This is the decision of the Railroad Retirement
Board regarding the status of Roadway Worker
Training, Inc.1 (RWT), as an employer under
the Railroad Retirement and Railroad Unemployment
Insurance Acts. The following information was
provided by Ms. Sally K. Kircher, counsel for
RWT.
RWT is incorporated and began operations November
2, 2001. It has five employees, and has engaged
the services of approximately 50 independent
contractors. RWT believes that two of these
individuals were previously employees of Union
Pacific Railroad, which is a customer of RWT.
Ms. Kircher advised that RWT provides services
to the entire railroad industry:
* * * including Class One Railroads, Regionals
and Shortlines, Transits, Consultants, Contractors
and Suppliers. Some of the services offered
by RWT include Training Program Development,
Safety and Training Audits, Railroad New Hire
Training, Dispatcher Training, Operating Rules
Training, Conductor Training, Remote Control
Locomotive Operator Training, Operations Assessments,
On-Track Worker Training (49 CFR 214), Physical
Plant Inspections, Data Base Review and Analysis,
Contractor and Supplier Technical Safety & Compliance
and Project Review and Analysis, Contractor
and Supplier Technical Safety & Compliance
and Project Review and Inspection.
RWT has had over 350 clients, some of which
are covered employers under the Acts and others
which are not. RWT subcontractors work both
on client property and at other locations.
RWT is a privately held corporation owned by
James L. Cashwell and Patsy J. Crisafi, and
is not affiliated with a railroad. RWT contractors
are compensated by RWT, not by RWT clients,
based on the provisions of their individual
contracts with RWT. These contracts typically
provide for compensation at a daily rate for
services rendered to RWT clients.
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;
(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 (45 U.S.C. §§ 351(a)
and (b)) contain substantially similar definitions,
as does section 3231 of the Railroad Retirement
Tax Act (26 U.S.C. § 3231).
RWT clearly is not a carrier by rail. Further,
the available evidence indicates that it is
not under common ownership with any rail carrier
nor is it controlled by officers or directors
who control a railroad. Therefore, RWT is not
a covered employer under the Acts.
This conclusion leaves open, however, the
question whether the persons who perform work
for RWT under its arrangements with rail carriers
should be considered to be employees of those
railroads rather than of RWT. Section 1(b)
of the Railroad Retirement Act and section
1(d) of the Railroad Unemployment Insurance
Act both define a covered employee as an individual
in the service of an employer for compensation.
Section 1(d)(1) 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.
The evidence in this case shows that RWT employees
do not work with employees of Union Pacific
or RWT’s other clients, except to train
them. The evidence also shows that RWT employees
are not compensated by the clients and do not
submit invoices and supporting documents such
as timesheets to RWT’s clients. RWT employees
are not assigned to specific projects, and
do not have work assigned or approved by clients.
The evidence thus shows that work by the five
RWT employees is not performed under the direction
or control of the railroad employers with which
RWT contracts. 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 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. See 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 RWT 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. While these
may be rather close questions in cases such
as this one, where the contractor has only
a small core of permanent employees and retains
subcontractors to perform the actual training,
it is apparent that RWT is in the business
of providing services to many customers, and
is engaged in the recognized trade or business
of providing training. Accordingly, it is the
opinion of the Board that RWT is an independent
business.
Because RWT is an independent contractor,
RWT employees are not covered employees within
the meaning of paragraphs (B) and (C). Accordingly,
it is the determination of the Board that service
performed by employees of RWT2 is not covered
under the Acts.
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