U n it e d States G o v e r n m e n t

M em o r an d u m

FORM C - l 151 (1-92)

R a il r o a d R e t ir e m e n t Bo a r d

July I 2004

L-2004-11

TO : Arthur A. Arfa

Director of Hearings and Appeals

FROM : Steven A. Bartholow /g.

General Counsel tJ

SUBJECT : Donated Sick Leave

Remuneration Payable or Accruing to Day of Sickness

This is in reply to your request for my opinion regarding whether sickness 

insurance benefits are payable under the Railroad Unemployment Insurance 

Act (RUIA) to an appellant who has received "donations of personal leave 

days". For the reasons set forth below, in my opinion no benefits may be paid 

for any day to which such payments may be attributed.

As stated in your memorandum, the appellant has been incapacitated by illness 

from performing his railroad employment, and evidently is otherwise a qualified 

employee under section 3 of the RUIA. The railroad employer has in effect a 

plan whereby employees may "donate" to an eligible co-worker paid days of 

leave which would otherwise accrue to them. The employer then pays the 

incapacitated employee additional days of sick pay, beyond the number of 

days which have accrued to that employee. There is evidently no statement of 

purpose by the railroad with respect to this program, or any co-ordination of 

payments under the program with benefits under the RUIA.

In general, section 2(a)(1)(B) of the RUIA provides for payment of sickness 

insurance benefits for qualified employees who have over four days of sickness 

in a two week registration period. Section 1 (k) of the Act defines a day of 

sickness as a day on which the employee is incapacitated by illness or injury, 

"with respect to which (i) no remuneration is payable or accrues to him," and (ii) 

the employee has filed a timely statement of sickness. Section 1 (j) of the RUIA 

defines "remuneration" as follows:
(j) The term "remuneration" means pay for services for hire, including 

pay for time lost, and tips, but pay for time lost shall be deemed 

earned on the day on which such time is lost. The term 

“ remuneration" includes also earned income other than for services 

for hire if the accrual thereof in whole or in part is ascertainable with 

respect to a particular day or particular days. The term 

"remuneration" does not include any money payments received 

pursuant to any nongovernmental plan for unemployment 

insurance, maternity insurance, or sickness insurance.

Because the payments received by the appellant in your case may be viewed 

as a voluntary transfer from co-workers to the appellant of a benefit owed to 

the co-worker by the railroad, it may be argued that the payments are a 

charitable contribution from one individual to another, rather than remuneration 

from the employer within the meaning of section 1 (j).

As an initial proposition, opinions of this Office clearly establish that sick leave 

pay from an employer is remuneration within the meaning of section 1 (j).1 In 

Legal Opinion L-48-509, issued shortly after the sickness insurance benefit 

provision was added to the Act, the Associate General Counsel considered 

payments by the railroad pursuant to a collective bargaining agreement which 

were made to "regularly assigned employees absent from duty on account of 

bona fide personal illness". Employees with one to five years of service to the 

railroad were eligible for six days per year; those with five and over were eligible 

for twelve days. Payments were specified as one-half of the employee's regular 

rate of pay, not exceeding $5. The Associate General Counsel concluded that 

because the payments could be made only to individuals employed for a 

specified minimum time, because the payments were made for specific periods

1 A review of the legislative history of section 1(j) shows that the first sentence was

enacted as part of the original Railroad Unemployment Insurance Act. See Public No.

722, ch. 680, 75th Cong., 3d Sess., 52 Stat. 1094,1095. The second sentence

regarding other earned income attributable to particular days was added in 1940. See

Public No. 833, ch. 842, 76th Cong., 3d Sess., at section 4, 54 Stat. 1094. The last

sentence, which excludes payments under nongovernmental plans, also appeared in

the original RUIA but referred only to nongovernmental plans for unemployment

insurance. It was amended to include nongovernmental plans for sickness insurance

when Congress added the sickness insurance benefit provisions to the Act in 1946.

See Public No. 572, ch. 709, 79th Con. 2d Sess., at section 302, 60 Stat. 722, 736. The

portions of section 10') relevant to this question therefore have not changed in almost 60

years, and interpretations of this provision during that time consequently remain useful

for the present analysis.
of absence for which no wages were paid, and because the payments were 

tied to the employee’s rate of pay, they had the characteristics of pay for time 

lost. As they were not made under a plan for nongovernmental sickness 

insurance, they were therefore remuneration with respect to the days for which 

they were paid, and sickness insurance benefits were not payable. See also 

Legal Opinion L-67-59 (payments of the incapacitated employee’s full daily rate 

of pay for ten, twenty or thirty days, depending on years of employment, 

constitutes remuneration as pay for time lost which prevents payment of sickness 

insurance benefits).

Arguments that payments by the railroad to employees on account of sickness 

are gratuities not paid for services for hire, or not otherwise earned income 

within the meaning of section 1 (j) have been rejected. In Legal Opinion L-52- 

297, the Associate General Counsel considered a railroad’s policy to make a 

lump sum payment to any employee undergoing corrective surgery for a hernia, 

regardless of whether the hernia resulted from a service-connected injury. The 

payment, calculated as a basic lump sum augmented by an additional amount 

for every year of service to the employer above five, was available to all 

employees, including those on monthly salary or on furlough who would not 

have lost w ages. Noting tha t the am ount of paym ent was related to the 

employee's years of service, the Associate General Counsel found the 

payments were based on past services or the expectation of future services, 

and thus were remuneration paid for services under section 10), rather than 

gratuities. While related to service to the employer, however, they were not 

related to a period of time. The Associate General Counsel therefore 

concluded the payments, though remuneration, did not accrue to any 

particular day within the meaning of section 1 (k) of the RUIA, and hence did not 

prevent payment of benefits for any specific day of sickness.

By comparison, other opinions have found claimed gratuities were remuneration 

for specific days under RUIA section 1 (k). Legal Opinion L-52-321 considered a 

salaried employee who received what the railroad termed a "special 

allowance" equal to his regular salary less the amount of sickness insurance 

benefits. Payments were made through the regular payroll, but the employee’s 

eligibility was at the railroad’s discretion. The Associate General Counsel noted 

that though the element of discretion meant they were not made pursuant to a 

nongovernmental plan for sickness insurance, because the payments were for 

an identifiable period, were in amounts having a definite relationship to regular 

salary, and were issued through payroll, they were pay for time lost and hence 

remuneration for purposes of RUIA section 1 (j) and 1 (k). The General Counsel 

reached the same conclusion in Legal Opinion L-54-575, where payments were 

made from a "gratuity roll" to management employees temporarily absent due
to illness or injury. The payments were commensurate with the individual 

employee’s monthly salary, and were made at the discretion of railroad 

management "in consideration of long and faithful service." The General 

Counsel noted that the fact that the payments were voluntary did not prevent 

their characterization as pay for time lost. See also L-63-203, finding “gratuities" 

paid to salaried employees absent from duty, in amounts equal to the 

employee's monthly wage less any benefits under the RUIA, were remuneration 

under RUIA sections 1 (k) and 1 (j).

Applying the analysis of prior opinions to the circumstances of your appellant 

leads to the conclusion that the payments received by reason of "donated 

personal days" were remuneration which prevents payment of sickness 

insurance benefits. First, the payment received by the appellant is 

remuneration. It is noteworthy that unlike an outright donation of cash, the 

personal days may be donated only between co-workers. The payments are 

through the company payroll, and evidently in the amount of the recipient's 

daily salary rather than the salary of the donor co-worker. Where the donor's 

pay rate is lower than the pay rate of the donee, the employer evidently 

nevertheless pays the higher rate. This indicates the payments are based on the 

value of past services or the expectation of future services to the employer by 

the recipient employee, rather than the value of such services by the donor 

employee at the donor’s rate of pay. Second, unlike the hernia surgery 

payments discussed in L-52-297, the payment is made because the recipient 

employee has lost wages due to absence from work during a specific time. The 

payment of donated personal days therefore has the characteristics of pay for 

time lost delineated by prior opinions of this Office. The fact that the payment is 

initiated by voluntary action, even the voluntary action of another employee, 

does not detract from this characterization, nor does the fact noted earlier that 

the employer may actually contribute the difference when the donor's rate of 

pay is less than the donee’s pay rate.

I also note that section 1 (i)(l) of the RUIA defines railroad compensation for the 

purpose of determining a qualified employee pursuant to section 3 of the Act as 

follows:

* * * any form of money remuneration, including pay for time lost but 

excluding tips, paid for services rendered as an employee to one or more 

employers * * *. A payment made by an employer to an individual 

through the employer's payroll shall be presumed, in absence of 

evidence to the contrary, to be compensation for service rendered by 

such individual as an employee of the employer in the period with respect 

to which the payment is made.
Creditable compensation under the RUIA thus by definition includes those 

payments which section 1 (j) defines as remuneration, other than tips. Section 

1 (i) (1) is substantially the same as the definition of railroad compensation subject 

to taxation as defined by section 3231 (e)(1) of the Railroad Retirement Tax Act 

(26 U.S.C. § 3231(e)(1)) and section 31.3231(e)-! (a) of the regulations of the 

Internal Revenue Service (26 CFR 31.3231 (e)-l (a)). The Commissioner of Internal 

Revenue has ruled under section 3231 (e)(1) that where an employer establishes 

a plan whereby co-workers may surrender to the employer leave time which 

may then be received by employees who suffer a “ medical emergency", the 

amounts paid by the employer under the plan are compensation for services to 

the employer provided by the recipient which is taxable under the Railroad 

Retirement Tax Act. See: Rev. Rul. 90-29, 1990-1 Cum. Bui. 11. Given the 

essential identity of the definition of compensation under the Tax Act and the 

RUIA, the Commissioner's interpretation in Revenue Ruling 90-29 supports the 

conclusion that a payment by an employer pursuant to a plan allowing transfer 

of leave donated from co-workers is to be considered compensation under 

section 1 (i)(l) of the RUIA as well. As compensation under section l(i)(l),a 

payment under such a plan is by definition also remuneration under section 1 (j) 

of the RUIA.

Accordingly, in view of prior opinions of this Office and the interpretation of the 

Railroad Retirement Tax Act by the Commissioner of Internal Revenue, it is my 

opinion that the payments for additional personal days received from the 

employer by the employee in your appeal are remuneration attributable to the 

days for which they are paid, and prevent payment of sickness insurance 

benefits for those days pursuant to section 1 (k) of the RUIA.

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