Employer Status Determination

Rail-West, Inc.

This is the decision of the Railroad Retirement Board regarding the

status of Rail-West, Inc. (Rail-West) as an employer under the Railroad

Retirement Act (RRA) and the Railroad Unemployment Insurance Act (RUIA).

Rail-West reports that it was incorporated June 26, 1986 and began

operations July 1, 1986. Rail-West owns the Willamette Valley Railroad

Company, the Willamina and Grande Ronde Railway Company, and the

Willamette Valley Railway. See 58 Fed. Reg. 12599, March 5, 1993.1

Rail-West also performs track rehabilitation work for nine non-railroad

companies, railcar repair for two other non-railroad companies, contract

switching for another non-railroad company, and rail contract service for

the rail division of the Port of Tillamook Bay (Port), a governmental

subdivision of the State of Oregon.2 Rail-West states that 70-90 percent

of its revenue derives from its non-railroad contractual operations and 

its remaining revenue from its subsidiaries and from the contract with

Port.

Section 1(a)(1) of the RRA (45 U.S.C. 231(a)(1)) defines the term

"employer", insofar as is relevant here, as follows:

(i) any express company, sleeping-car company

and carrier by railroad, subject to 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 (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 * * *.

Section 1(a) of the RUIA (45 U.S.C. 351(a)) defines "employer" in

substantially the same way.

The first question that we must address is whether Rail-West, as the

parent of several railroad subsidiaries, is "owned or controlled by or

under common control with [those subsidiary railroads]." A recent 

decision of the United States Court of Appeals for the Federal Circuit

regarding a claim for refund of taxes under the RRTA held that a parent

corporation which owns a rail carrier subsidiary is not under common

2The Willamette Valley Railroad Company, the Willamina and Grand

Ronde Railway, and the Willamette Valley Railway have been held to be

covered employers under the Acts. See: L-85-75,

B.C.D. 93-45, and B.C.D. 93-46.

2The rail division of Port has been held to be an employer under the

RRA and RUIA. See Legal Opinion L-56-13, dated January 17, 1956.

BCD 1995-51
-2-

control with the subsidiary within the meaning of § 3231 of the Internal 

Revenue Code. Union Pacific Corporation v. United States. 5 F. 3d 523

(Fed. Cir., 1993).

Rail-West stands in the same relation to the Willamette Valley Railroad,

the Willamette Valley Railway, and the Willamina and Grande Ronde Railway

as Union Pacific Corporation did to the Union Pacific Railroad. 

Accordingly, it is the determination of a majority of the Board that

Rail-West is not a carrier affiliate employer under the Railroad

Retirement and Railroad Unemployment Insurance Acts with respect to any

services its employees perform for its carrier subsidiaries because it

is not owned or controlled or under common control with those

subsidiaries. As Rail-West meets no other definition of a covered

employer under the Acts, in the opinion of a majority of the Board, RailWest is not a covered employer.

This conclusion leaves open, however, the question whether the persons

who perform rail service under Rail-West's arrangement with Port should 

be considered to be employees of Port rather than of Rail-West. Section

1(b) of the RRA and section 1(d)(1) of the RUIA both define a covered

employee as an individual in the service of an employer for compensation.

Section 1(d) 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 service-recipient

not only with respect to the outcome of his work but also with respect 

to the way he performs such work.

The Interstate Commerce Commission has determined that Port operates as

a common carrier by Rail. Tillamook County Naval Airport Commission. 290

ICC 817 (1955), as summarized in Legal Opinion L-56-13. A rail carrier

subject to the Interstate Commerce Act is under a duty to provide

locomotives and cars to transport the public's property as part of its

operation as a carrier. The law of agency recognizes that certain duties 

owed to third parties are so essential under the law that responsibility

for their proper performance must be retained by the principal or

employer. See Restatement (Second) of Aaencv § 214. The Board believes

that operation of train service is a function so essential to the

statutory duty of a "ail carrier to provide rail transportation that the
1

-3-

carrier must retain the power to direct and control the individuals who

conduct the service. Cf. Annotation, What Employees are Engaged in

Interstate Commerce within the Federal Employers' Liability Act. 10

A.L.R. 1184 (1921), at 1220-1226; and Annotation, Who is an Employee in

Interstate Commerce within Federal Employers' Liability Act as Amended

in 1939, 10 A.L.R. 2d 1279, 1296 (1950), (both discussing liability of

the railroad for injuries to locomotive engineers, firemen, brakemen and

conductors). Finally, regulations of the Board provide that where an

individual is subject to the direction and control of an employer, the

employee relationship is established "irrespective of whether the right 

to supervise and direct is exercised." See 20 CFR 203.3(b).

The individuals provided to Port by Rail-West act as crew for the trains 

which Port must run in satisfaction of its rail carrier obligation. Port

must retain ultimate control of the performance of its service as a

common carrier. Accordingly, it is the determination of the Board that

service performed by employees of Rail-West under contract with Port of

Tillamook Bay is creditable as service as employees of the Port under the

Railroad Retirement and Railroad Unemployment Insurance Acts.

Glen L. Bower

part, opinion attached)

Attachment

%