BNSF RAILWAY CO. v. LOOS
No. 17-1042
SUPREME COURT OF THE UNITED STATES
March 4, 2019
586 U.S. ___ (2019)
Argued November 6, 2018
OCTOBER TERM, 2018
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
BNSF RAILWAY CO. v. LOOS
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT
No. 17-1042. Argued November 6, 2018—Decided March 4, 2019
Respondent Michael Loos sued petitioner BNSF Railway Company under the Federal Employers’ Liability Act (FELA) for injuries he received while working at BNSF‘s railyard. A jury awarded him $126,212.78, ascribing $30,000 of that amount to wages lost during the time Loos was unable to work. BNSF asserted that the lost wages constituted “compensation” taxable under the Railroad Retirement Tax Act (RRTA) and asked to withhold $3,765 of the $30,000 to cover Loos‘s share of the RRTA taxes. The District Court and the Eighth Circuit rejected the requested offset, holding that an award of damages compensating an injured railroad worker for lost wages is not taxable under the RRTA.
Held: A railroad‘s payment to an employee for working time lost due to an on-the-job injury is taxable “compensation” under the RRTA. Pp. 2–14.
(a) In 1937, Congress created a self-sustaining retirement benefits system for railroad workers. The RRTA funds the program by imposing a payroll tax on both railroads and their employees, referring to the railroad‘s contribution as an “excise” tax,
The statutory foundation of the railroad retirement system mirrors that of the Social Security system. The Federal Insurance Contributions Act (FICA) taxes employers and employees to fund benefits distributed pursuant to the Social Security Act (SSA). Tax and benefit
(b) Given the textual similarity between the definitions of “compensation” and “wages,” the decisions on the meaning of “wages” in Social Security Bd. v. Nierotko, 327 U. S. 358, and United States v. Quality Stores, Inc., 572 U. S. 141, inform this Court‘s comprehension of the RRTA term “compensation.” In Nierotko, the Court held that “wages” embraced pay for active service as well as pay received for periods of absence from active service, 327 U. S., at 366, and concluded that backpay for time lost due to “the employer‘s wrong” counted as “wages,” id., at 364. In Quality Stores, the Court held that severance payments qualified as “wages” taxable under the FICA. 572 U. S., at 146–147. In line with these decisions, the Court holds that “compensation” under the RRTA encompasses not simply pay for active service but also pay for periods of absence from active service—provided that the remuneration in question stems from the “employer-employee relationship.” Nierotko, 327 U. S., at 366.
Damages awarded under the FELA for lost wages fit comfortably within this definition. See BNSF R. Co. v. Tyrrell, 581 U. S. 402. If a railroad negligently fails to maintain a safe railyard and a worker is injured as a result, the FELA requires the railroad to compensate the injured worker for working time lost due to the employer‘s wrongdoing. FELA damages for lost wages, like backpay, are “compensation” taxable under the RRTA. Pp. 4–7.
(c) The Eighth Circuit construed “compensation” for RRTA purposes to mean only pay for active service, but this reading cannot be reconciled with Nierotko and Quality Stores. In addition, the RRTA‘S pinpointed exclusions for certain types of payments for time lost signal that nonexcluded pay for time lost remains RRTA-taxable “compensation.” Pp. 7–10.
(d) Loos contends that “compensation” does not include payments made to compensate for an injury. This reading, however, is at odds with Nierotko, which held that “wages” included backpay awarded to redress “the loss of wages” occasioned by “the employer‘s wrong.” 327 U. S., at 364.
Loos also argues that the exclusion of personal injury damages from “gross income” for federal income tax purposes, see
865 F. 3d 1106, reversed and remanded.
GINSBURG, J., delivered the opinion of the Court, in which ROBERTS, C. J., and BREYER, ALITO, SOTOMAYOR, KAGAN, and KAVANAUGH, JJ., joined. GORSUCH, J., filed a dissenting opinion, in which THOMAS, J., joined.
NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
No. 17-1042
BNSF RAILWAY COMPANY, PETITIONER v. MICHAEL D. LOOS
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT
[March 4, 2019]
JUSTICE GINSBURG delivered the opinion of the Court.
Respondent Michael Loos was injured while working at petitioner BNSF Railway Company‘s railyard. Loos sued BNSF under the Federal Employers’ Liability Act (FELA),
The question presented: Is a railroad‘s payment to an employee for working time lost due to an on-the-job injury taxable “compensation” under the RRTA,
I
In 1937, Congress created a self-sustaining retirement benefits system for railroad workers. The system provides generous pensions as well as benefits “correspon[ding] . . . to those an employee would expect to receive were he covered by the Social Security Act.” Hisquierdo v. Hisquierdo, 439 U. S. 572, 575 (1979).
Two statutes operate in concert to ensure that retired railroad workers receive their allotted pensions and benefits. The first, the RRTA, funds the program by imposing a payroll tax on both railroads and their employees. The RRTA refers to the railroad‘s contribution as an “excise” tax,
Taxes under the RRTA and benefits under the RRA are measured by the employee‘s “compensation.”
The IRS‘s reading of the word “compensation” as it appears in the RRTA has remained constant. One year after the RRTA‘s adoption, the IRS stated that “compensation” is not limited to pay for active service but reaches, as well, pay for periods of absence. See
Congress created both the railroad retirement system and the Social Security system during the Great Depression primarily to ensure the financial security of members of the workforce when they reach old age. See Wisconsin Central Ltd. v. United States, 585 U. S. 274 (2018) (slip op., at 1); Helvering v. Davis, 301 U. S. 619, 641 (1937). Given the similarities in timing and purpose of the two programs, it is hardly surprising that their statutory foundations mirror each other. Regarding Social Security, the Federal Insurance Contributions Act (FICA),
II
A
To determine whether RRTA-qualifying “compensation” includes an award of damages for lost wages, we begin
Given the textual similarity between the definitions of “compensation” for railroad retirement purposes and “wages” for Social Security purposes, our decisions on the meaning of “wages” in Social Security Bd. v. Nierotko, 327 U. S. 358 (1946), and United States v. Quality Stores, Inc., 572 U. S. 141 (2014), inform our comprehension of the RRTA term “compensation.” In Nierotko, the National Labor Relations Board found that an employee had been “wrongfully discharged for union activity” and awarded him backpay. 327 U. S., at 359. The Social Security Board refused to credit the backpay award in calculating the employee‘s benefits. Id., at 365-366. In the Board‘s view, “wages” covered only pay for active service. Ibid. We disagreed. Emphasizing that the phrase “any service performed” denotes “breadth of coverage,” we held that “wages” means remuneration for “the entire employer-employee relationship“; in other words, “wages” embraced pay for active service plus pay received for periods of absence from active service. Id., at 366. Backpay, we
In Quality Stores, we again trained on the meaning of “wages,” reiterating that “Congress chose to define wages . . . broadly.” 572 U. S., at 146 (internal quotation marks omitted). Guided by Nierotko, Quality Stores held that severance payments qualified as “wages” taxable under the FICA. “[C]ommon sense,” we observed, “dictates that employees receive th[ose] payments ‘for employment.‘” 572 U. S., at 146. Severance payments, the Court spelled out, “are made to employees only,” “are made in consideration for employment,” and are calculated “according to the function and seniority of the [terminated] employee.” Id., at 146-147.
In line with Nierotko, Quality Stores, and the IRS‘s long held construction, we hold that “compensation” under the RRTA encompasses not simply pay for active service but, in addition, pay for periods of absence from active service—provided that the remuneration in question stems from the “employer-employee relationship.” Nierotko, 327 U. S., at 366.
B
Damages awarded under the FELA for lost wages fit comfortably within this definition. The FELA “makes railroads liable in money damages to their employees for on-the-job injuries.” BNSF R. Co. v. Tyrrell, 581 U. S. 402, 407 (2017) (slip op., at 1); see
III
A
The Eighth Circuit construed “compensation” for RRTA purposes to mean only pay for “services that an employee actually renders,” in other words, pay for active service. Consequently, the court held that “compensation” within the RRTA‘s compass did not reach pay for periods of absence. 865 F. 3d, at 1117. In so ruling, the Court of Appeals attempted to distinguish Nierotko and Quality Stores. The Social Security decisions, the court said, were inapposite because the FICA “taxes payment for ‘employment,‘” whereas the RRTA “tax[es] payment for ‘services.‘” 865 F. 3d, at 1117. As noted, however, supra, at 3–4, the FICA defines “employment” in language resembling the RRTA in all relevant respects. Compare
Nierotko and Quality Stores apart, we would in any event conclude that the RRTA term “compensation” covers
On enactment of the RRTA in 1937, Congress made “compensation” taxable at the time it was earned and provided specific guidance on when pay for time lost should be “deemed earned.” Congress instructed: “The term ‘compensation’ means any form of money remuneration earned by an individual for services rendered as an employee . . . including remuneration paid for time lost as an employee, but [such] remuneration . . . shall be deemed earned in the month in which such time is lost.” 1937 RRTA, §1(e), 50 Stat. 436 (emphasis added). In 1946, Congress clarified that the phrase “pa[y] for time lost” meant payment for “an identifiable period of absence from the active service of the employer, including absence on account of personal injury.” Act of July 31, 1946 (1946 Act), §2, 60 Stat. 722.
Thus, originally, the RRTA stated that “compensation” included pay for time lost, and the language added in 1946 presupposed the same. In subsequent amendments, however, Congress removed the references to pay for time lost. First, in 1975, Congress made “compensation” taxable when paid rather than when earned. Congress simultaneously removed the 1937 language that both referred to pay for time lost and specified when such pay should be “deemed earned.” So amended, the definitional sentence, in its current form, reads: “The term ‘compensation’ means any form of money remuneration paid to an individual for services rendered as an employee ....” Act of Aug. 9,
Second, in 1983, Congress shifted the wage base for RRTA taxes from monthly “compensation” to annual “compensation.” See Railroad Retirement Solvency Act of 1983 (1983 Act), §225, 97 Stat. 424-425. Because the “monthly wage bases for railroad retirement taxes [were being] changed to annual amounts,” the House Report explained, the RRTA required “[s]everal technical and conforming amendments.” H. R. Rep. No. 98–30, pt. 2, р. 29 (1983). In a section of the 1983 Act titled “Technical Amendments,” Congress struck the subsection containing, among other provisions, the 1946 Act‘s clarification of pay for time lost. 1983 Act, §225, 97 Stat. 424-425. In lieu of the deleted subsection, Congress inserted detailed instructions concerning the new annual wage base.
As the Court of Appeals and the dissent see it, the 1975 and 1983 deletions show that “compensation” no longer includes pay for time lost. 865 F. 3d, at 1119; see post, at 6-7. We are not so sure. The 1975 Act left unaltered the language at issue here, “remuneration . . . for services rendered as an employee.” That Act also left intact the 1946 Act‘s description of pay for time lost. Continuing after the 1975 Act, then, such pay remained RRTA-taxable “compensation.” The 1983 Act, as billed by Congress, effected only “[t]echnical [a]mendments” relating to the change from monthly to annual computation of “compensation.” Concerning the 1975 and 1983 alterations, the IRS concluded that Congress revealed no “inten[tion] to exclude payments for time lost from compensation.” 59 Fed. Reg. 66188 (1994). We credit the IRS reading. It would be passing strange for Congress to restrict substantially what counts as “compensation” in a manner so oblique.
Moreover, the text of the RRTA continues to indicate that “compensation” encompasses pay for time lost. The RRTA excludes from “compensation” a limited subset of
In justification of its confinement of RRTA-taxable receipts to pay for active service, the Court of Appeals also referred to the RRA. The RRA, like the RRTA as enacted in 1937, states that “compensation” “includ[es] remuneration paid for time lost as an employee” and specifies that such pay “shall be deemed earned in the month in which such time is lost.”
B
Instead of adopting lockstep the Court of Appeals’ interpretation, Loos takes a different approach. In his view, echoed by the dissent, “remuneration . . . for services rendered” means the “package of benefits” an employer pays “to retain the employee.” Brief for Respondent 37; post, at 3-4. He therefore agrees with BNSF that benefits like sick pay and vacation pay are taxable “compensation.” He contends, however, that FELA damages for lost wages are of a different order. They are not part of an employee‘s “package of benefits,” he observes, and therefore should
Our decision in Nierotko undermines Loos‘s argument that, unlike sick pay and vacation pay, payments “compensat[ing] for an injury,” Brief for Respondent 20, are not taxable under the RRTA. We held in Nierotko that an award of backpay compensating an employee for his wrongful discharge ranked as “wages” under the SSA. That was so, we explained, because the backpay there awarded to the employee redressed “the loss of wages” occasioned by “the employer‘s wrong.” 327 U. S., at 364; see supra, at 5. Applying that reasoning here, there should be no dispositive difference between a payment voluntarily made and one required by law.4
Nor does United States v. Cleveland Indians Baseball Co., 532 U. S. 200 (2001), aid Loos‘s argument, repeated by the dissent. See post, at 8. Indeed, Cleveland Indians reasserted Nierotko‘s holding that “backpay for a time in
C
Loos presses a final reason why he should not owe RRTA taxes on his lost wages award. Loos argues, and the District Court held, that the RRTA‘s tax on employees does not apply to personal injury damages. He observes that the RRTA taxes “the income of each employee.”
The argument is unconvincing. As the Government points out, the District Court, echoed by Loos, conflated “the distinct concepts of ‘gross income,’ [a prime component of] the tax base on which income tax is collected, and ‘compensation,’ the separately defined category of payments that are taxable under the RRTA.” Brief for United States as Amicus Curiae 15. Blending tax bases that Congress kept discrete, the District Court and Loos proffer a scheme in which employees pay no tax on damages
For federal income tax purposes, “gross income” means “all income” “[e]xcept as otherwise provided.”
Congress, we reiterate, specified not “gross income” but employee “compensation” as the tax base for the RRTA‘s income and excise taxes.
Given the multiple flaws in Loos‘s last ditch argument, we conclude that
*
*
*
In harmony with this Court‘s decisions in Nierotko and Quality Stores, we 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. Either way, the payment is remitted to the recipient because of his status as a service-rendering employee. See
For the reasons stated, FELA damages for lost wages qualify as RRTA-taxable “compensation.” The judgment of the Court of Appeals for the Eighth Circuit is accordingly reversed, and the case is remanded for proceedings consistent with this opinion.
It is so ordered.
SUPREME COURT OF THE UNITED STATES
No. 17-1042
BNSF RAILWAY COMPANY, PETITIONER v. MICHAEL D. LOOS
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT
[March 4, 2019]
JUSTICE GORSUCH, with whom JUSTICE THOMAS joins, dissenting.
BNSF Railway‘s negligence caused one of its employees a serious injury. After a trial, a court ordered the company to pay damages. But instead of sending the full amount to the employee, BNSF asserted that it had to divert a portion to the Internal Revenue Service. Why? BNSF said the money represented taxable “compensation” for “services rendered as an employee.”
The Court does not lay out the facts of the case, but they are relevant to my analysis and straightforward enough. Years ago, Michael Loos was working for BNSF in a train yard when he fell into a hidden drainage grate and injured his knee. He missed work for many months, and upon his return he had a series of absences, many of which he attributed to knee-injury flareups. When the company moved to fire him for allegedly violating its attendance policies, Mr. Loos sued. Among other things, Mr. Loos sought damages for BNSF‘s negligence in maintaining the
Then a strange thing happened. BNSF argued that the lost wages portion of Mr. Loos‘s judgment represented “compensation” to him “for services rendered as an employee” and was thus taxable income under the Railroad Retirement Tax Act (RRTA).
What‘s the reason for BNSF‘s tireless campaign? Is the
Whatever the reason for BNSF‘s gambit, the problems with it start for me at the first step of the statutory interpretation analysis—with the text of the law itself. The RRTA taxes an employee‘s “compensation,” which it defines as “money remuneration . . . for services rendered as an employee to one or more employers.”
But damages for negligence are different. No one would describe a dangerous fall or the wrenching of a knee as a “service rendered” to the party who negligently caused the accident. BNSF hardly directed Mr. Loos to fall or offered to pay him for doing so. In fact, BNSF didn‘t even pay Mr. Loos voluntarily; he had to wrest a judgment from the railroad at the end of a legal battle. So Mr. Loos‘s FELA judgment seems to me, as it did to every judge in the proceedings below, unconnected to any service Mr. Loos rendered to BNSF. Instead of being “compensation” for “services rendered as an employee,” it seems more natural to say that the negligence damages BNSF paid are “compensation” to Mr. Loos for his injury. That‘s exactly how we usually understand tort damages—as “compensation” for an “injury” caused by “the unlawful act or omission or negligence of another.” Black‘s Law Dictionary 314 (2d ed. 1910). And that‘s exactly how FELA describes the damages it provides—stating that it renders a railroad “liable” not for services rendered but for any “injury” caused by the defendant‘s “negligence.”
Of course, BNSF isn‘t without a reply. Time and again
Looking beyond the statute‘s text to its history only compounds BNSF‘s problems. To be clear, the statutory history I have in mind here isn‘t the sort of unenacted legislative history that often is neither truly legislative (having failed to survive bicameralism and presentment) nor truly historical (consisting of advocacy aimed at winning in future litigation what couldn‘t be won in past statutes). Instead, I mean here the record of enacted changes Congress made to the relevant statutory text over time, the sort of textual evidence everyone agrees can sometimes shed light on meaning. See United States v. Wong Kim Ark, 169 U. S. 649, 653-654 (1898).
The RRTA‘s statutory history is long and instructive. Beginning in 1937, the statute defined taxable “compensation” to include remuneration “for services rendered,” but with the further instruction that this included compensation “for time lost.” Carriers Taxing Act of 1937, §1(e), 50 Stat. 436. Courts applying the RRTA‘s sister statute, the Railroad Retirement Act (RRA), understood this language to capture settlement payments for personal injury claims that would not otherwise qualify as “remuneration . . . for services rendered.” See, e.g., Jacques v. Railroad Retirement Bd., 736 F. 2d 34, 39-40 (CA2 1984); Grant v. Railroad Retirement Bd., 173 F. 2d 385, 386–387 (CA10 1949). Congress itself seemed to agree, explaining in 1946 that remuneration for “time lost” includes payments made “with respect to an . . . absence on account of personal injury.” §3(f), 60 Stat. 725. But then Congress reversed field. In 1975, it removed payments “for time lost” from the RRTA‘s definition of “compensation.” §204, 89 Stat. 466. And in 1983, Congress overwrote the last remaining reference to payments “for time lost” in a nearby section. §225, 97 Stat. 424-426. To my mind, Congress‘s decision to remove the only language that could have fairly captured the damages here cannot be easily ignored.
Yet BNSF would have us do exactly that. On its account, the RRTA‘s discussions about compensation for time lost and personal injuries only ever served to illustrate what has qualified all along as remuneration for “services rendered.” So, on its view, when Congress first added and then removed language about time lost and personal injuries, it quite literally wasted its time because none of its additions and subtractions altered the statute‘s meaning. Put another way, BNSF asks us to read back into the law words (time lost, personal injury) that Congress deliberately removed on the assumption they were never really needed in the first place. As I see it, that is
Looking beyond the text and history of this statute to compare it with others confirms the conclusion. Where the RRTA directs the taxation of railroad employee income to fund retirement benefits, the RRA controls the calculation of those benefits. And, unlike the RRTA, that statute continues to include “pay for time lost” in the definition of “compensation” it uses to calculate benefits.
With so much in the statute‘s text, history, and surroundings now pointing for Mr. Loos, BNSF is left to lean heavily on case law. The company says we must rule its way primarily because of Social Security Bd. v. Nierotko, 327 U. S. 358 (1946). But I do not see anything in that case dictating a victory for BNSF. Nierotko concerned a different statute, a different legal claim, and a different factual context. There, the plaintiff brought a wrongful termination claim before the National Labor Relations Board, claiming that his employer fired him in retaliation for union activity. The NLRB ordered the employee reinstated to his former job and paid as if he had never left. Under those circumstances, this Court held that for pur-
By this point BNSF is left with only one argument, which it treats as no more than a last resort: Chevron deference. In the past, the briefs and oral argument in this case likely would have centered on whether we should defer to the IRS‘s administrative interpretation of the RRTA. After all, the IRS (at least today) agrees with BNSF‘s interpretation that “compensation . . . for services rendered” includes damages for personal injuries. And the Chevron doctrine, if it retains any force, would seem to allow BNSF to parlay any statutory ambiguity into a colorable argument for judicial deference to the IRS‘s view, regardless of the Court‘s best independent understanding of the law. See Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837 (1984). Of course, any Chevron analysis here would be complicated by the gov-
But nothing like that happened here. BNSF devoted scarcely any of its briefing to Chevron. At oral argument, BNSF‘s lawyer didn‘t even mention the case until the final seconds—and even then “hate[d] to cite” it. Tr. of Oral Arg. 58. No doubt, BNSF proceeded this way well aware of the mounting criticism of Chevron deference. See, e.g., Pereira v. Sessions, 585 U. S. 198 (2018) (Kennedy, J., concurring). And no doubt, too, this is all to the good. Instead of throwing up our hands and letting an interested party—the federal government‘s executive branch, no less—dictate an inferior interpretation of the law that may be more the product of politics than a scrupulous reading of the statute, the Court today buckles down to its job of saying what the law is in light of its text, its context, and our precedent. Though I may disagree with the result the Court reaches, my colleagues rightly afford the parties before us an independent judicial interpretation of the law. They deserve no less.