BCD 00-14

Employee Status Determination

Managers of the Central Kansas Railway, L.L.C.

MAY 1 0 2000

This is the decision ofthe Railroad Retirement Board regarding whether the

services performed by managers ofthe Central Kansas Railway, L.L.C. (CKR),

constitute employee service under the Railroad Retirement and Railroad

Unemployment Insurance Acts.

CKR, a covered employer under the Acts (B.A.2765), is a limited liability

corporation, doing business in and incorporated under the law ofthe State of 

Kansas. A contract between CKR and its parent, OmniTrax, Inc., provides that

certain individuals associated with OmniTrax are managers of CKR.

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

Retirement Act 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 the rendition of

which is integrated into the employer's operations; and

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

Section 1(e) ofthe Railroad Unemployment Insurance Act contains a definition of 

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

the Railroad Retirement Tax Act (26 U.S.C. §§ 3231(b) and (d)).

Limited liability corporations are formed under the laws of the individual states.

Sections 17-7607 et sea, of the Kansas Statutes govern limited liability

corporations organized under the laws ofthat state. Section 17-7616 suggests that

the functions of managers of a limited liability corporation are similar to those of

directors of a corporation. See also sections 17-7617-19. Limited liability

corporations are taxed as partnerships, but have the limited liability aspect of

corporations. Managers of a limited liability corporation, such as CKR, are

analogous to partners in a partnership, and generally would not be employees of

the enterprise.
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Managers ofthe Central Kansas Railway, L.L.C.

Information provided by OmniTrax indicates that the managers of CKR were

Mr. Patrick J. Broe, Mr. Dwight N. Johnson, Mr. William B. Bryant, Mr. Michael

J. Ogbom, and Mr. Thomas E. Whyte. Mr. Whyte and Mr. Bryant are no longer

managers of CKR, having resigned June 6, 1997, and February 6, 1998,

respectively. The managers have appointed officers for CKR, including a

president of CKR, and none ofthe managers are themselves officers of CKR. The

officers have general and active control of CKR’s affairs and business and general

supervision of its agents and employees. The president supervises and controls

the day to day operations ofthe business.

The managers approve the budget and financing arrangements for CKR and

approve major contracts outside the ordinary course of CKR’s business, perform

other similar oversight functions, and are authorized to perform such functions

as signing documents for CKR. They are not compensated for performance of

their duties as managers, and they spend approximately an hour a month in

performance of their duties as managers of CKR and of at least seven other

OmniTrax subsidiary railroads.

Essentially, OmniTrax has created managers analogous to boards of directors for

its limited liability corporation rail subsidiaries. Directors of corporations, and

the managers of CKR in this case, are not employees of the companies of which

they are directors or managers in that they are not subject to the continuing

authority ofthe employer to supervise and direct the manner of rendition oftheir

service, are not rendering professional or technical services and are not

integrated into the staff of the employer, and are not rendering, on the property

used in the employer's operations, personal services the rendition of which is

integrated into the employer's operations.

Accordingly, it is decision of the Board that the services provided by the

managers of CKR do not constitute service covered under the Railroad

Retirement or Railroad Unemployment Insurance Acts.

V. M. Speakman, Jr.