Supreme Court rules injured railroad worker’s damages are taxable compensation

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The U.S. Supreme Court, in a 7-2 decision, held 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.

The court reversed a decision by the Eighth Circuit in the case, BNSF Railway Co. v. Loos, in a majority opinion Monday written by Justice Ruth Bader Ginsburg, who returned to the court after undergoing lung cancer surgery. Justices Neil Gorsuch and Clarence Thomas dissented in the case.

In the case, railroad worker Michael Loos injured his knee while on the job, and after a jury trial was awarded more than $126,000 in damages, ascribing $30,000 of the amount to wages lost during the time he was unable to work. His employer, BNSF Railway Company, asserted that the lost wages constituted compensation taxable under the RRTA and asked to withhold $3,765 to cover Loos’ share of the taxes owed. Both the district court and the Eighth Circuit denied the requested offset, holding that an award of damages that compensate an injured railroad worker for lost wages is not taxable under the RRTA. The question has been decided differently by different state courts, prompting the U.S,. Supreme Court to hear the case.

“It’s curious as to why the railroad appealed the case all the way to the Supreme Court,” said Arvin J. Pearlman, of counsel at Sommers Schwartz, PC. “It now has a bargaining tool in regard to future settlements. If we go to trial and get a verdict, and a portion of the verdict is for past present and future wages lose, the railroad will be able to deduct from the award the taxes due under the RRTA standard.”

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