March 4, 2019
Decided March 4, 2019
BNSF Railway Co. v. Loos, No. 17-1042
Today, the Supreme Court held 7-2 that payments for lost wages due to on-the-job injuries are a form of taxable “compensation” under the Railroad Retirement Tax Act (“RRTA”).
A railroad employee sued the railroad for work-related injuries and won a jury award that included $30,000 for lost wages. The railroad moved to withhold from that amount $3,765 to cover the employee’s share of taxes under the RRTA, which taxes railroad employee “compensation” in order to fund retirement benefits for railroad employees. 26 U.S.C. § 3231(e)(1). The district court denied the railroad’s motion and the Eighth Circuit affirmed, reasoning that an award for lost wages does not qualify as taxable “compensation” under the statute because “compensation” means “any form of money remuneration paid . . . for services rendered,” id., which does not include payments for services the employee would have rendered but for the injury.
Whether payments to railroad employees for lost wages due to on-the-job injuries are taxable “compensation” under the RRTA.
Yes. The term “compensation” under the RRTA includes not only payments for active service, but also payments for a period of absence from active service that stems from the “employer-employee relationship.” Social Sec. Bd. v. Nierotko, 327 U.S. 358, 366 (1946).
“[W]e hold that ‘compensation’ for RRTA purposes includes an employer’s payments to an employee for active service and for periods of absence from active service. It is immaterial whether the employer chooses to make the payment or is legally required to do so.”
Justice Ginsburg, writing for the majority
What It Means:
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