EMPLOYER STATUS DETERMINATION

RAILCAR MANAGEMENT, INC.

This is the decision of the Railroad Retirement Board concerning

the status of Railcar Management, Inc. (RMI) as an employer under

the Railroad Retirement Act (RRA) and the Railroad Unemployment

Insurance Act (RUIA).

Information regarding RMI was provided in letters dated March 20,

1995, and May 2, 1995, from James A. Day, Vice President and CFO of

RMI. According to Mr. Day, RMI is a privately held corporation

which began operations on June 28, 1979. It initially began

operations as a data service bureau (primarily accounting) for

investor owned railway equipment leased to various railroads.

Since the mid 1980's, RMI has been processing accounting data and

developing and licensing software used in the railroad industry to

perform management, accounting and recordkeeping functions.

According to Mr. Day, since 1990 RMI has also performed

administrative and accounting services for the Georgia Northeastern

Railroad Company, Inc. (GNRR), a short line carrier.1

RMI and GNRR share two common officers/directors. Mr. Wilds Pierce

is Chairman of the Board of RMI and President of GNRR. In addition

to being Vice President and CFO of RMI, Mr. James Day is Vice

President - Finance of GNRR. Information provided by Mr. Day also

shows that Mr. Wilds Pierce owns 78.8% of the stock of RMI and 50%

of the stock of GNRR. In addition, Mr. James Day owns 1.1% of the

stock of Railcar Management, Inc. and 1% of the stock of GNRR. Mr.

Day stated that the services for GNRR account for "less than 2.5%

of RMI's revenue."

Mr. Day provided a list of the rail carriers for which RMI provides

services; this list contains approximately 45 carriers, of which

about one-fourth have been found not to be covered employers under

the Acts. GNRR is the only rail carrier with which RMI has any

affiliation.

Section 1(a) of the RRA defines the term "employer" to include:

(i) any express company, sleeping-car company, and

carrier by railroad, subject to the 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 (except trucking service, casual service, and the

casual operation of equipment or facilities) in connection

with the transportation of passengers or property by railroad,

or the receipt, delivery, elevation, transfer in transit,

1 GNRR has been found to be an employer covered by the Acts.

BCD 1996-7
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RAILCAR MANAGEMENT, INC.

refrigeration or icing, storage, or handling of property

transported by railroad. [45 U.S.C. § 231 (a) (1) (i) and

(ii)] .

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

the same definition.

Section 202.7 of the Board's regulations (20 CFR 202.7) provides

that service is in connection with railroad transportation:

* * * if such service or operation is reasonably directly

related, functionally or economically, to the performance of

obligations which a company or person or companies or persons

have undertaken as a common carrier by railroad, or to the

receipt, delivery, elevation, transfer in transit,

refrigeration or icing, storage, or handling of property

transported by railroad.

Finally, section 202.5 of the Board's regulations (20 CFR 202.5)

defines a company under common control with a carrier as one

controlled by the same person or persons which control a rail

carrier.

RMI is itself not a carrier by rail under section 1(a) (1) (i) of the

RRA. Whether RMI is a covered employer therefore turns upon the

two questions; the first being whether RMI is under common control

with a rail carrier and the second question being whether it

provides a service in connection with rail transportation. For the

reasons set forth below, a majority of the Board finds RMI does not

provide a service in connection with rail transportation,

therefore, in the view of the majority we do not need to address

the issue of ownership or control.

The United States Court of Appeals for the District of Columbia has

held that a rail carrier affiliate which repaired and rebuilt rail

cars performed a service in connection with rail transportation.

Despatch Shoos. Inc., v. Railroad Retirement Board, 153 F.2d 644,

646 (D.C. Cir., 1946). However, in Board Order 85-16 the Board

ruled that a car repair company affiliated with a railroad that

performed only 4.4 percent of its service for the rail affiliate

was not performing covered service in connection with rail

transportation. See also, Board Order 83-113. The Board has also

determined that a rail carrier affiliate which performed car and

locomotive repairs performed a service in connection with rail

transportation where 95 percent of the company's business derived

from the rail industry, including approximately 25 percent from its 

affiliated railroad. In Re Appeal of Livingston Rebuild Center,

Inc., Board Order 91-122. The decision of the Board was affirmed
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RAILCAR MANAGEMENT, INC.

by the Court of Appeals for the Seventh Circuit in Livingston

Rebuild Center v. Railroad Retirement Board. 970 F. 2d 295, (7th

Cir. 1991). More recently, a majority of the Board has determined

that a company which performs 58.2% of its business with the 

railroad industry, but only 2.5% of its business with its rail

carrier affiliate, was not an employer under the Acts because it

provides only a minimal amount of service to its affiliate

railroad. Board Coverage Decision 93-84.

As noted earlier, the facts in this case are that RMI performs only

2.5 percent of its business for its affiliate rail carrier. This

is considerably less than the 25 percent level of affiliate service

at issue in the Livingston Rebuild case. The 2.5 percent is also

less than the level of affiliate service found insufficient for

coverage in Board Order 85-16, and the same level of affiliate

service found insufficient for coverage in Board Coverage Decision

Based on our review of relevant court decisions and prior decisions

of the Board, a majority of the Board finds that RMI is not an

employer under Railroad Retirement and Railroad Unemployment

Insurance Acts because it provides only a minimal amount of service

to its affiliated railroad.

93-84 .

Glen L. Bower

V. M./Speakman, Jr. '(Dissenting)

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