STB Finds Dispatching Contractor is a Rail Carrier for RRB purposes

The Surface Transportation Board ruled on November 15, 2013 that a contractor that provides rail dispatch services to small and regional railroads is a rail carrier for purposes of the Railroad Retirement Act. The STB decision, which was not unanimous, and contains a well-reasoned dissent, is attached here.

Rutland Vermont-based Rail-Term is small privately owned company that provides rail dispatch services to small and regional rail carriers. Rail-Term has no ownership in its rail customers, nor does it own any tracks, trains, or employ any personnel besides contract dispatchers. The case came before the STB from the U.S. Court of the Appeals for the D.C. Circuit, which was hearing Rail-Term's appeal after the Railroad Retirement Board (RRB) found that Rail Term was a rail carrier and therefore was required to pay RRB taxes for its employees. The Board's decision also comes nearly two years after the D.C. Circuit stayed the case for STB input on the question of rail carrier status.

The Basis for the Board's decision was that Rail-Term, though providing no transportation services itself, did provide services (i.e. dispatching) which are an "essential component of its clients' holding out of interstate common carrier rail transportation." And, those dispatching services are "required" for the actual rail carrier to provide service to its customers. Ultimately, the Board found that the dispatching contractor has "control" over "a key step in the movement of the trains of its rail common carrier customers."

The dissent filed by STB Vice Chair Begeman, questions the factual and legal basis for the Board finding a contractor that does not hold itself out as common carrier, own, or operate trains, is in fact a rail carrier.

The likely result of this decision is increased costs for small railroads that contract out dispatching services, now that contract dispatchers can be considered "carriers" themselves, and subject to the RRB Act. The decision also raises many questions, including whether this decision makes a contractor liable under the Federal Employer's Liability Act, and just what type of contract services will be considered "integral" or "essential" to a carrier's operations to impose carrier status on independent contractors?