroad Retirement Tax Act. Accordingly, under

Kelm the Board finds the employees of TRSI not to be employees of

Lake State under section 1(d) (1) (b) or section 1(d) (1) (c) of the

RRA.

Based on the above discussion, the Board finds TRSI not to be a

covered employer under the RRA and RUIA and a majority of the Board

finds that the employees of TRSI are not statutory employees of

Lake State.

Glen L. Bower

opinion attached)

(Jerome F. Kever
DISSENT OF V M. SPEAKMAN, JR.

ON THE EMPLOYER STATUS DETERMINA TION

TR YBAN RAIL SER VICES, INC

I disagree with the majority's decision in this case and believe that the

persons who perform workfor Tryban Rail Services, Inc., (TRSI) under its

arrangements with Lake State Railway should be considered employees of

that railroad, rather than ofTRSI. Since 90% ofTRSI’s work isfor Lake

State Railway, it is hard to conclude it is an independent contractor. I

consider the employees in question to be rendering, on the property used in

Lake State’s operations, personal services, the rendition ofwhich are

integrated into the railroad’s operations.