L-44-305 M-174 # June 7, 1944

TO The Director of Retirement Claims

FROM The General Counsel

SUBJECT Creditability of service rendered under ore dock operations contract between Addison Miller, Inc. () and and Ishpeming Railroad Company

In response to your request I herewith submit my opinion on the following:

QUESTION

Is service rendered under contract between Addison Miller, Inc. and Lake Superior and Ishpeming Railroad Company covering ore dock operations at Presque Isle, in the City of Marquette, , creditable under the Railroad Retirement and Railroad Unemployment Insurance Acts?

OPINION

It is my opinion that the service in question is creditable as "employee" service rendered to Lake Superior and Ishpeming Railroad Company. It is my further opinion that even if it were determined that the ore dock operations have been conducted by Addison Miller, Inc. independently, the individuals performing the contract work would, nevertheless, be covered under the Railroad Retirement and Railroad Unemployment Insurance Acts since, in that event, Addison Miller, Inc., with respect to such operations, would itself be an "employer" under the Acts as a carrier by railroad subject to Part I of the Inter­ state Commerce Act.

DISCUSSION

On February 5» 1925, the Lake Superior and Ishpeming Railroad Company entered into a contract with Addison Miller, Inc., a corpora­ tion organized under the laws of Minnesota, for the operation, during the shipping season of 1925, 1926 and 1927, of the Railroad's -2- The Director of Retirement Claims

docks situated at Presque Isle, in the City of Marquette, Michigan. The ore dock operations, performed under tariffs filed by the Railroad Company with the Interstate Commerce Commission, consist of the unload­ ing of iron ore from railroad cars spotted on the Railroad's dock into ore pockets located thereon, and the loading of the ore from the pockets into the holds of vessels waiting at the ore docks to receive the ore for transportation to various Great Lake ports. Such loading and unloading operations are accomplished by means of ore handling machin­ ery located on the dock.

Although the contract of February 5# 1925 provided for the operation of the ore dock during the shipping seasons of 1925, 1926 and 1927, the contract, it appears from information submitted by the Railroad Company, has been extended from time to time and has been continued in effect. Under the terms of that contract, Addison Miller agreed promptly to unload from railroad cars into such ore dock pockets "as may be designated by the representative of the Railroad Company" and promptly to load from such pockets "into the holds of the vessels designated" all iron ore transported by the Railroad to its dock, "furnishing an adequate supply of labor therefor, including necessary foremen and checkers and whatever general supervisory service is necessary for the successful completion of the work". It was provided that the "labor so supplied shall in addition perform such work as has been heretofore ordinarily done by such laboi".

For each ton of ore transferred, Addison Miller was to be paid monthly at the rate of one and three-quarters cents per ton. It was agreed that each ore shipping season should constitute a separate unit for accounting under the contract and, for the purposes of such accounting, the term "costs" was defined to include only the actual pay roll on the ore dock v/ork, except that, if the costs, as so defined, should exceed one and three-fourths cents per ton, there should be added, insurance and bond premium costs and any necessary "off line transportation" and supervisory wages or expenses. If at the end of the ore shipping season in each year the costs for the entire season should exceed one and three-quarters cents per ton but should not ex­ ceed two cents per ton, the Railroad agreed to reimburse Addison Miller for the costs plus two per cent. If the costs should exceed two cents per ton, but should not exceed two and one-half cents per ton, the Railroad agreed to reimburse Addison Miller for the costs plus one per cent. If the costs should exceed two and one-half cents per ton, the Railroad agreed to reimburse Addison Miller for actual costs only.

The contract provided that the Railroad would place the ore cars at the proper pockets for unloading; furnish and keep in repair all the tools and equipment customarily used in the handling of iron ore; furnish free transportation on its lines to the Contractor and -3- The Director of Retirement Claims

the employees travelling on business connected with the contract; sup­ ply the Contractor, free of charge, any necessary boarding cars or bunkhouse facilities, including necessary fuel, light, and ice; and transport free over the Railroad's lines, the Contractor's boarding outfit, bedding and supplies.

Addison Miller agreed to indemnify the Railroad Company for damages arising out of injury to, or death of, employees engaged in carrying out the contract work to comply with the terms of the Michigan Workmen's Compensation Act and to procure and maintain workmen's com­ pensation insurance, as well as adequate insurance to cover claims under the Employers' Liability Act; to keep the Railroad "informed as to the manner in which said risks are insured"; and to "promptly report to the Railroad Company all accidents, and all claims for injuries or damage". Addison Miller also agreed to indemnify the Railroad for damages arising out of injury or damage to the person or property of any third parties, except that Addison Miller was not rendered liable for damage to vessels loading at the dock.

The contract required Addison Miller to "employ the foremen and checkers heretofore employed for the same service by the Railroad Company", and, if it should be necessary at any time to replace any of such foremen or checkers, to employ only those individuals "who are satisfactory to the Superintendent of the Railroad Company". And the contract further provided that the wages paid to foremen and checkers "shall be no less than the wages paid by the Railroad Company for the same service during the ore shipping season in 1923". It was stipulated that all tine for work performed under the contract would be kept by timekeepers in the employ, and carried on the pay roll, of the Railroad Company: that the Railroad's auditors would "at all times have access to the books, records and accounts of the Contractor inso­ far as they pertain to this contract"; that Addison Miller would pay the employees performing the contract work "semi-monthly, upon such days as shall be satisfactory to the Superintendent of the Railroad Company"; and that Addison Miller would "promptly and adequately take care of all pay-roll obligations as they accrue". The decision of the Superintendent of the Railroad, it was agreed, "shall be final and conclusive upon the Contractor" in case of a dispute as to whether the supply of labor furnished by the Contractor is adequate for the contem­ plated contract work.

Paragraph 6 of the contract states that Addison Miller "is an independent contractor, that except as herein provided, the employ­ ees engaged in the work under this contract shall be the employees of the Contractor and not of the Railroad Company", and that the contract work "shall be performed under the direct supervision" of Addison Miller. But paragraph 7 provides "that the prompt unloading and « -4- The Director of Retirement Claims

release of cars, and the prompt loading and dispatch of vessels are of the utmost importance in the carrying out of this contract, and that if a dispute shall arise as to whether the operating methods and plans of the Contractor are proper to accomplish these purposes, the decision of the Superintendent of the Railroad Company shall be final and conclusive upon the Contractor". And, it was provided that, at any time, whenever in the Railroad's judgment, "its interests or the public service shall require" it, the Railroad Company "shall have the right" to terminate the contract upon twenty-four hours notice.

An individual is an "employee" within the meaning of the Railroad Retirement and Railroad Unemployment Insurance Acts if he is subject to the continuing authority of an "employer" to supervise and direct the manner of rendition of his compensated service. Secs. 1(b) and l(

The statement in the contract to the effect that Addison L i H e r is an independent Contractor and that the individuals perform­ ing the contract work shall be the employees of Addison Miller might, if standing alone, tend to indicate that an independent contractual relationship exists between Addison Miller and the Railroad and that the individuals performing the contract work are not "employees" of the Railroad. But this provision is by no means conclusive of the established relationship, for, in determining the true character of the relationship, it is necessary to consider all the provisions of the contract in the light of the surrounding facts and circumstances. Gulf Refining Co. v. Brown, 93 F (2d) 870 (C.C.A. 4th 1938)j 7. P. Brown & Son Lumber Co. v. Crossley, 230 Ala. 403, -61 So. 536; Gulf Refining Co. of Louisiana v. Huffman Weakley, 155 Tenn. 580, 297 S.7. 199, 200-201.

And, although the contract provides that the work shall be performed under the "direct" supervision of Addison Miller, the test under Section 1(c) of the Railroad Retirement Act and Section l(e) of the Railroad Unemployment Insurance Act is whether an "employer" has the "authority" to supervise and direct the manner of rendition of the service, and does not require actual supervision to establish an "employee" status under the Act. It is sufficient, therefore, to find that the Railroad possesses the right to supervise and direct -5- The Director of Retirement Claims

the manner of rendition of the service, even though such right is never exercised. Cf. Singer Mfg. Co. v. Rahn, 132 U.S. 518, 523; Lembke v. Fritz. 223 Iowa 261, 272 N.W. 300, 303.

That the Railroad, in entering into the contract did not surrender its right to control the work, and that Addison Miller was merely engaged as a supplier of labor and supervising agent for, and under the direction of, the Railroad, is recognized by the express provision in’ the contract that the decision of the Superintendent of the Railroad, is "final and conclusive" as to the "operating methods" to be employed. Moreover, the very nature of the work to be performed under the contract is, in itself, a strong indication that the rail­ road reserved the right to supervise and direct the manner of its per­ formance. Cf. State v. District Court, 128 Minn. 43, 150 N.W. 211, 212; Gulf Refining Co. of Louisiana v. Huffmann and Weakley, supra, 297 S.W., at pp 200-201. The operation of the ore dock is an essen­ tial and integral part of the railroad's carrier business, and is so vitally connected with the transportation service performed by the railroad under its public tariffs that a failure in the ore dock opera­ tions might seriously hamper the movement of ore over the dock and interfere with the Railroad's fulfillment of its common carrier obli­ gations. Indeed, this point was expressed by the parties by specifi­ cally providing in the contract: "It is agreed that the prompt unloading and release of cars, and the prompt loading and dispatch of vessels are of the utmost importance in the carrying out of this contract, and that if a dispute shall arise as to whether the operat­ ing methods and plans of the Contractor are proper to accomplish these purposes, the decision of the Superintendent of the Railroad Company shall be final and conclusive upon the Contractor".

Additional emphasis to Addison Miller's position as a mere supplier of labor is given by-the requirement that Addison Miller, in replacing foremen or checkers, employ only those individuals "who are satisfactory" to the Railroad Superintendent; by the requirements governing the rate of wages to be paid such employees; by the right of the Railroad to make the "final and conclusive" decision as to the adequacy of the supply of labor furnished by Addison Miller; by the right of the Railroad to have timekeepers in its direct employ keep the time for work performed under the contract, and its right to have access to Addison Miller's records pertaining to the contract work; and by the requirement that Addison Miller pay the employees on the days satisfactory to the Railroad.

Further analysis of the provisions of the contract clearly shows the presence of many of the well-established indicia of an employer-employee relationship, which, when considered together, rea­ sonably lead to the conclusion that the Railroad has reserved such -6- The Director of Retirement Claims

control over the dock operations as to constitute the individuals engaged therein its "employees".

The contract, unlike the usual independent contract, does not call for the performance by Addison Miller, of a specific job or piece of work, but rather contemplates and provides for the perfor­ mance of the general and continuing service of dumping ore year in and year out for the Railroad. The rendition of such a continuing service is recognized by the authorities as one of the most important factors indicating an employer-empioyee relationship, particularly where, as here, the service is performed as an essential and integral part of the general business of the employer. See Louisville, Evans­ ville & St. Louis Railroad v. Wilson, 138 U.S. 501, 505; Seaboard Airline Railway v. Continental Trust Co., 166 Fed. 597, 601-602 (c.C. N.D. Ga., 1908); Press Publishing Co. v. Industrial Accident Comm., 190 Cal. 114, 119, 210 Pac. 820; Industrial Commission v. Hammond, 77 Colo. 414, 419, 236 Pac. 1006, 1008; Mallinger v. Webster City Oil Co., 211 Iowa 847, 851, 234 N.W. 254, 257; Bowen v. Gradison Construction Co., 236 Ky. 270, 27s, 32 S.W. (2d) 1014, 1017; Burruss v. B.M.C. Logging Co., 38 N.M. 254, 258, 31 Pac. (2d) 263; Chicago, Rock Island & Pacific R. R. Co. v. Bennett, 36 Okla. 358, 363, 128 Pac. 705, 707; Nestle's Food Co. v. Industrial Commission, 205 Wis. 467 , 470 , 237 N.W. 117, 118. And, in fact, such a provision for continuity of service is so strongly indicative of an employer-empioyee relationship that it has been said to give rise to a presumption of such relationship. See Industrial Commission v. Hammond, supra; Chicago, Rock Island & Pacific R. R. Co. v. Bennett, supra.

Further, under the terms of the contract the Railroad has undertaken to furnish the tools and facilities necessary in the per­ formance of the work, and is to keep such facilities in a constant state of repair. This factor, too, is an important indication of the existence of an employer-empioyee relation, especially where, as here, the facilities furnished are of great value. See Mallinger v. Webster City Oil Co., supra, at p. 851, 234 N.W., at p. 257; Murray's Case, 130 Me. 181, 186, 154 Atl. 352, 354; Knicely v. West Virginia Midland Railway Co., 64 W. Va. 278, 61 S.E. 811, 813.

The contract provisions relating to the manner and basis of payment, and the procedure set up for an accounting at the end of each ore shipping season are inconsistent with an independent contract­ ual relationship. Under these provisions Addison Miller incurs no financial risk, for at the end of each season it is reimbursed by the Railroad Company for any losses suffered during that season by reason of the performance of the work. This insurance against financial loss is another factor held to be indicative of an employer-empioyee rela­ tionship, as distinguished from an independent contractual relationship. Root v. Shadboldt & Middleton. 195 Iowa 1225, 1232, 193 N.W. 634, 637. -7- The Director of Retirement Claims

Finally, the right of the Railroad to terminate the contract at any time, without cause, upon a mere twenty-four hour notice affords the Railroad a most effective means of compelling obedience by Addison Miller to the Railroad*s directions as to how the work shall be done. Such a right of termination as is here reserved by the Railroad Company is almost conclusive of the existence of an employer-empioyee relation­ ship. Gulf Refining Co. v. Brown, supra. p. 873; Press Publishing Co. v. Industrial Accident Comm. 190 Cal. 114, 210 Pac. 820; Maltz v. Jackoway-Katz Cap Co; 336 Mo. 1000, 1015, 82 S.VI. (2d) 909, 918; Cockran v. Rice. 26 S.D. 393, 128 N.W. 583, 585.

Consideration of all these circumstances warrants the con­ clusion that the Lake Superior and Ishpeming Railroad Company possesses continuing authority to supervise and direct the manner of the perfor­ mance of the work under the contract and that the individuals engaged in the performance of such work are "employees" of the Railroad within the meaning of the Railroad Retirement and Railroad Unemployment Insur­ ance Acts.

Even if it were determined that Addison Miller is operating the Railroad’s ore docks independently and that, therefore, the indivi­ duals performing the contract work are employees of Addison Miller and not of the Railroad, such individuals would, nevertheless, be covered under the Railroad Retirement and Railroad Unemployment Insurance Acts since, in that event, Addison Miller itself would, with respect to such ore dock operations, be an "employer" under the Acts as a carrier by railroad subject to Part I of the Interstate Commerce Act. Thiswould clearly follow from Union Stock Yard & Transit Co. v. United States, 308 U.S. 213 (1939). In that case the court held (at pp. 218-219) that in loading and unloading interstate carload shipments of livestock transported by railroad to and from its stockyard, the Stockyard Com­ pany was engaged in the performance of "railroad transportation serv­ ices" within the meaning of the term "transportation" as defined in Section 1(3) of the Interstate Commerce Act; that in the operation of the platforms and chutes used in loading and unloading such livestock it was engaged in the operation of "terminal facilities" within the meaning of the term "railroad" as defined in that Section; and that it ivas, therefore, "a 'carrier1 engaged in 'transportation of property wholly by railroad* as those terms are defined by the words of the statute." Having thus determined that the Stockyard Company was a railroad carrier, the court then went on to hold that it was engaged in a public or common calling, and hence was a common carrier by rail­ road within the meaning of the Interstate Commerce Act. In this con­ nection the court said (308 U.S., at pp. 220-221):

"The statute, it is true, does not purport to say when one who is a railroad carrier because engaged in furnishing railroad terminal facilities and —8— The Director of Retirement Claims

services, is to be deemed a 1 common carrier.1 But that question was put at rest in United States v. Brooklyn Eastern District Terminal, 249 U.S. 296. There a local terminal company rendering terminal services as the agent of numerous rail carriers, was held to be engaged in a public or common calling, and hence to be a common carrier within the meaning of the Hours of Service Act, 34 Stat. 1415, which is applicable to any common carrier by railroad engaged in interstate commerce. Cf. Southern Pacific Terminal Co. v. Interstate Commerce Commission, 219 U.S. 498; United States v. California, 297 U.S. 175, 181; United States v. Sioux City Stockyards Co., 162 Fed. 556.

"It is not important, as appellant seems to think, that, as an incident to the service it renders to shippers and to the line-haul carriers, it acts as agent of the latter. The character of the service in its relation to the public, determines whether the calling is a public one, and a common carrier does not cease to be such merely because in ren­ dering service to the public it acts as the agent of another. United States v. Brooklyn Eastern District Terminal, supra, 30?. Connecting common carriers frequently act in that capacity for each other without losing their status as such.

"Nor is it of weight that the terminal service includes no rail-haul (see Southern Pacific Cc. v. Interstate Commerce Commission, 219 U.S. 498) or that operation and control of the terminal facili­ ties are wholly separate from those of any railroad. United States v. Brooklyn Eastern District Terminal, supra, 305. It is enough that the loading and unloading are rail transportation services performed at a railroad terminal as a common or public calling by one who, in rendering it, engages in the trans­ portation of property by railroad within the meaning of the Act."

When the statutory definitions which were thus relied upon by the Supreme Court in the Union Stock Yard case are applied to Addison Miller it is equally clear that Addison Miller too would be a common carrier by railroad subject to Part I of the Interstate Commerce Act if it were independently operating the Railroad's ore dock. -9- The Director of Retirement Claims

There certainly can be no question that Addison Miller would then be operating a "railroad" within the meaning of Section 1(3) of the Interstate Commerce Act, since the term "railroad" expressly in­ cludes "terminals and terminal facilities of every kind used or neces­ sary in the transportation of the persons or property designated herein including all freight depots, yards, and grounds, used or necessary in the transportation or delivery of any such property." And the ore dock operated by Addison Miller, and the ore handling facilities located thereon and used by Addison Miller, are clearly "terminals and terminal facilities", which are both "used" and "necessary in the transportation" by the Lake Superior and Ishpeming Railroad Company of interstate iron ore shipments. It is likewise clear that Addison Miller would be per­ forming "transportation" as that term is defined in Section 1(3) of the Interstate Commerce Act.*r For, the dock and ore handling facili­ ties operated by Addison Miller are included vtithin the statutory term "all instrumentalities and facilities of shipment and carriage". And the ore handling services performed by Addison Miller through use of such instrumentalities and facilities are "services in connection with the . . . delivery, . . . transfer in transit, . . . and handling of property transported," within the meaning of the term "transportation", since such services are an integral and essential part of the complete railroad transportation service which the Superior and Ishpeming Rail­ road Company, in its published tariffs, has undertaken to perform.

By thus satisfying the statutory definitions of the terms "railroad" and "transportation" Addison Miller would clearly be, in the words of the Supreme Court, "a barrier1 engaged in ‘transporta­ tion of property wholly by railroad' as those terms are defined by the words of the statute." Union Stock Yard & Transit Co. v. United States, supra, at pp. 218-219. And it is also clear that, under the principle of lav: laid down'in the Brooklyn Eastern District Terminal and Union Stock Yard cases, Addison Miller would be operating the Rail­ road's ore dock facilities as a "common carrier." Such facilities are held out to the public by the Railroad Company under published tariffs as its ore terminal for the delivery of trans-lake shipments of iron ore; and Addison Miller, in the independent operation of the dock,

* The term "transportation" is defined in Section 1(3) as follows:

"The term 'transportation' as used in this part shall include locomotives, cars, and other vehicles, vessels, and all instrumentalities and facilities of shipment or carriage, irrespective of ownership or any contract, express or implied, for the use thereof, and all serv­ ices in connection with the receipt, delivery, elevation, and transfer in transit, ventilation, refrigeration or icing storage, and handling of property transported." (49 U.S.C. Sec. 1(3).) - 10- The Director of Retirement Claims

would have the obligation under its contract with the Railroad Company, as did the Brooklyn Eastern District Terminal under its contracts with the rail carriers using that terminal, to load and unload at the dock for a common charge all iron ore offered by the public for movement and handling across the dock. Thus, in handling under published tar­ iffs all the iron ore that passes through the terminal of the Rail­ road Company, Addison Miller would be serving the public as the substitute for such carrier, and hence, since it would be rendering a service distinctly public in character, it would be a "common carrier" under the doctrine of the Brooklyn Eastern District Terminal and Union Stock Yard cases.

It is therefore clear that if Addison Miller were operating the Railroad's ore dock independently, it would, in the operation thereof, be a common carrier by railroad subject to Part I of the Interstate Commerce Act and hence an "employer" within the meaning of the Railroad Retirement and Railroad Unemployment Insurance Acts.

Joseph H. Freehill General Counsel