EMPLOYER STATUS DETERMINATION

Georgetown Rail Equipment Company

This is the decision of the Railroad Retirement Board regarding the

status of Georgetown Rail Equipment Company (Rail Equipment) as an

employer under the Railroad Retirement Act (45 U.S.C. §231 et sea.)

(RRA) and the Railroad Unemployment Insurance Act (45 U.S.C. §351

et sea.) (RUIA).

Rail Equipment was incorporated March 23, 1993, to own and operate

special self-unloading railroad equipment which is rented to Class

I and short line railroads. Rail Equipment was spun off from

Georgetown Railroad Company, a covered rail carrier employer under

the Acts (BA No. 2845). The stock of Rail Equipment is entirely

owned by Mr. Edwin deS. Snead. Mr. deS. Snead's brother owns

Georgetown Railroad. Rail Equipment has performed track and

roadbed repair for the Burlington Northern Railroad (BA No. 1621)

and the Union Pacific Railroad (BA No. 1715) and supplies selfunloading equipment to Georgetown Railroad. It has also

transported iron ore for River Terminal Railroad (BA No. 4346).

Rail Equipment employees, other than Mr. deS. Snead, perform their

service on the property of rail carriers.

Section 1(a)(1) of the RRA defines the term "employer", insofar as

is relevant here, as follows:

(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 (other than trucking service,

casual service, and the casual operation of equipment or

facilities) in connection with the transportation of

passengers or property by railroad * * *. [45 U.S.C. §

231(a) (1) (i) and (ii) . See also P.L. 104-88, section

323, 109 Stat. 950, December 29, 1995.]

Section 1(a) of the RUIA defines "employer" in substantially the

same way [45 U.S.C. 351(a); P.L. 104-88, section 324, 109 Stat.

950] .

Rail Equipment does not conduct any rail carrier operations itself.

It is therefore not a carrier employer under the RRA and the RUIA.

Further, since the entire stock ownership of Rail Equipment is in

the hands of one individual and that individual does not own or

control any rail carrier employer, Rail Equipment is not under

BCD 1996-37
2

Georgetown Rail Equipment Company

common control with a rail carrier employer1. Accordingly, the

Board determines that Rail Equipment is not a carrier affiliate

employer under the RRA and RUIA. Rail Equipment meets no other

definition of a covered employer under the Acts. Rail Equipment

is, therefore, not a covered employer.

This conclusion leaves open, however, the question whether the

persons who perform track maintenance work for various rail

carriers under Rail Equipment's contracts with those carriers

should be considered to be employees of those railroads rather than

of Rail Equipment. Section 1(b)(1) of the RRA and section 1(d) of

the RUIA both define a covered employee as an individual in the

service of an employer for compensation. Section 1(d) of the RRA

provides that an individual is "in the service of an employer"

when:

(i)(A) he is subject go 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; and

(ii) he renders such service for compensation * * *.

Section 1 of the RUIA contains a definition of employee service

substantially identical to the one above.

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

with respect to the way he performs such work. The evidence in

this case indicates that this test is not met.

Specifically, Rail Equipment's business is to own and operate selfunloading railroad equipment which is rented to Class I and short

line railroads. Rail Equipment provided a copy of one of its

leases, dated August 22, 1995, to Burlington Northern Railroad

Company. An Appendix to that lease identifies the equipment and

1 The mere fact that Mr. deS. Snead's brother owns Georgetown

Railroad is not sufficient to presume common control between the

two entities.
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Georgetown Rail Equipment Company

the services to be provided. That Appendix provides in relevant

part that:

The above lease charge includes one equipment operator

for this equipment. In the event additional unloading

personnel are necessary and not specified in this lease,

the Lessee will be charged for the additional personnel

at the rate of $_________ per day. (The amount of the

charge was blacked out in the copy provided.)

Thus, pursuant to the lease, Rail Equipment provides one or more of

its employees to operate the leased equipment. Rail Equipment

includes its employees, i.e.. operating technicians, in all of its

leases. Rail Equipment employees work on the property of the rail

carriers which lease its equipment and take instructions from

carrier employees as to where to pick up ties, place ballast,

stockpile aggregate, etc. The carrier's employees do not, however,

supervise the maintenance or the operation of the leased equipment.

Rail Equipment supervisors provide bi-monthly supervision by

visiting the lessee's premises. No Rail Equipment employees work

exclusively for one railroad at any time during their employment or

during the duration of any single Rail Equipment service contract.

In summary, the record indicates that when Rail Equipment leases

equipment to various rail carriers, it also supplies its own

employees to operate and maintain that equipment. The Board finds

that Rail Equipment retains the right to direct the manner in which

its employees render their services to operate the equipment which

Railroad Equipment leases to rail carriers. Accordingly, the

control test in paragraph (A) is not met.

The tests set forth under paragraphs (B) and (C) do not apply to

employees of independent contractors performing services for a

railroad where such 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 consistently been followed by the Board.

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

Rail Equipment is an independent contractor. Courts have faced

similar considerations when determining the independence of a

contractor for purposes of liability to a company to withhold

employment and income taxes under the Internal Revenue Code. In

these cases, the courts have noted such factors as whether the

contractor has any opportunity for profit or loss; e.a., Aparacor,

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

whether the contractor engages in a recognized trade; e. ct . , Lanicran
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Georgetown Rail Equipment Company

Storage & Van Co. v. United States. 389 F. 2d 337, 342 (6th Cir.

1968). The evidence shows that Rail Equipment provides its

services to the rail industry as a whole, and that its revenue

derives from a number of different customers. Rail Equipment

consequently meets the test for independent contractor status, and

individuals performing service under its contracts are employees of

Rail Equipment rather than employees of the various rail carriers

to which the company leases equipment. Kelm. supra.

Accordingly, it is the determination of the Board that service

performed by employees of Rail Equipment under contract with

Burlington Northern, Union Pacific, and other rail carriers is not

covered employee service under the Railroad Retirement and Railroad

Unemployment Insurance Acts.

Glen L. Bower

--- - V. M. Speakman, Jr.

AJJ2^

(.Jerome F. Kever