CANAC INTERNATIONAL LTD.

EMPLOYER STATUS DETERMINATION

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This is the decision of the Railroad Retirement Board concerning

the status of CANAC International Ltd. (CANAC Ltd.) as an employer

under the Railroad Retirement Act (RRA) and the Railroad

Unemployment Insurance Act (RUIA).

CANAC Ltd., a Delaware corporation which was incorporated on

July 6, 1988, is owned by CANAC International Inc. (CANAC Inc.), a

Canadian based subsidiary of Canadian National Railways (CN). CN

is a Crown corporation of Canada which is not an employer under the

Acts administered by the Board. However, CN has affiliates which

it owns directly or indirectly, and which are covered rail 

employers. CN directly owns CN (Noyes Division), CN d/b/a

Minnesota and Manitoba Railroad, and CN d/b/a New England Lines,

all covered employers. CN owns indirectly the Grand Trunk Western

Railroad Company, a covered employer as well as other affiliated

companies including non-railroad and railroad employers covered

under the Acts administered by the Board which it classifies as CN

North America.

CANAC Ltd. currently provides consulting services and construction

services to the railroad industry. From 1992 through August 1994,

CANAC Ltd. also sold computer software to various non-railroad

clients. The software sales were conducted exclusively by two 

individuals who devoted 100 per cent of their time to this 

operation. Both of these individuals were terminated by the end of

August 1994. The remaining employee of CANAC Ltd. is Mr. Howard

Tischler, its vice president and general manager. Mr. Tischler

provided a revenue chart which shows that 12.58 percent of CANAC

Ltd's revenue from 1988 through 1994 was derived from it services

to non-railroad sources. The balance of CANAC Ltd's revenues

during this period was derived from services to the railroad

industry, including no less than 18 percent from affiliated

railroads.

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, 

refrigeration or icing, storage, or handling of property

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

(ii) ] •

BCD 1995-110 BA # 2905
-2-

CANAC INTERNATIONAL LTD.

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. The Tenth Circuit has held that where a company and a

railroad are jointly owned by a parent company, the non-carrier

company is under common control with the railroad. Utah Copper Co.

v. Railroad Retirement Board. 129 F. 2d 358, 363 (10th Cir., 1942).,

See also. Livingston Rebuild Center. 970 F. 2d at 296.

CANAC Ltd. is itself not a carrier by rail under section 1(a) (1) (i)

of the RRA. However, it is under common control with one or more

rail carrier employers within the meaning of the Acts because CANAC

Ltd. is a subsidiary corporation of CANAC Inc. which is a

subsidiary of CN, a company which also owns covered rail carrier

employers such as CN (Noyes Division), CN d/b/a New England Lines,

and the Grand Trunk Western Railroad Company. Whether CANAC Ltd.

is a covered employer therefore turns upon whether CANAC Ltd.

provides a service in connection with rail transportation.

Service in connection with rail transportation has been found to 

exist where a rail carrier affiliate repaired and rebuilt rail 

cars. Despatch Shops, Inc, v. Railroad Retirement Board. 153 F. 2d

644,646 (D.C. Cir. 1946). In another case, service in connection

with rail transportation was found to exist where a company which

repaired locomotives and track was ruled to be a covered employer

when 95% of its business was with the railroad industry, 25% of

which was with its affiliated railroad. Livingston Rebuild Center

v. Railroad Retirement Board. 970 F 2d 295, (7th Cir. 1991). More

recently, service in connection with rail transportation was found

to exist where 31% of a company's revenue and 36.67% of its staff 

time was related to car repair and other support services
CANAC INTERNATIONAL LTD

performing for its affiliate railroad. Reconsideration of employer

status of Pacific Standard Corporation. B.C.D. 94-104, decided

November 15, 1994.

In Board Order 85-16, 4.4% of service for the rail affiliate was 

held not to be service in connection with rail transportation.

Likewise, in B.C.D. 93-79, 2.5% of service for the rail affiliate

was held not to be service in connection with rail transportation.

In this case, only 12.58% of CANAC Ltd.'s revenues from 1988

through 1994 were derived from non-railroad business, while the 

remaining 87.42% of its business is railroad related. Moreover,

that portion of CANAC Ltd.'s revenues based on non-railroad

business began in 1992 and ceased in August 1994. Of the railroad

related business, at least 18.15% is conducted for CN affiliates.

It is clear from the facts that CANAC Ltd. provided more than

casual service to its CN affiliates. In fact, its only nonrailroad business was the sale of software which is no longer

conducted by CANAC Ltd.

Based on the above, it is the Board's determination that Canac Ltd.

is performing services in connection with the transportation of

property by railroad and is a covered employer under section

1(a)(1)(ii) of the RRA and its companion section in the RUIA.

The Board finds that CANAC ltd. has been a covered employer under

the Acts since July 6, 1988.

Glen L. Bower

/^Jerome F. Kever