March 28, 1940

Mr. John C. Shields, General Solicitor Pere. Marquette Railway Company General Motors Building Detroit, Michigan

Dear Sir:

This will acknowledge receipt of your letter, and the memo­ randum attached thereto, of February 20, 1940, in which you express the hope that I may be able to find that the circumstances under which the operations of the Lake Erie Navigation Company are conducted are such as to exclude it from the operation of the Railroad Unemployment Insurance Act. Neither your letter nor your memorandum contain any reference to the Railroad Retirement Act. Presumably, however, since the coverage provisions of the Railroad Retirement and Railroad Unem­ ployment Insurance Acts are substantially identical, you desire a reconsideration of the status of the Navigation Company under both Acts.

After a careful consideration of your memorandum, I am of the opinion that it does not afford any basis for changing my conclu­ sion, embodied in my letter of December 2, 1929, to Mr. R. J . Bowman (Opinion No. 1939, R. R. 117), that the Navigation Company is an "employer" under the Railroad Retirement and the Railroad Unemploy­ ment Insurance Acts; and that, since it is not conducting the principal part of its business within the United States, only service rendered to it in the United States is covered by and creditable under those Acts.

You have not submitted any additional information with respect to the operations of the Navigation Company which would affect, in any way, my conclusion that such company is engaged in the operation of equipment and facilities and in the performance of a service in connection with the transportation of property by rail­ road within the meaning of Section 1 (a) of the Railroad Retirement and the Railroad Unemployment Insurance Acts and Section 202.07 of the Regulations (4 Federal Register, 1479; April 7, 1939). In this connection, you contend that, although "the Lake Erie Navigation Company concurs in tariffs of certain railroads, it has no part in the performance of the duties imposed by lav; on the Fere Marquette Railway Company as a common carrier by railroad;” and, in support of such contention, you state as follows: -2- Mr. John C. Shields

"x'he Lake Erie Navigation Company, while owned indirectly by Pere Marquette Railway Company, func­ tions as it would if owned by an independent steam­ ship company. Neither its existence nor the work and service it engages in is necessary to the opera­ tion of the Pere Marquette Railway Company as a common carrier by railroad. It is an enterprise which the Pere Marquette Railway Company has the right to engage in apart from the performance of its duties as a common carrier, and one which it has a right to sell or otherwise dispose of at any time without conflicting with its duties as a common carrier."

That a company may not have "a part in the performance of duties imposed by law” on its controlling railroad as a common car­ rier by railroad does not necessarily oxclude the company from the coverage of the Acts, since it may be engaged in other railroad con­ nected activities which are sufficient to constitute it an 'employer” within the meaning of the Acts. Nothing further need be added to the discussion in my letter to Mr. Bowman (cited above) and tho v authorities included therein to establish that the Navigation Com­ pany, in transporting coal by boat from railroad interchange connec­ tions at the United States Lake Erie ports to Erieau, Ontario, and unloading and storing coal at Erieau in order to permit its further transportation by railroad, and thus serving as an integral part of a rail-water freight transportation unit, is engaged in the operation of equipment and facilities and in the performance of a service in connection with railroad transportation within the meaning of the Acts and the Regulations.

You also advance for our consideration the facts that the Navigation Company was incorporated under the laws of the Dominion of Canada; end that all the officers and members of the crew of the Navigation Company's steamer operating across Lake Erie are Canadian citizens or British subjects. The laws of Canada, you state, require certificated officers to be British subjects, although the sailors need not be citizens of Canada.

The proviso in Section 1 (e) of the Railroad Unemployment Insurance Act that "an individual not a citizen or resident of the United States shall not be deemed to be in the service of an employer when rendering service outside the United States to an employer v.ho is required under the laws applicable in the place "here the service is rendered to employ therein, in whole or in part, citizens or resi­ dents thereof” (underscoring supplied) is inapplicable to the situa­ tion of the Navigation Company. Under my ruling, only service which is rendered to the Navigation Company in the United States is credit­ able in any event, and the proviso in question only applies to service rendered outside the United States. Mr. John C. Shields

Except for this proviso in the Railroad Unemployment Insur­ ance Act, there is no limitation imposed on the coverage of the Acts based on citizenship or residence of employees or place of incorpora­ tion of employers. The only other territorial distinction made in the Acts is between companies which conduct the principal part of their business in the United States and companies which conduct the principal part of their business outside the United States. In the case of the former class of companies, all service to them is credit­ able whether .rformed within or without the United States, except that, under the proviso in Section 1 (e) of the Railroad Unemployment Insurance Act, service rendered outside of the United States to an employer required under the laws applicable in the place where the service is rendered to employ citizens or residents thereof is not creditable. In the case of employers conducting the principal part of their business outside the United States, service to them is creditable only if rendered in the United States. See also Sec­ tion 203.06 of the Board's Regulations under the Railroad Retirement Act of 1957 (4 Fed. Register 1480; April 7, 1939), which provides that "the age, citizenship, or residence of an individual ... shall be of no force or effect in determining whether or not such individ­ ual is an employee within the meaning of the Act."

In your memorandum you make the further contention that

"The employment relation between the Lake Erie Navigation Company and its employees is governed by the laws of Canada. The employees of this company perform no service within the jurisdiction of the United States to anyone except the Navigation Com­ pany and this service is limited to navigating a boat to certain United States ports where it is loaded by others. If this be called rendering a service within the United States, then it is serv­ ice which is only incidental. In this situation, to bring the Navigation Company v/ithin the law in question would not only constitute an invalid interfer­ ence with the right of contract between a Canadian corporation and its employees, but would give to that lav/ extraterritorial effect, and because this is dehors the power of the Congress, it must be said that there was no intent on the part of the Congress to include such companies as the Naviga­ tion Company within the Act."

The question of whether Congress may give legislation such as the Railroad Retirement and Railroad Unemployment Insurance Acts extraterritorial effect is not involved in this case, since under my above-cited opinion on the status of the Navigation Company, only such service as is performed to the Navigation Company in the United -4- Mr. John C. Shields

States is creditable. Even assuming that such operations as are con­ ducted by the Navigation Company in the United States are only inci­ dental to operations conducted outside the United States, it could not, of course, be concluded that Congress is, therefore, powerless to legislate with respect to operations conducted within the United States, no mat4: r how slight or trivial such operations might be.

You express the apprehension that certain undesirable results might follow as a result of including the employees of the Navigation Company under the Acts. Thus you state that every member of the crew falls within the provision of the Workmen's Compensation Act of Canada, and that, if Canada enacts the presently contemplated unemployment insurance legislation, the members of such crew might be entitled to draw benefits from both the United States and Canada. Moreover, you point out that since the members of the crew are only employed eight months out of the year, the United States might be called upon to pay to them unemployment insurance in amounts not commensurate with the taxes received under the Railroad Unemployment Insurance Act. Although certain of the factors indicated might con­ ceivably have some bearing on the question of an individual's quali­ fications for unemployment insurance benefits under the Railroad Unemployment Insurance Act, the foregoing factors have no relevancy to the question of whether the Navigation Company and the service of its employees are covered by the Acts, since there is nothing in such Acts which would remove an "employer1' or the service of its employees from their coverage by virtue of those factors. It is the Board's duty to administer the Acts in accordance with their provisions. Such undesirable results as you foresee seem to be matters properly to be addressed to Congress.

We appreciate the difficulty which, as you point out, is involved in ascertaining the extent of the service rendered by employ­ ees of the Navigation Company in the United States and the remunera­ tion received for such service. You state that "In navigating the boat, only a ’"vt of the crew is on duty at a time. A change of watch is made while the ship is under way. As a matter of guess work, it is thought that about one-third of the crew's time is spent in United States waters, but there is no way of determining this tine with accuracy." You realize, however, that the Board cannot by reason of such difficulties deprive the employees of the Navigation Company of the benefits given to them by the provisions of the Acts.

I suggest that the Navigation Company attempt to devise a reasonable method for allocating the compensation and service of the employees of the Navigation Company as betv/een their service in the United States and their service outside the United States, and report to the Board in the regular prescribed manner the compensation so allocated to service rendered in the United States, and the service involved. You must appreciate that any such allocation is subject to -5- Mr. John C. Shields

the provisions of Section 8 of the Railroad Retirement Act of 1937 and Section 6 of the Railroad Unemployment Insurance Act.

If you have any further inquiries in this matter, I shall be glad to give you such information as you may desire.

Very truly yours,

Lester P. Schoene General Counsel