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U.S. Supreme Court: Wages paid to injured railroad worker

Wages paid to injured railroad worker

The U.S. Supreme Court today held (seven to two) that a railroad’s payment to an employee for working time lost due to an on-the-job injury is taxable compensation under the Railroad Retirement Tax Act (RRTA).

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The Supreme Court majority found that an award compensating for lost wages is subject to taxation under the RRTA, and reversed and remanded a decision from the Eighth Circuit (the appeals court held that the damage award to the injured railroad worker for lost wages was not taxable under the RRTA).

The Supreme Court majority noted the similarity between the definitions of “compensation” for railroad retirement purposes and “wages” for Social Security purposes, and looked to, among other opinions, the 2014 decision in United States v. Quality Stores, Inc. (severance payments qualified as “wages” taxable for FICA purposes). The Court today concluded:

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. … [D]amages for lost wages qualify as RRTA-taxable “compensation.”

Justice Ginsburg delivered the opinion for the Court. Justice Gorsuch, joined by Justice Thomas, dissented.

The case is: BNSF Railway Co. v. Loos, No. 17-1042 (S. Ct. March 4, 2019). Read the Supreme Court’s decision [PDF 116 KB] that includes a dissenting opinion.

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