The question of LPM’s service was first raised in his letter of October 15, 2007, in which LPM stated he worked for “a railroad contractor” which had contracts with Kansas City Southern, Union Pacific, Burlington Northern, and Watco railroads, and that he would “like to start paying into my railroad retirement account again”. Retroactive credit for service is limited to four years pursuant to Section 9 of the RRA which requires railroad employers to file annual reports of compensation and service with the Railroad Retirement Board. Section 9 provides that the Board’s records of reported compensation and service become final unless the error in a report of compensation or the failure to report compensation is called to the attention of the Board within four years after the date on which the report of compensation was required to be made. Section 209.8 of the Board’s regulations (20 CFR 209.8) requires that on or before the last day of February, each railroad employer must report the compensation and service of the employer’s employees for the previous calendar year. Section 211.16 of the Board’s regulations (20 CFR 211.16) provides that as a general rule the Board’s record of compensation and service may not be corrected after four years in the absence of fraud.

As noted above, LPM first raised the issue of creditability of his contract service in October of 2007. The Board finds no evidence of fraud in the record in connection with the failure to report the service of LPM. Accordingly, the Board finds that LPM’s request with respect to his services for the years 1999 through 2002 are outside the four year limitation of section 9. Only his services for the years 2003 through the present are considered in this decision.

As a majority of the Board (Labor Member dissenting) has found KHC not to be an employer under the Acts administered by the Board, service provided to that company are not creditable under the Acts1. The question remains whether the services Mr. Matney performed for those railroad clients of KHC which are employers covered by the Acts may be considered creditable service under the Acts.

To be an employee of a covered railroad employer for purposes of benefit entitlement under the Acts administered by the Board, LPM must fall within the definition of that term provided by the Acts. 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 Railroad Retirement Tax Act (RRTA) (26 U.S.C. § 3231(b) and (d)).

A determination of whether or not an individual performs service as an employee of a covered employer is a fact-based decision that can only be made after full consideration of all relevant facts. In considering whether the control test in paragraph (A) is met, the Board will consider criteria that are derived from the commonly recognized tests of employee-independent contractor status developed in the common law. In addition to those factors, in considering whether paragraphs (B) and/or (C) apply to an individual, we consider whether the individual is integrated into the employer’s operations. The criteria utilized in an employee service determination are applied on a case-by-case basis, giving due consideration to the presence or absence of each element in reaching an appropriate conclusion with no single element being controlling. Because the holding in this type of determination is completely dependent upon the particular facts involved, each holding is limited to that set of facts and will not be automatically applied to any other case.

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 tests set forth under paragraphs (B) and (C) go beyond the test contained in paragraph (A) and could 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. The Board has in recent years not applied paragraphs (B) and (C) to employees of independent contractors performing services for a railroad where such contractors are engaged in an independent trade or business, relying on the decision of the United States Court of Appeals for the 8th Circuit in Kelm v. Chicago, St. Paul, Minneapolis and Omaha Railway Company, 206 F. 2d 831 (8th Cir. 1953). The Kelm decision distinguished between services performed for the railroad by employees of a firm with a clearly independent existence, and services performed by an individual who primarily contracts to furnish only his own labor. 206 F. 2d at 835. Employees of a contracting firm must meet the direction and control requirements of paragraph (A), while single individuals contracting directly with the railroad may fall within the broader definitions of (B) or (C). In making a determination under these sections, the Board is not to be bound by the characterization of the relationship stated by the parties in a contract. Gatewood v. Railroad Retirement Board, 88 F. 3d 886, (10th Cir., 1996), at 891(holding with respect to an attorney’s agreement to perform professional services for the railroad as an independent contractor that “ * * *merely to state that such a relationship exists does not necessarily make it so * * * .”)

According to the “Contract for Work or Services”, supplied by KHC in connection with its coverage determination, work is performed at times and locations authorized by the railroad client, and work is done in accordance with the conditions, requirements, and stipulations contained in the particular proposal and bid form/schedule of billable service items. KHC furnishes all superintendence, labor, tools, equipment, materials, and supplies, and all other things requisite and necessary to perform the work under the agreement. KHC and the employees of KHC are not considered employees of the railroad; KHC pays the wages and salaries of KHC employees performing the services; KHC provides safety training for its employees; KHC requires its employees to wear personal protective equipment as required by regulations (hardhats are affixed with KHC’s logo); and KHC will maintain payroll records for its employees. These records will include time and day of week when employee’s workweek begins, hours worked each day, total hours worked each workweek, basis of compensation (hourly, weekly, piecework), regular hourly pay rate, total overtime; total wages paid; client for whom work is performed; job location; and Forms W4, W-2, 1099. The agreement also states that KHC is required to maintain daily employee timesheets for both hourly and salaried employees. The agreement further states that the railroad client has “no control over the employment, discharge, compensation of and service rendered by” KHC’s employees.

A majority of the Board, Labor Member dissenting, finds that the evidence of record indicates that LPM has been performing services as an employee of KHC, rather than as an employee of KHC’s railroad clients. While the nature of the work required that LPM work on the premises of a particular railroad, he did not use that railroad’s supplies or equipment, but the supplies and equipment of KHC. He was trained by KHC, and paid by KHC. The railroad client, according to the written agreement, had no control over the services rendered by LPM.

Accordingly, it is the decision of a majority of the Board, Labor Member dissenting, that the services performed by LPM for various railroad employers were performed as an employee of Kelly-Hill Company. As Kelly-Hill Company has been found not to be an employer under the Acts, a majority of the Board therefore finds that these services are not creditable under the Railroad Retirement and Railroad Unemployment Insurance Acts.

.

Dissenting Opinion of V. M. Speakman, Jr.
Employee Status Determination LPM
S.S.A. No. XXX-XX-1256

KHC employees perform track construction and maintenance on railroad property. About 80% of KHC employees perform such services. A plain reading of section 1(d)(1)(i)(C) of the Railroad Retirement Act would dictate that these employees, while working on carrier property, should be covered under that statute. The deemed employee provisions of section 1(d)(l)(i)(B) and (C) were enacted to directly address the contracting out of traditional railroad work. See my dissent in Board Coverage Decision 06-21, June 5, 2006. Employee Status Determination – J A d/b/a The “A” Team. 2

1 The Board’s regulations provide that an employee of a company is not a party to any coverage determination with respect to that company. See section 259.2(a) of the Board’s regulations.

2 Available at www.rrb.gov