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BNSF Railway Co. v. Loos

United States Supreme Court

March 4, 2019

BNSF RAILWAY COMPANY, PETITIONER
v.
MICHAEL D. LOOS

          Argued November 6, 2018

          CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT

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, 26 U.S.C. §3221, and the employee's share as an "income" tax, §3201. The Railroad Retirement Act (RRA) entitles railroad workers to various benefits. Taxes under the RRTA and benefits under the RRA are measured by the employee's "compensation," which both statutes define as "any form of money remuneration paid to an individual for services rendered as an employee." §3231(e)(1); 45 U.S.C. §231(h)(1).
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 amounts are determined by the worker's "wages," the Social Security equivalent to "compensation." Both the FICA and the SSA define "wages" employing language resembling the RRTA and the RRA definitions of "compensation." The term "wages" means "all remuneration" for "any service, of whatever nature, performed ... by an employee." 26 U.S.C. §3121(a)-(b) (FICA); see 42 U.S.C. §§409(a), 410(a) (SSA). Pp. 2-4.
(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 BNSFR. Co. v. Tyrrell, 581 U.S., . 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 26 U.S.C. §104(a)(2), should carry over to the RRTA's tax on the "income" of railroad workers. The RRTA, however, uses the term "income" mere- ly to distinguish the "income" tax on an employee from the matching "excise" tax on a railroad. Further, Congress specified not "gross income" but employee "compensation" as the tax base for RRTA taxes. Congress did not exclude personal injury damages from "compensation." Pp. 10-14.

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.

          OPINION

          GINSBURG, J.

Respondent Michael Loos was injured while working at petitioner BNSF Railway Company's railyard. Loos sued BNSF under the Federal Employers' Liability Act (FELA), 35 Stat. 65, as amended, 45 U.S.C. §51 et seq., and gained a $126, 212.78 jury verdict. Of that amount the jury ascribed $30, 000 to wages lost during the time Loos was unable to work. BNSF moved for an offset against the judgment. The lost wages awarded Loos, BNSF asserted, constituted "compensation" taxable under the Railroad Retirement Tax Act (RRTA), 26 U.S.C. §3201 et seq. Therefore, BNSF urged, the railway was required to withhold a portion of the $30, 000 attributable to lost wages to cover Loos's share of RRTA taxes, which came to $3, 765. The District Court and the Court of Appeals for 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.

         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, 26 U.S.C. §3231(e)(1)? We granted review to resolve a division of opinion on the answer to that question. 584 U.S. __(2018). Compare Hance v. Norfolk S. R. Co., 571 F.3d 511, 523 (CA6 2009) ("compensation" includes pay for time lost); Phillips v. Chicago Central & Pacific R. Co., 853 N.W.2d 636, 650-651 (Iowa 2014) (agency reasonably interpreted "compensation" as including pay for time lost); Heckman v. Burlington N. Santa Fe R. Co., 286 Neb. 453, 463, 837 N.W.2d 532, 540 (2013) ("compensation" includes pay for time lost), with 865 F.3d 1106, 1117-1118 (CA8 2017) (case below) ("compensation" does not include pay for time lost); Mickey v. BNSF R. Co., 437 S.W.3d 207, 218 (Mo. 2014) ("compensation" does not include FELA damages for lost wages). We now hold that an award compensating for lost wages is subject to taxation 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. His-quierdo, 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, 26 U.S.C. §3221, and describes the employee's share as an "income" tax, §3201. Congress assigned to the Internal Revenue Service (IRS) responsibility for collecting both taxes. §§3501, 7801.[1] The second statute, the Rail- road Retirement Act (RRA), 50 Stat. 307, as restated and amended, 45 U.S.C. §231 et seq., entitles railroad workers to various benefits and prescribes eligibility requirements. The RRA is administered by the Railroad Retirement Board. See §231f(a).

         Taxes under the RRTA and benefits under the RRA are measured by the employee's "compensation." 26 U.S.C. §§3201, 3221; 45 U.S.C. §231b. The RRTA and RRA separately define "compensation," but both statutes state that the term means "any form of money remuneration paid to an individual for services rendered as an employee." 26 U.S.C. §3231(e)(1); 45 U.S.C. §231(h)(1). This language has remained basically unchanged since the RRTAs enactment in 1937. See Carriers Taxing Act of 1937 (1937 RRTA), §l(e), 50 Stat. 436 (defining "compensation" as "any form of money remuneration earned by an individual for services rendered as an employee"). The RRTA excludes from "compensation" certain types of sick pay and disability pay. See 26 U.S.C. §3231(e)(1), (4)(A).

         The IRS's reading of the word "compensation" as it appears in the RRTA has remained constant. One year after the RRTAs adoption, the IRS stated that "compensation" is not limited to pay for active service but reaches, as well, pay for periods of absence. See 26 CFR §410.5 (1938). This understanding has governed for more than eight decades. As restated in the current IRS regulations, "[t]he term compensation is not confined to amounts paid for active service, but includes amounts paid for an identifiable period during which the employee is absent from the active service of the employer." ยง31.3231(e)-l(a)(3) (2017). In 1994, the IRS ...


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