This
is the determination of the Railroad Retirement
Board concerning the status of N&T
Railway Company, LLC (N&T Railway), PAV
Railroad, Inc. (PAV Railroad), and Republic
N&T Railroad, Inc. (Republic N&T) as
employers under the Railroad Retirement Act
(45 U.S.C. § 231 et seq.) and the Railroad
Unemployment Insurance Act (45 U.S.C. § 351
et seq.). N&T Railway has previously been
determined to be a covered employer, with service
creditable beginning January 1, 2003. The status
of Republic N&T and PAV Railroad has not
previously been considered.
The evidence is that N &T Railway acquired
from Nimishillen & Tuscarawas, LLC, two
unconnected lines of rail in central Ohio in
Stark County: the “Canton line” consisting
of about 21 miles of track in Canton Township;
and the “Massillon line” of about
15 miles of track in Perry Township. N&T
Railway also leased a third line of 150 miles
of track in the vicinity of the city of Lorain,
Ohio, situated near Lake Erie. The rail lines
serve steel processing plants operated at those
locations by Republic Engineered Products,
LLC, which is the parent company of N&T
Railway, and interchange with CSX Transportation
(BA 1524), Norfolk Southern Railway (BA 1525),
Lake Terminal Railroad Co. (BA 4221), and Wheeling & Lake
Erie Railway Co. (BA 3373). In Board Coverage
Decision 03-45, the Board determined N&T
Railway to be a rail carrier employer under
the Acts effective with commencement of operations
on January 1, 2003.
Republic Engineered Products filed for bankruptcy
protection in October 2003, and solicited bids
for its assets, including its steel plants
and the rail lines of N&T Railway. As a
result, it sold all assets to PAV Republic,
Inc. The asset transfer was completed effective
with close of business December 18, 2003, and
N&T Railway had no assets or employees,
and conducted no operations after that date.
On December 15, 2003, PAV Railroad, Inc.,
was incorporated as a Delaware corporation
as a wholly owned subsidiary of PAV Republic.
As part of the PAV Republic purchase of assets
from the bankrupt company, on December 19,
2003, PAV Railroad received the assets of N&T
Railway, and hired all of the railway’s
91 employees. The Surface Transportation Board
(STB) on December 19, 2003, approved a notice
of exemption to allow PAV Railroad to operate
the rail lines of N&T Railway. See: PAV
Railroad, Inc.—Acquisition and Operation
Exemption—Assets of N&T Railway Company
LLC, Finance Docket No. 34450. On January 5,
2004, PAV Railroad then amended its articles
of incorporation to change its name to Republic
N&T Railroad, Inc.
Section 1(a)(1) of the
Railroad Retirement Act (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;
Section 1 of the RUIA (45 U.S.C. § 351)
contains essentially the same definitions,
as does section 3231 of the Railroad Retirement
Tax Act (26 U.S.C.§ 3231).
Regulations of the Board at 20 CFR 202.11
provide that the status of an employer as covered
by the Acts terminates “whenever such
company or person loses any of the characteristics
essential to the existence of an employer status.” Section
202.12(b) of the regulations further provides
that evidence considered in determining that
employer status ends includes cessation of
business and the sale, transfer or lease of
property, equipment or machinery essential
to continuance of an employer function.
The Board finds that evidence of record establishes
that N&T Railway Company, LLC, ceased to
be a covered rail carrier employer effective
with the close of business December 18, 2003,
the date it disposed of all rail assets and
no longer had employees. The Board further
determines that PAV Railroad, Inc. became a
rail carrier employer within the meaning of
section 1(a)(1)(i) of the Railroad Retirement
Act and its corresponding provision of the
Railroad Unemployment Insurance Act effective
December 19, 2003, the date as of which it
began operating the rail lines received from
N&T Railway. Cf. Rev. Rule. 82-100, 1982-1
C.B. 155, wherein the IRS held that a company
became an employer under the Railroad Retirement
Tax Act on the date it hired employees to perform
functions directly related to its carrier operations.
Effective January 5, 2004, PAV Railroad changed
its name to Republic N&T Railroad, Inc.
The mere change of name has no effect on the
continued status of the re-named corporation
as a covered employer.
Section 8(a) of the RUIA (45 U.S.C. §358(a))
requires that employers covered under the Act
shall make contributions based on compensation
paid to their employees at a rate which shall
take into consideration the benefits paid after
December 31, 1989 under the RUIA to employees
of that employer. See section 8(a)(15) of the
RUIA (45 U.S.C.§ 358(a)(15)) and regulations
of the Board at 20 CFR 345.302(f). Section
8(a)(19) of the RUIA (45 U.S.C.§ 358(a)(19)),
and regulations of the Board promulgated pursuant
thereto (20 CFR 345.204(a)), further provide
that where property of an employer is sold
or transferred to an entity which becomes an
employer as a result of the sale, the individual
employer record of such employer shall be prorated
among the entities that receive the property
and become an employer by reason of such transaction.
However, where an employer abandons a line
of track in accordance with the provisions
of the Interstate Commerce Act, and a new entity
is formed to operate or continue service over
such line, then the Board will assign to such
entity a new-employer contribution rate.
The evidence of record is that the property
of N&T Railway was transferred to the company
which is now named Republic N &T Railroad
without abandonment of operations. Accordingly,
pursuant to section 8(a)(19) of the RUIA, the
Board finds that Republic N&T Railroad
is the successor employer of N&T Railway
LLC for purposes of contribution rates.
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