BNSF Railway Company v. Loos

Whether a railroad’s payment to an employee for time lost from work is subject to employment taxes under the Railroad Retirement Tax Act.

Railroad employees do not pay into Social Security and are subject to the Railroad Retirement Tax Act’s statutory scheme. Respondents were Petitioner’s employees injured on the job and obtained a judgment for lost wages against Petitioner in District Court. The District Court and Eighth Circuit both concluded that the damages award does not constitute taxable income under the RRTA. The primary issue in this case involves statutory interpretation, requiring a court to decide the textual meaning of “compensation” within the statute.  26 C.F.R. § 31.3231(e)–1(a).  Although the Eighth Circuit concluded that “compensation” refers specifically to an employee’s work that has been performed, lost wage damage awards are nevertheless not taxable. Petitioners take issue with the Eighth Circuit’s purported misapplication of Chevron deference and contend that the Court’s holding is contrary to the Sixth Circuit and various state supreme court decisions. Petitioners insist that conflicting decisions with respect to this interpretive question incentivize forum shopping across state and federal courts. Petitioners urge the Supreme Court to resolve decisional conflicts among the state and federal courts and hold that damages awards for lost wages are subject to tax under the RRTA.