Opinion ID: 420022
Heading Depth: 1
Heading Rank: 6

Heading: General Counsel Opinions

Text: 30 Railroad Concrete contends that the decision of the Board contradicts five earlier General Counsel opinions 6 which held that subsidiaries or affiliates of railroads that engaged in manufacture and sales of railroad equipment were not employers under the Acts. However, a close examination of those decisions reveals that the subsidiaries and affiliates in those cases were not performing a service of the same character as Railroad Concrete because their product was not sold primarily to the controlling carrier. 31 In Youngstown Sheet and Tube Company, General Counsel opinion L40-391, the company sold between 3 and 3 1/2 percent of the net tonnage of its sales to railroad carriers. The holding in Ford Motor Company, General Counsel opinion L40-304, identifies the difference between that case and the instant one. The company was held not to be an employer because: 32 the sales of its products to railroads have been made in the regular course of business, but these transactions obviously not constituting any major portion of the Company's distributing activities, have been purely commercial sales rather than services in the procurement of products required by railroads. 33 (Emphasis added.) In Wheeling Steel Corporation, General Counsel opinion L39-571, a steel company controlled a carrier. However, it was held not to be an employer under the RRA because it sold steel products to various railroads on a purely commercial basis and there was no finding that a substantial portion of the company's sales was made to the carrier it controlled. The facts in Wheeling are similar to those in Carnegie-Illinois Steel Corporation, General Counsel opinion L39-811. Carnegie-Illinois manufactured iron and steel products and their by-products. Sales were made to many railroads throughout the country, 'on a straight sale basis,'  and the company also sold its steel products to other industrial companies. The General Counsel's decision stated that there was nothing to indicate that, so far as a service relationship was concerned, any carrier by railroad was in any position different from that of any other industrial customer of the Steel Corporation. These cases differ from the one we now consider because Railroad Concrete sold approximately 90% of its products to Florida East Coast, thus creating a service relationship. Furthermore, the nature and variety of the manufactured products in the four cases discussed above made it less likely that the provision of the product could be considered a service. 34 Pullman Standard Car Manufacturing Company, General Counsel opinion L40-403, is closer to this case since the primary product manufactured by the company, railroad cars, is certainly essential to the operation of a railroad. However, although Pullman-Standard and its predecessors had sold cars and other products to its affiliated company, the Pullman Company, the General Counsel found that most of their business has been with unaffiliated railroad and nonrailroad companies. That factor is in marked contrast to the case at hand, where not only most, but 90%, of the subsidiary's sales are to the parent company. 35 Our opinion does not purport to hold that in all cases subsidiaries or affiliates that are directly or indirectly owned or controlled by a carrier and that manufacture products that are sold to the carrier will be held to be an employer under the Acts. Nor do we attempt to set any guidelines for determining when the amount of sales are substantial enough and the type of product so inextricably linked to the operation of the railroad that the sale of the product constitutes a service ... in connection with the transportation of passengers or property by railroad .... We simply decide that in a case such as this, when the nature of the relationship and the volume of sales between Railroad Concrete and Florida East Coast indicate that the subsidiary is economically dependent on the parent, and when the type of product is so obviously essential to the functioning of the railroad, that the subsidiary's provision of the product constitutes a service to the parent within the meaning of 45 U.S.C.A. Secs. 231(a)(1) and 351(a). 36 The determination of the Railroad Retirement Board that Railroad Concrete Crosstie Corporation is an employer under the Railroad Retirement Act, 45 U.S.C.A. Sec. 231 et seq., and the Railroad Unemployment Insurance Act, 45 U.S.C.A. Sec. 351 et seq., is AFFIRMED.