This is the decision
of the Railroad Retirement Board regarding
the status of Columbia National Group Inc.
(National Group), Columbia Iron and Metal
Company (Iron and Metal), and CR Construction
Company (CR Construction) as employers under
the Railroad Retirement and Railroad Unemployment
Insurance Acts. The status of these companies
has not previously been considered.
The evidence is that
Iron and Metal and CR Construction are wholly
owned subsidiaries of National Group. Iron
and Metal purchases steel products from International
Steel Group, an unrelated company which is
successor to LTV Steel. CR Construction performs
track maintenance and rail car repair. CR
Construction began operations July 23, 1993,
and employs between 30 and 70 individuals
during the year. CR Construction has provided
its services to large class I railroads such
as Norfolk Southern (BA 9408) and CSX Transportation
(BA 1524), and to short lines such as Midland
Terminal (BA 4266) and Ohio Central Railroad
(BA 3362). Currently, approximately 70 percent
of CR Construction’s business activity
and revenues derive from one contract with
the ISG Cleveland Works Railway, a covered
rail carrier employer (BA 4276), which is
owned by International Steel Group. CR Construction
owns a variety of general construction equipment
such as pick-up trucks, “bobcat”
tractors, and hydraulic jacks and jackhammers.
It also owns specialized rail equipment such
as hi-rail trucks, ballast regulators, spike
pullers and drivers, and re-railers. National
Group provides CR Construction with a repair
facility and office and yard space. Cleveland
Works Railway also provides office shop and
repair space for work done for that company.
CR Construction repairs track and rail cars
for Cleveland Works Railway as a subcontractor
to Iron and Metal, which has the primary contract
with the Railway. According to the General
Manager of Iron and Metal, this arrangement
would allow Iron and Metal, in the event of
financial difficulties encountered by International
Steel Group, to net payments due for its purchases
of steel products against receivables owing
for its track and rail car repairs. A copy
of both the primary contract between Iron
and Metal and the Railway, and of the subcontract
between Iron and Metal and CR Construction
are in evidence. The general contract, dated
June 3, 2002, states at appendix A that Iron
and Metal agrees to “provide all labor,
tools, supplies, and supervision necessary
to construct, maintain and repair tracks,
right of way and freight cars including ancillary
services such as signal maintenance, welding,
weed spray, rail defect detection, etc.”
Article I of the contract states that all
work is to be performed “at the I[nternational]
S[teel] G[roup] job site located in Cleveland,
Ohio.” Article VIII of the contract
requires that the work must meet “OSHA,
FRA, and AAR standards”, and that the
contractor indemnify the Railway from damages
and claims arising from the work. The final
numbered paragraph 4 of the general contract
appendix states that the contractor’s
labor rates are billed directly, without mark-up,
to Railway. The subcontract between CR Construction
and Iron and Metal summarizes CR Construction’s
duties as “All of the work and fulfill
all of the responsibilities of the contract
on behalf of the contractor.” Neither
National Group, nor Iron and Metal nor CR
Construction is affiliated through equity
ownership or through common directors or corporate
officers with any rail carrier.
Section 1(a)(1) of the Railroad Retirement
Act (RRA) (45 U.S.C. 231(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 (except trucking service, casual
service, and the casual operation of equipment
or facilities) in connection with the transportation
of passengers or property by railroad * *
*.
Sections 1(a) and 1(b) of the Railroad Unemployment
Insurance Act (RUIA), 45 U.S.C. 351(a) and
(b), contain substantially similar definitions,
as does section 3231 of the Railroad Retirement
Tax Act (RRTA), 26 U.S.C. 3231.
National Group, Iron and Metal, and CR Construction
are clearly not carriers by rail. Further,
there is no evidence that any of the three
companies is under common ownership with any
rail carrier or controlled by officers or
directors who control a railroad. National
Group, Iron and Metal, and CR Construction
are therefore not covered under the Acts as
rail carrier affiliate employers. They meet
no other definition of a covered employer
under the Acts. The majority of the Board
finds that National Group, Iron and Metal,
and CR Construction are not covered employers.
This conclusion leaves open, however, the
question whether the persons who perform rail
maintenance and rail car repair work for CR
Construction as the subcontractor of Iron
and Metal with Cleveland Works Railway should
be considered to be employees of the railroad
rather than of CR Construction. Section 1(b)
of the RRA and section 1(d)(i) 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 the 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.
As noted above, Iron and Metal and CR Construction
contract with Cleveland Works Railway. The
general contract which CR Construction has
agreed to fulfill provides that CR Construction
will furnish labor, materials, cranes, trucks,
machines and tools necessary to repair track
and rail cars. CR Construction further agrees
to carry liability insurance and to name Railway
as an additional insured. The individuals
performing the agreed services are supervised
by CR Construction employees. Railway compensates
CR Construction, not its employees, for the
contract services.
A majority of the Board finds that the foregoing
evidence shows that CR Construction employees
work under the directions of CR Construction
staff; accordingly, the control test in paragraph
(A) is not met. The tests set forth under
paragraphs (B) and (C) go beyond the test
contained in paragraph (A) and would hold
an individual to be a covered employee if
he is integrated into the railroad's operations
even though the control test in paragraph
(A) is not met. However, under an Eighth Circuit
decision consistently followed by the Board,
these tests do not apply to employees of independent
contractors performing services for a railroad
where such contractors are engaged in an independent
trade or business. 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 CR Construction
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.g., Aparacor, Inc. v.
United States, 556 F. 2d 1004 (Ct. Cl. 1977),
at 1012; and whether the contractor engages
in a recognized trade; e.g., Lanigan Storage
& Van Co. v. United States, 389 F. 2d
337 (6th Cir. 1968, at 341). CR Construction
clearly has a sizable investment in equipment.
In the view of a majority of the Board, the
fact that CR Construction maintains track
and rail cars on the premise of the railroad
is not determinative, since the Board has
in the past found other companies performing
work of this nature to be independent of the
railroad. See, e.g., B.C.D. 01-11, Heavy Railroad
Excavations, Inc., and B.C.D. 03-74, DOT Rail
Service, Inc. (maintenance of way) and Railcar
Repair of the South, B.C.D. 95-101 (car repair).
Finally, CR Construction provides its services
to the rail industry as a whole, as evidenced
by its list of current and prior customers.
A majority of the Board finds that CR Construction
consequently meets the test for independent
contractor status, and individuals performing
service under its contract with Iron and Metal
are employees of CR Construction rather than
employees of Steel Works Railway. Kelm, supra.
Accordingly, it is the determination of a
majority of the Board that service performed
by employees of CR Construction Company is
not covered employee service under the Railroad
Retirement and Railroad Unemployment Insurance
Acts.
