BNSF R. Co. v. Loos
Headline: Court rules payments for lost working time to injured railroad employees are taxable, letting railroads withhold Railroad Retirement taxes and affecting injured workers’ awards.
Holding: A railroad’s payment to an employee for lost working time due to an on-the-job injury is taxable “compensation” under the RRTA, permitting the railroad to withhold the employee’s RRTA taxes from such awards.
- Makes lost-wage awards to injured railroad employees taxable under the RRTA.
- Allows railroads to withhold employee RRTA taxes from FELA lost-wage awards.
- Could change settlement bargaining and incentives in workplace injury cases.
Summary
Background
Michael Loos, a railroad worker, was injured in BNSF Railway Company’s railyard and sued under the Federal Employers’ Liability Act (FELA). A jury awarded him $126,212.78, including $30,000 for wages lost while he could not work. BNSF sought to withhold $3,765 to cover Loos’s share of Railroad Retirement Tax Act (RRTA) taxes; lower courts rejected that offset and the case reached the Supreme Court.
Reasoning
The Court addressed whether payments a railroad makes to an employee for lost working time count as taxable “compensation” under the RRTA. The majority compared the RRTA’s definition to similar Social Security tax language and relied on prior decisions holding that pay for periods of absence can count as taxable wages. The Court concluded that FELA damages awarded for lost wages fall within RRTA “compensation” and are taxable, and it rejected arguments that personal-injury exclusions from income tax automatically exempt such awards from RRTA taxes.
Real world impact
As a result, railroads may treat lost-wage awards under FELA as RRTA-taxable and withhold employee taxes from those awards. The decision affects injured railroad employees who receive jury awards or settlements labeled as lost wages. The ruling resolves a split among lower courts and will guide how such awards are taxed and reported going forward.
Dissents or concurrances
Justice Gorsuch dissented, arguing that damages for injury compensate the victim, not for services rendered, and warning that taxing such awards could change settlement incentives and bargaining between employers and injured workers.
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