203 L. Ed. 2d 160
U.S.2019Background
- Michael Loos, a BNSF employee, was injured on the job and sued under the Federal Employers' Liability Act (FELA); a jury awarded $126,212.78, including $30,000 for lost wages.
- BNSF sought an offset to withhold RRTA taxes from the $30,000, asserting the lost-wages award is RRTA "compensation." The IRS treats pay for time lost as RRTA-compensation.
- The District Court and Eighth Circuit held FELA lost-wage damages are not RRTA-taxable compensation; the Supreme Court granted review to resolve a circuit split.
- The RRTA defines "compensation" as "remuneration paid to an individual for services rendered as an employee;" the FICA/SSA use similar language for "wages."
- The IRS long interpreted RRTA "compensation" to include pay for time lost (including backpay and similar awards); the Court considered precedent and statutory history.
Issues
| Issue | Plaintiff's Argument (Loos) | Defendant's Argument (BNSF) | Held |
|---|---|---|---|
| Whether FELA damages for lost wages constitute RRTA "compensation" taxable under 26 U.S.C. § 3231(e)(1) | Lost-wage damages compensate for injury, not for "services rendered"; they are tort damages (and some are excludable under §104 principles) | Lost-wage awards function like backpay/other remuneration for employment; RRTA (and IRS regs) treat pay for time lost as "compensation" | Yes. RRTA "compensation" includes pay for periods of absence; FELA lost-wage awards are taxable RRTA compensation. |
Key Cases Cited
- Social Security Bd. v. Nierotko, 327 U.S. 358 (holding backpay counts as "wages" for Social Security benefit calculations)
- United States v. Quality Stores, Inc., 572 U.S. 141 (holding severance pay is taxable "wages" under FICA; Congress defined "wages" broadly)
- United States v. Cleveland Indians Baseball Co., 532 U.S. 200 (reaffirming that backpay can be treated as wages for taxation; addressed allocation timing)
- Hisquierdo v. Hisquierdo, 439 U.S. 572 (discussing parallels between railroad retirement system and Social Security)
- Wilkerson v. McCarthy, 336 U.S. 53 (noting FELA liability rests on negligence)