V.Memorandum OEC271989

F O R M 0-111 |7-ee> UNITED STATES GOVERNMENT RAILROAD RETIREMENT BOARD V .Memorandum OEC27 1989 TO Director of Compensation and Certification L " 8 9-161 FROM Deputy General Counsel SUBJECT: Fox River Valley Railroad Corporation Employee Service This is in reply to your Form G-215 dated August 4, 1989, requesting my opinion regarding the status of individuals providing services to the Fox River Valley Railroad Corporation. That company has been held to be an employer under the Railroad Retirement and Railroad Unemployment Insurance Acts.± 7 In response to inquiries from your office, Mr. Stephen P. Selby, President of Fox River Valley Railroad Corporation, provided the following information. The change from FRVR Corporation to Fox River Valley Railroad Corporation came with the purchase of 208 miles of railroad from the Chicago and North Western Transportation Company. The new company, Fox River Valley Railroad Corporation (hereinafter "FRVR '), made the decision to meet the need for various types of operating personnel by arranging for services to be provided by various temporary employment services. The rationale behind this decision was, according to Mr. Selby, that due to the period of transition and changes in the way business would be conducted by FRVR, there was uncertainty as to how many permanent employees would actually be needed. According to Mr. Selby: "in order to avoid placing people in positions that were almost certainly not going to be permanent positions, and thereby avoid recruiting them away from permanent positions they may have held, FRVR made a decision to meet the temporary need by arranging for services to be provided by companies whose business it is to furnish temporary workers." 1/ It appears in the Employer Status List at B .A. No. 3659, with the period of creditable service being from October 1, 1987 to date. It is noted that the company's original corporate name was "FRVR Corporation". In December 1988 FRVR Corporation became Fox River Valley Railroad Corporation, with no change in the employer status (see Interstate Commerce Commission Finance Docket No. 31492, decided July 14, 1989). Director of Compensation and Certification Mr. Selby described six different situations in which temporary employment services were utilized. A total of thirty-six different temporary employees were provided by four companies, Manpower Inc., Kelly Temporary Services, Applied Information and Development, Inc., and Cap Gemini America ..2/ Information provided by Mr. Selby about each of these situations is outlined below. 1. "Start-up". Mr. Selby describes several activities, e.g., development of a computer program and data base; establishment of computerized accounting programs for car records; and redesigning computer programs to be compatible with the new equipment which replaced the equipment used by the previous owner, as "one-time undertaking related to startup, and not requiring continued performance." Mr. Selby states that a "substantial portion of the temporary assistance we engaged during the first six months of our operation was to meet these short-term, one-time, computer and formatting requirements . " 2. Temporary manning of Broadway Tower. The acquisition plans of FRVR called for Broadway Tower to be closed within sixty days of start-up. Litigation held back the start of the new company until December 8, 1988 (from the scheduled start of September 1988) , and then weather conditions prohibited construction of the crossover necessary to close the tower. As a result, FRVR arranged for temporary operators from December 1988 until weather permitted the construction. Broadway Tower was permanently closed on June 12, 1989. Prior to that closing, Manpower Inc. furnished nine individuals to FRVR to perform the necessary services. 3. Bridgetenders. Manpower Inc., also provided personnel to serve as bridgetenders during the pleasure boating season. Personnel were needed from May 10, 1989, until automation of all bridge locations is complete or the season ends (Note: the season ended in September). As four of the five bridge locations were automated before the season began, temporary personnel were used only at the one which had not been automated (located in Oshkosh).3/ 77 Manpower Inc., provided service at Fr Vr 1s sites in Green Bay, Oshkosh and Fond du Lac, Wisconsin; the other three companies provided services at Green Bay only. _3/ It is noted that a memorandum from the Board's base point in Escanaba, Michigan dated August 14, 1989, states that a railroad employee who was a former bridgetender for the Director of Compensation and Certification 4. Secretarial and receptionist personnel. Manpower Inc. and Kelly Services provided FRVR with temporary secretarial and receptionist personnel to fill in for FRVR employees who were on vacation. Four such temporaries were provided, each of whom worked for two weeks or less. 5. Track repair gangs. For the period of May 3 through June 11, six laborers were provided by Manpower Inc. to work on a track repair gang.z' 6. Consultants. FRVR hired four consultants; one was a professional civil engineer to design a crossover, and the other three provided 'training and direction to FRVR in setting up computerized accounting systems". 37 Continued. Chicago & North Western Transportation Company was displaced when their Green Bay Wisconsin operation was sold to FRVR. The employee applied with FRVR for the same job, and was advised that all bridgetending position would be filled through Manpower, Inc. He applied at Manpower, Inc., was hired by that company, and worked for FRVR as a bridgetender for approximately fourteen weeks. 4/ It should be noted that Mr. Selby states that: "FRVR, like virtually all railroads, particularly in the northern climates, utilizes college students to work on track repair gangs during the summer. They are included on the FRVR payroll as employees, and contributions under the Railroad Retirement and Unemployment Insurance Acts are made. However, because of the new status of our railroad and the need for taking advantage of some suitable weather prior to the time these college students were available, FRVR arranged with Manpower Inc. during the period of May 3 through June 11 to furnish six temporary laborers to work on the track gang. They were employees of Manpower Inc., and not of FRVR." ■ Director of Compensation and Certification As you know, 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 Retirement Act further defines 'in the service of an employer" as: "(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 identicalto the above, as do sections 3231(b) and 3231(d) of the Railroad Retirement Tax Act (26 U.S.C. §§ 3231(b) and (d)). Courts have construed the definitions of employee service under the Railroad Retirement, Railroad Unemployment, and Railroad Retirement Tax Acts interchangeably. Under certain circumstances, courts have determined that the employees of a third party which contracts to perform a service for a railroad employer may be considered to be in the service of the railroad employer within the meaning of these sections. A prime consideration in determining whether an individual is subject to the continuing authority of a railroad in the performance of his services is whether or not the services performed are of a nature which the railroad could delegate and place beyond its control and still claim to operate its railroad and carrier activities. Wabash R.R. Co. v. Finnegan, 67 F. Supp. 94, 99 (E.D. Mo., 1946). This is not limited to employees engaged in actual train operation, as the Board has in the past been required to identify and cover as employees under the Acts individuals performing accounting, purchasing and stenographic services. Adams v. Railroad Retirement Board, 214 F. 2d 534 (9th Cir., T954). Furthermore, in considering an individual's status as an employee under the Acts, the fact that an individual may be nominally on the payroll of another company may be disregarded. The language in all three Acts which includes as employees those individuals rendering professional or technical services, or rendering personal services on the property used in the employer's operations, does not refer to the degree of the railroad's •Director of Compensation and Certification control over the employee. The latter provisions were added as part of the 1946 amendments to the Acts. A paper prepared by the General Counsel's office shortly after the 1946 amendments found the purpose of these provisions to be that of "preventing escape from coverage through 'contracting out' railroad work." See Legal Opinion L-46-692. The General Counsel further noted that as the Acts had already been held to include as railroad employees individuals appearing on the payroll of another company, Congress intended the amendments to clarify existing law, rather than establish a new interpretation. See Utah Copper Co. v. Railroad Retirement Board, 129 F . 2d 358, 362 (10th Cir. , 1942). Opinions of this office have, in appropriate cases and consistent with this rationale, determined independent contractors and their employees to be employees of the railroad which contracted for their services. The Internal Revenue Service is in agreement with respect to the Railroad Retirement Tax Act. See Rev. Rul.

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