Employer Status Determination

Southeastern Rail, Inc.

This is the decision of the Railroad Retirement Board regarding the 

status of Southeastern Rail, Inc. (SRI) as an employer under the 

Railroad Retirement and Railroad Unemployment Insurance Acts. The

following information was provided by Mr. Paul Roberts, formerly

President, and Mr. John Cameron, currently President of SRI. The

information below, including the quotations, is from a letter of

September 12, 1995, from Mr. Roberts.

SRI began operations and first compensated employees on April 1,

1994. It has 20 employees and performs "heavy construction work,

and its primary business consists of railroad construction,

reconstruction, repair, and maintenance for freight railroads and

private industries that ship by rail. All of its employees are 

engaged in such construction work." "SRI bids on and contracts for

railroad construction, reconstruction, repair, and maintenance work

for freight railroads and private industries * * *."

SRI is privately held. "* * * The controlling interest and

majority of all capital stock issued and outstanding in SRI is

owned by the three SRI officers who manage the company, Paul 

Roberts, Randy Rigdon, and John Cameron, and who constitute the

majority of its Board of Directors." Each initially owned 170

shares out of 1000. Later, Paul Roberts and Randy Rigdon sold

their stock to John Cameron & Robert Griffin who together now own

51 percent of the outstanding stock of SRI.

"No officers or directors of SRI are officers or directors of a

rail carrier."

"SRI owns trucks, trailers, backhoes, generators, air compressors,

welders, a Burro crane, Kershaw tie crane, ballast regulator,

spiker, rail lifters, rail drills and saws, tie inserters, and 

related construction equipment." •

A sample list of companies for which SRI performs work included 5

railroads and 15 other companies. A sample contract provided that 

SRI furnishes all machinery, tools, etc., and is responsible for

workers' insurance coverage. The cost may be either a lump sum 

amount or unit price, with progress payments.

CAGY Industries, Inc., a holding company, owns 49 percent of the

stock of SRI. It is also the sole owner of certain railroads,

including the Chattanooga and Chickamauga Railway Company and the

Redmont Railway Company.

In 1994 SRI received approximately 23 percent of its revenue from

its affiliated railroads; in 1995 it received approximately 44

percent of its revenue from those railroads.

BCD 1996-40
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Southeastern Rail, Inc.

Section 1(a)(1) of the Railroad Retirement Act (45 U.S.C. §

231(1) (a) (1)), insofar as relevant here, defines a covered employer

as :

(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 and

facilities) in connection with the transportation of

passengers or property by railroad * * *.

Sections 1(a) and 1(b) of the Railroad Unemployment Insurance Act 

(45 U.S.C. §§ 351(a) and (b)) contain substantially similar

definitions, as does section 3231 of the Railroad Retirement Tax

Act (26 U.S.C. § 3231).

Section 202.4 of the Board's regulations (20 CFR 202.4) defines

"control" as follows:

A company or person is controlled by one or more

carriers, whenever there exists in one or more such

carriers the right or power by any means, method or

circumstance, irrespective of stock ownership to direct,

either directly or indirectly, the policies and business

of such a company or person and in any case in which a

carrier is in fact exercising direction of the policies

and business of such a company or person.

Section 202.5 of the Board's regulations (20 CFR 202.5) defines

"common control" as follows:

A company or person is under common control with a

carrier, whenever the control (as the term is used in §

202.4) of such company or person is in the same person,

persons, or company as that by which such carrier is

controlled.

SRI clearly is not a carrier by rail. As mentioned above, the

holding company, CAGY, has a 49 percent interest in SRI. The Board

determines that a 49 interest is not by itself a controlling

interest. Therefore, since there is no evidence that the owners of
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Southeastern Rail, Inc.

51 percent of SRI have any interest or relation to CAGY, its

affiliates, or any railroads, a majority of the Board finds that 

SRI is not controlled by CAGY and consequently is not under common

control with an employer under the Acts. Therefore, SRI is not a

covered employer under the Acts.

Glen L. Bower

opinion attached)

erome F. Kever
DISSENT OF

V. M. SPEAKMAN, JR.

ON EMPLOYER STATUS DETERMINATION OF

SOUTHEASTERN RAIL, INC.

Since CAGY Industries, Inc., owns 49% ofthe stock of Southeastern Rail,Inc., I feel it

can be shown that this, in itself, constitutes common control with the other railroads the 

CAGY Industries, Inc., owns. Moreover, SRI receives a substantial percent ofits revenue 

from its affiliated railroads.

Accordingly, SRI should be considered covered under the Acts and I dissent from the 

majority ofthe Board’s decision to the contrary.

V. M. Speakman, Jr. tDate