Employer Status Determination

Drummac, Inc.

This is the decision of the Railroad Retirement Board regarding the

status of Drummac, Inc. (Drummac) as an employer under the Railroad

Retirement and Railroad Unemployment Insurance Acts.

Drummac is a privately held company which began operations on

January 1, 1993, and has approximately 120 full-time and part-time

employees. Drummac provides cleaning, maintenance, and routine

inspection services. While currently Drummac provides these

services for Virginia Rail and New England Rail, and approximately

75% of the work performed by Drummac is in connection with

contracts between Drummac and Amtrak, Drummac is pursuing contracts

to provide these services with air and sea transportation

companies. No railroad has a financial interest in Drummac, and

none of the owners of Drummac have any ownership interest in a rail

carrier.

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) .

Drummac clearly is not a carrier by rail. Further, the available

evidence indicates that it is not under common ownership with any

rail carrier nor controlled by officers or directors who control a

railroad. Therefore, Drummac is not a covered employer under the

Acts.

This conclusion leaves open, however, the second question submitted

for decision by the Board, that is, whether the persons who perform

work for Drummac under its arrangements with Amtrak should be

considered to be employees of that railroad rather than of Drummac.

Section 1(b) of the Railroad Retirement Act and section 1(d) of the

BCD 1996-57
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Drunnnac, Inc.

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:

(i) (A) he is subject to 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 and rendition of which is integrated into the

employer's operations; and

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

Section 1(e) of the RUIA contains a definition of service

substantially identical to the above, as do sections 3231(b) and

3231(d) of the RRTA (26 U.S.C. §§ 3231(b) and (d)).

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

as to the way he performs such work.

The evidence submitted shows that Drummac's work is performed under

the direction of its own supervisors; accordingly, the control test

in paragraph (A) is not met. Moreover, under an Eighth Circuit

decision consistently followed by the Board, the tests set forth

under paragraphs (B) and (C) do not apply to employees of an

independent contractor performing services for a railroad where

such contractor is engaged in an independent trade or business.

See Kelm v. Chicago, St. Paul, Minneapolis and Omaha Railway

Company, 206 F. 2d 831 (8th Cir. 1953).

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

Drummac 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; e.a,, Aaaracor,

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

whether the contractor engages in a recognized trade; e.ct,, Laniaan

Storage & Van Co. v. United States. 389 F. 2d 337 (6th Cir., 1968,

at 341. The facts in this case show that Drummac is an established

business engaging in a recognized trade or business with several
Drummac, Inc.

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railroads, and companies other than railroads as well.

Accordingly, it is the opinion of the Board that Drummac is an

independent business.

It is the determination of the Board that service performed by

employees of Drummac, Inc. is not cojffirei under the Acts.

Glen L.

V.M. Speakman, Jr.