This
is the decision of the Railroad Retirement
Board regarding the status of the Training
Consulting Connection (TCC) as an employer
under the Railroad Retirement and Railroad
Unemployment Insurance Acts.
TCC was founded in 1991 and holds itself
out as specialists in organization and staff
development. It has a client list of approximately
80 companies, one of which is a railroad,
Union Pacific Railroad Company. Under a
contract with Union Pacific it supplies
individuals, who it regards as independent
contractors, to train Union Pacific employees
in Remote Control Locomotive technology.
This technology enables a railroad employee
to operate a locomotive with a hand-held
device. It is used in switching yards only,
to break up and re-form trains, and generally
not where there are crossings. Where there
are crossings, the device must have a camera
associated with it. There is no evidence
that TCC is affiliated with a railroad.
There are nine individuals with whom TCC
has contracted to provide this training
to Union Pacific. All of them are former
Union Pacific employees. The technology
in which they are training Union Pacific
employees is new to railroads in the United
States (although apparently it has been
in use in Canada for some time). Accordingly,
the work these individuals performed for
Union Pacific is generally different than
that they are performing for TCC.
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).
TCC 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,
TCC is not a covered employer under the
Acts.
This conclusion leaves open, however, the
question whether the individuals who perform
work for TCC under its arrangements with
rail carriers should be considered to be
employees of those railroads rather than
independent contractors. 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 submitted shows that the work
of the nine individuals is not performed
under the direction of any Union Pacific
employee or employees, but is performed
under the terms of their contracts with
TCC; accordingly, the control test in paragraph
(A) is not met. Moreover under an Eighth
Circuit decision consistently followed by
the Board, the tests set forth under paragraphs
(B) and (C) 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 TCC 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 does
not have permanent employees but rather
hires individuals on a per job basis, it
is apparent that TCC is in the business
of providing services to many customers,
only a very small percentage of which are
connected to the rail industry. The record
indicates that TCC is engaged in a recognized
trade or business. Accordingly, it is the
opinion of the Board that TCC is an independent
business.
Because TCC engages in an independent business,
Kelm would prevent applying paragraphs (B)
and C) of the definition of covered employee
to this case. Accordingly, it is the determination
of the Board that service performed by the
individuals who contract with TCC to provide
services to Union Pacific are not employees
of Union Pacific and that the services they
provide to Union Pacific are not covered
under the Acts.
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