B.C.D. 01-21

FEB 2 8 2001

EMPLOYER STATUS DETERMINATION

Rail Terminal Services, L.L.C.

This is the determination ofthe Railroad Retirement Board concerning the status ofRail

Terminal Services, L.L.C. (RTS), as an employer under the Railroad Retirement Act (45 U.S.C.

§ 231 et seg.) and the Railroad Unemployment Insurance Act (45 U.S.C. § 351 et seq.V

Information regarding RTS was provided by Ms. Adele Hedley Page, counsel for RTS 

According to Ms. Page, RTS was incorporated and began doing business March 1, 1997. It

currently has 886 employees. RTS is a subsidiary of Rail Management Services and performs

intermodal services including placing trailers and containers on and offrailroad flatcars,

maintaining lift equipment, container and chassis repair, and performing in and out gate

equipment inspections and related administrative services. All ofRTS’s work is performed

under contracts with the Burlington Northern Santa Fe (45 percent) and the Union Pacific 

Railroad (55 percent).

Section 1(a)(1) ofthe Railroad Retirement Act (45 U S.C. § 231(a)(1)), insofar as relevant here, 

defines a covered employer as:

(i) any carrier by railroad subject to the jurisdiction ofthe Surface

Transportation Board under Part A ofsubtitle IV oftitle 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)

ofthis 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 * * *.

Sections 1(a) and 1(b) ofthe Railroad Unemployment Insurance Act (45 U.S.C. §§351(a) and

(b)) contain substantially similar definitions, as does section 3231 ofthe Railroad Retirement

Tax Act (26 U.S.C. § 323 1).

RTS clearly is not a carrier by rail Rail Management Services was previously found by the

Board not to be an employer The evidence of record establishes that RTS is not under common

ownership with any rail carrier nor is it controlled by officers or directors who control a railroad. 

Therefore, RTS is not a covered employer under the Acts.

This conclusion leaves open, however, the question whether the persons who perform work for

RTS under its arrangements with rail carriers should be considered to be employees ofthose

railroads rather than of RTS. 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:
Rail Terminal Services, L.L.C.

(i) (A) he is subject to the continuing authority ofthe 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(e) ofthe RU1A contains a definition ofservice substantially identical to the above, as

do sections 3231(b) and 3231(d) ofthe RRTA (26 U.S.C. §§ 3231(b) and (d)).

The focus ofthe test under paragraph (A) is whether the individual performing the service is

subject to the control ofthe service-recipient not only with respect to the outcome of his work

but also with respect to the way he performs such work.

There is no evidence that work by employees of RTS is performed under the direction of

employees ofthe carriers with which it contracts; the sample form contract provided by Mr.

Paisley states that RTS “shall employ and direct all persons performing any service hereunder

Such persons shall be and remain the sole employees of and subject to the control and direction

ofthe Contractor and not the employees or subject to the direction and control ofthe Railroad.”

Accordingly, the control test in paragraph (A) is not met.

The tests set forth under paragraphs (B) and (C) go beyond the test contained in paragraph (A)

and would hold an individual a covered employee if he is integrated into the railroad's operations

even though the control test in paragraph (A) is not met. However, under an Eighth Circuit

decision consistently followed by the Board, these tests do not apply to employees of

independent contractors performing services for a railroad where such contractors are engaged in

an independent trade or business. See Kelm v Chicago. St Paul. Minneapolis and Omaha

Railway Company. 206 F 2d 83 1 (8th Cir. 1953)

Thus, under Kelm the question remaining to be answered is whether RTS 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; eg. Aparacor, Inc v. United States. 556 F. 2d 1004 (Ct. Cl.

1977), at 1012, and whether the contractor engages in a recognized trade; e g . Lanigan Storage

& Van Co v. United States. 389 F 2d 337 (6th Cir. 1968) at 341. While these may be rather

close questions in cases such as this one, where the contractor contracts with only two customers,

it is apparent that RTS has a number of permanent employees (886) and a substantial investment

in equipment: 175 hostling tractors (for trailer/container lift on and offservices), 75 vehicles

used for the administration ofthe lift on and off operations, and 40 miscellaneous pieces of

equipment including repair vans and manlifts. Accordingly, it is the opinion of a majority ofthe

Board, Labor Member dissenting, that RTS is an independent business.
Rail Terminal Services, L.L.C.

Based on that finding that RTS engages in an independent business, a majority of the Board finds

that neither paragraph (B) nor (C) ofthe definition of covered employee applies to this case The

Labor Member would find that employees of RTS perform employee service under paragraph

(C). Accordingly, it is the determination of a majority ofthe Board that service performed by

employees of RTS is not covered under the Acts.

Cherryl TV Thomas

V. M. Speakman, Jr. (Dissenting in part)

Jerome F. Kever