This
is the decision of the Railroad Retirement
Board regarding whether the services performed
by AM for the Columbia & Cowlitz Railway
Company (C&C) constitute employee service
under the Railroad Retirement and Railroad
Unemployment Insurance Acts. The C&C
is an employer (BA 3602) under the Acts
administered by the Board. AM is an employee
of Weyerhaeuser, a publicly traded integrated
forest products company. Weyerhaeuser Corporation
owns the C&C. According to an Employee
Questionnaire regarding the activities of
AM supplied by Mr. Kennedy Ketterman, Tax
Audit Manager for Weyerhaeuser Corporation,
AM is the General Manager of the C&C.
He performs this work at the offices of
Weyerhaeuser Corporation. AM started performing
this service in August 1967. As part of
his duties for the C&C, AM participates
in meetings with employees of the railroad
to discuss company policies, work procedures,
etc. He also meets with the customers and
suppliers of the railroad. He makes decisions
as necessary to conduct railroad operations,
to hire and discharge employees, conduct
salary negotiations, disciplinary and arbitration
hearings. He attends, as a representative
of the railroad, national railway and shortline
conferences and in general conducts any
other business required to manage the C&C.
AM spends approximately 15 hours of his
40-hour workweek (approximately 40%) on
C&C business. Weyerhaeuser is reimbursed
for the salary paid to AM by a direct charge
on the C&C.
Section 1(b) of the Railroad Retirement
Act and section 1(d)(1) 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) of the Railroad Retirement
Act 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 Railroad Unemployment
Insurance Act contains a definition of service
substantially identical to the above, as
do sections 3231(b) and 3231(d) of the Railroad
Retirement Tax Act (26 U.S.C. § 3231(b)
and (d)). Paragraph (A) of the definition
dates from the inception of the railroad
retirement system. See Public Law No. 162,
75th Cong., Ch. 382, Part I, (50 Stat. 307).
In Reynolds v. Northern Pacific Railway,
168 F. 2d 934 (8th Cir. 1948), the Eighth
Circuit stated that for purposes of liability
for taxes under the analogous provision
of the Railroad Retirement Tax Act, persons
performing services for a railroad may be
regarded as railroad employees, even though
they are not directly employed or directly
paid by the railroad. Id. at 942. The Court
further stated that the intent of parties
to the contract to avoid coverage, the historical
practice of the railroad industry, and factors
deciding the employment relationship under
other Federal laws should all be considered.
Id at 940-941.
Under other federal laws, numerous factors
are involved in determining whether an individual
is engaged in employee service. In the absence
of judicial authority directly interpreting
the employee service provisions of the Railroad
Retirement Act, these factors may be useful
in determining application of those provisions.
An individual may not be self-employed where
the employer furnishes without charge the
supplies and premises for the work. See
Henry v. United States, 452 F. Supp. 253,
255 (E.D. Tenn., 1978). Payment on an hourly
basis rather than at a specified amount
per job also indicates that the individual
is an employee. See Bonney Motor Express,
Inc. v. United States, 206 F. Supp. 22,
26 (E.D. Va., 1962). An independent contractor
offers his service to the general public
rather than to a specific employer. See
May Freight Service, Inc. v. United States,
462 F. Supp. 503, 507 (E.D. N.Y., 1978).
Similarly, an independent contractor generally
may substitute another individual to perform
the contract work, while an employee must
perform the work himself. Gilmore v. United
States, 443 F. Supp. 91, 97 (D. Md., 1977).
AM is the general manager of the C&C.
He performs numerous managerial services
that are directly integrated into the management
and operation of the railroad employer.
He is paid indirectly by the C&C for
these services on an ongoing basis. Therefore,
the Board finds that AM is integrated into
the employer's staff or operations, as is
specified in paragraph (B).
Under section 211.16(a) of the Board’s
regulations (20 CFR 211.16(a)), the period
of time within which compensation may be
reported is limited to four years after
the date on which such compensation is required
to be reported to the Board. The four-year
rule is subject to certain exceptions including
the case “Where the earnings were
erroneously reported to the Social Security
Administration in the good faith belief
by the employer or employee that such earnings
were not covered under the Railroad Retirement
Act * * *” (section 211.16(b)(ii)).
However, no employee may be credited with
service months or tier II compensation beyond
the four-year period unless the appropriate
railroad retirement taxes have been paid
(section 211.16(c)). Accordingly, it is
the decision of the Board that AM’s
services for the Columbia & Cowlitz
Railway Company is employee service. Consequently,
such service is creditable under the Railroad
Retirement and Railroad Unemployment Insurance
Acts insofar as is permitted by section
211.16.
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