LEGAL OPINIONS
Posted: Sat Mar 09, 2019 5:57 pmThis one is an interesting case. And I find myself actually agreeing with Justices Thomas and Gorsuch. They posit that the railroad wants to tax compensation for lost wages in settlements for injury claims as a way to pressure workers to settle out of court for less money. On the basis that the worker will lose a significant portion of the back pay awarded in court due to taxes.
The majority of the court seems to have ruled that precedents were already established making this taxable income. What is interesting also about the case is that apparently, this falls into a doctrine for the courts called the Chevron ruling that says the courts have to side with federal agencies when they make reasonable interpretations about things that are ambiguous or unclear even if the courts think the decision is not in line with the law. Gorsuch appears to say that if this doctrine were stronger the agency would have used it more and been able to uphold their position better.
Justice Gorsuch pens anti-Chevron dissent in workers’ compensation case
The Chevron doctrine may be dying according to Justice Neil Gorsuch’s dissent in BNSF Railway Co. v. Loos. Justice Ruth Bader Ginsburg’s 7-2 majority upheld an IRS interpretation of the law but ignored Chevron.
The Chevron doctrine requires judicial deference to reasonable agency interpretations of unclear laws. That means judges uphold agency decisions even when they may disagree about the meaning of a law. The U.S. Supreme Court decided Chevron v. NRDC in 1984 and bipartisan litigants cited the decision 81,000 times as of 2018. Even so, every justice has argued for limiting Chevron at least once, according to a 2018 study.
Gorsuch said the railroad company would have made a stronger case for deference if the Chevron doctrine was still powerful. Instead, he said the company was reluctant to cite Chevron in its briefs and during oral argument. Gorsuch disagreed with the court’s interpretation of the relevant laws, but not its method. He said it was good that the court gave an independent judicial interpretation of the law “[i]nstead of throwing up [its] 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.”
Summary:
The issue: Whether a railroad's payment to an employee for time lost from work is subject to employment taxes under the Railroad Retirement Tax Act.[3]
The outcome: The court reversed and remanded the ruling of the United States Court of Appeals for the 8th Circuit, holding that "a railroad’s payment to an employee for working time lost due to an on-the-job injury is taxable 'compensation' under the RRTA."
Background:
In 2010, Michael Loos fell in a train yard when he was working for BNSF Railway. After being terminated for attendance policy violations, Loos sued BNSF Railway claiming retaliation under the Federal Railroad Safety Act (FRSA) and negligence under the Federal Employers Liability Act (FELA). The district court found that Loos could not establish a basis for suing his former employer for retaliation under FRSA and the Eighth Circuit Court affirmed the decision.[5][6]
On the issue of negligence, a jury found that Loos was entitled to $30,000 for lost wages and $11,212.78 for medical expenses. BNSF asked the court to reduce the award by the amount of payroll taxes Loos would have owed under the Railroad Retirement Act (RRTA). Under RRTA, railroad employees have a separate retirement and disability benefit system.The district court denied the motion because it found the no RRTA tax was owed on the award. The Eighth Circuit Court affirmed the district court’s ruling finding “that the text of RRTA is unambiguous in not including damages for lost wages in its definition of compensation as money remuneration for services rendered,” according to Oyez.[5][6]
BNSF appealed to the Supreme Court, and the court agreed to hear the case on November 6, 2018. BNSF argued that the decision of the Eighth Circuit Court “creates an ‘untenable situation’ because other courts have taken the opposite view, subjecting railroads and their employees to different tax liabilities depending on where employees file their lawsuits,” according to SCOTUSblog.[5][6]
Outcome:
Justice Ruth Bader Ginsburg delivered the opinion of the court. The court reversed and remanded the ruling of the 8th Circuit, holding that "a railroad’s payment to an employee for working time lost due to an on-the-job injury is taxable 'compensation' under the RRTA."[2]
Opinion:
In her opinion, Justice Ginsburg wrote,
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.[8]
Dissenting
Justice Gorsuch filed a dissenting opinion, in which Justice Thomas joined. In his dissent, Gorsuch wrote,
Today, the Court agrees with the company. Respectfully, I do not. When an employee suffers a physical injury due to his employer’s negligence and has to sue in court to recover damages, it seems more natural to me to describe the final judgment as compensation for his injury than for services (never) rendered.[8]
If you want to read the full opinion and dissent click on that blue line thingy.
The majority of the court seems to have ruled that precedents were already established making this taxable income. What is interesting also about the case is that apparently, this falls into a doctrine for the courts called the Chevron ruling that says the courts have to side with federal agencies when they make reasonable interpretations about things that are ambiguous or unclear even if the courts think the decision is not in line with the law. Gorsuch appears to say that if this doctrine were stronger the agency would have used it more and been able to uphold their position better.
Justice Gorsuch pens anti-Chevron dissent in workers’ compensation case
The Chevron doctrine may be dying according to Justice Neil Gorsuch’s dissent in BNSF Railway Co. v. Loos. Justice Ruth Bader Ginsburg’s 7-2 majority upheld an IRS interpretation of the law but ignored Chevron.
The Chevron doctrine requires judicial deference to reasonable agency interpretations of unclear laws. That means judges uphold agency decisions even when they may disagree about the meaning of a law. The U.S. Supreme Court decided Chevron v. NRDC in 1984 and bipartisan litigants cited the decision 81,000 times as of 2018. Even so, every justice has argued for limiting Chevron at least once, according to a 2018 study.
Gorsuch said the railroad company would have made a stronger case for deference if the Chevron doctrine was still powerful. Instead, he said the company was reluctant to cite Chevron in its briefs and during oral argument. Gorsuch disagreed with the court’s interpretation of the relevant laws, but not its method. He said it was good that the court gave an independent judicial interpretation of the law “[i]nstead of throwing up [its] 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.”
Summary:
The issue: Whether a railroad's payment to an employee for time lost from work is subject to employment taxes under the Railroad Retirement Tax Act.[3]
The outcome: The court reversed and remanded the ruling of the United States Court of Appeals for the 8th Circuit, holding that "a railroad’s payment to an employee for working time lost due to an on-the-job injury is taxable 'compensation' under the RRTA."
Background:
In 2010, Michael Loos fell in a train yard when he was working for BNSF Railway. After being terminated for attendance policy violations, Loos sued BNSF Railway claiming retaliation under the Federal Railroad Safety Act (FRSA) and negligence under the Federal Employers Liability Act (FELA). The district court found that Loos could not establish a basis for suing his former employer for retaliation under FRSA and the Eighth Circuit Court affirmed the decision.[5][6]
On the issue of negligence, a jury found that Loos was entitled to $30,000 for lost wages and $11,212.78 for medical expenses. BNSF asked the court to reduce the award by the amount of payroll taxes Loos would have owed under the Railroad Retirement Act (RRTA). Under RRTA, railroad employees have a separate retirement and disability benefit system.The district court denied the motion because it found the no RRTA tax was owed on the award. The Eighth Circuit Court affirmed the district court’s ruling finding “that the text of RRTA is unambiguous in not including damages for lost wages in its definition of compensation as money remuneration for services rendered,” according to Oyez.[5][6]
BNSF appealed to the Supreme Court, and the court agreed to hear the case on November 6, 2018. BNSF argued that the decision of the Eighth Circuit Court “creates an ‘untenable situation’ because other courts have taken the opposite view, subjecting railroads and their employees to different tax liabilities depending on where employees file their lawsuits,” according to SCOTUSblog.[5][6]
Outcome:
Justice Ruth Bader Ginsburg delivered the opinion of the court. The court reversed and remanded the ruling of the 8th Circuit, holding that "a railroad’s payment to an employee for working time lost due to an on-the-job injury is taxable 'compensation' under the RRTA."[2]
Opinion:
In her opinion, Justice Ginsburg wrote,
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.[8]
Dissenting
Justice Gorsuch filed a dissenting opinion, in which Justice Thomas joined. In his dissent, Gorsuch wrote,
Today, the Court agrees with the company. Respectfully, I do not. When an employee suffers a physical injury due to his employer’s negligence and has to sue in court to recover damages, it seems more natural to me to describe the final judgment as compensation for his injury than for services (never) rendered.[8]
If you want to read the full opinion and dissent click on that blue line thingy.