This is the decision of the Railroad Retirement Board regarding whether the
services performed by MC for Norfolk Southern is creditable service under the
Railroad Retirement Act (45 U.S.C. § 231 et seq.) and the Railroad Unemployment
Insurance Act (45 U.S.C. § 351 et seq.). The Board's Office of Programs has
requested a determination regarding this issue.
MC states that he performs freight car inspections for Norfolk Southern
Corporation. Prior to his retirement, he was an employee of Norfolk Southern and
supervised other employees in building and inspecting freight cars. He states
that he is not supervised and determines his own working hours. The length of
service is indefinite (apparently he works “as needed”) and he states that he is
not supervised and does not supervise people. MC is paid $250.00 per day plus
expenses such as meals, lodging, car rental, etc. He receives no fringe benefits
and is responsible for any tax liability. He works on the premises of Norfolk
Southern. The contract with Norfolk Southern entered into on or about December
3, 2004, was with MC personally. The contract was modified on March 18, 2005, to
substitute M&B Contracting and Consulting, LLC, a limited liability company.
MC and his spouse, RC, are members of M&B Contracting and Consulting, LLC. He
receives a 50 percent share of the profits and distributions, up to $12,000.00,
the current annual exempt amount (i.e., the amount of earnings below which there
is no reduction in an annuity due to earnings). MC receives a salary, plus 50
percent of any of profits in excess of $24,000.00. MC has certain expenses
associated with his work which are reimbursed by Norfolk Southern.
In response to the agency's request for comments on MC's description of his
services, Michael J. Adamczyk, Manager Car Maintenance, Norfolk Southern,
supplied the following description of Mr. Crowder's work:
Section 1(b) of the Railroad Retirement Act (RRA) 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:
MC has been employed on a consulting basis to
inspect Bad Order freight cars verifying or updating information in our Bad
Order database. At the direction of another retired NS employee who is also on
contract, he traveled to many locations on Norfolk Southern property where BO
cars were stored. Upon arrival he consulted with local NS mechanical
supervisors about cars and their physical location in the yard. He located
those cars and inspected them, estimating the cost to repair and recording
that data on an NS supplied form. He may have been accompanied by a local
supervisor during the inspections as a courtesy for assistance in locating the
cars, transportation within the train yard, as well as for information sharing
and safety concerns.
(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)).
As the above definitions would indicate, the determination of whether or not an
individual performs service as an employee of a covered employer is a fact-based
decision that can only be made after full consideration of all relevant facts.
In considering whether the control test in paragraph (A) is met, the Board will
consider criteria that are derived from the commonly recognized tests of
employee-independent contractor status developed in the common law. In addition
to those factors, in considering whether paragraphs (B) and/or (C) apply to an
individual, we consider whether the individual is integrated into the employer's
operations. The criteria utilized in an employee service determination are
applied on a case-by-case basis, giving due consideration to the presence or
absence of each element in reaching an appropriate conclusion with no single
element being controlling. Because the holding in this type of determination is
completely dependent upon the particular facts involved, each holding is limited
to that set of facts and will not be automatically applied to any other case.
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
There is no evidence that MC is under the direction and control of Norfolk
Southern employees. There is no evidence that he receives any instructions from
Norfolk Southern employees or supervision of any kind. It should be noted that
his contractual work for Norfolk Southern is apparently different from his
former work as an employee, where he supervised other Norfolk Southern
The tests set forth under paragraphs (B) and (C) go beyond the test contained
in paragraph (A) and could hold an individual a covered employee if he is
integrated into the railroad's operations even though the control test in
paragraph (A) is not met. The Board finds that MC is an employee of Norfolk
Southern, if not under paragraph (B) above, then under paragraph (C). The
services which MC performs are personal. He is not at liberty to substitute some
other individual and, as mentioned above, the contract originally was between
Norfolk Southern and MC personally, rather than between the limited liability
company and Norfolk Southern. The services are being performed on Norfolk
Southern property, and car inspections, under the conditions described, are
integrated into the operations of the Norfolk Southern.
Under an Eighth Circuit decision consistently followed by the Board, the
tests 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 the limited
liability company 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. In this case, it does not
appear that MC has any investment in the limited liability company or any
opportunity for profit or loss. It appears that the limited liability company's
only customer is Norfolk Southern. Accordingly, it is the opinion of a majority
of the Board that the limited liability company is not an independent business,
and that the exclusion under Kelm would not apply.
Accordingly, a majority the Board finds that the services performed by MC
beginning December 3, 2004, under the contract between him and Norfolk Southern,
later modified to be between the limited liability company and Norfolk Southern,
were and are being performed by MC as an employee of Norfolk Southern.
Original signed by:
||Michael S. Schwartz
||V.M. Speakman, Jr.
||Jerome F. Kever (Dissenting)