A decision by the U.S. Supreme Court found that the portion of a damages award attributable to lost wages for a workplace injury is considered to be taxable compensation under the Railroad Retirement Tax Act (RRTA). The decision in BNSF Railway Co. v. Loos (No. 17-1042) was released March 4.
Michael Loos pursued a claim against his then-employer, BNSF, for a workplace injury under the Federal Employers’ Liability Act (FELA), a law allowing railroad workers to file suit against their employers for on-the-job injuries. Loos was awarded damages of $126,212, of which $30,000 was attributable to lost wages from BNSF. BNSF indicated that it would withhold railroad retirement taxes from the lost wages portion of the award. Loos disagreed with this theory of withholding, arguing that, consistent with the RRTA’s definition of compensation, the payment must be “for services rendered” in order to be taxable and instead of compensation for services rendered the payment at issue compensated for an injury.
The issue worked its way from the lower courts to the Supreme Court. Oral arguments took place on November 6, 2018, and the court reached its decision on a 7-2 vote. In reversing the decision of the Circuit Court of Appeals for the Eighth Circuit, the Supreme Court held that the RRTA’s definition of compensation includes not simply pay for active service, but also “pay for periods of absence from active service provided there is an employer-employee relationship.” Whether the employer chooses to make the payment through a voluntary settlement or is involuntarily made to do so through an award of damages is immaterial so long as the payment for lost wages is provided based on the recipient’s status as a service-rendering employee.
The Internal Revenue Service administers the RRTA and, therefore, is the official source for Railroad Retirement tax information.
However, for purposes only of illustrating the court’s decision, the following example is provided.
In 2019, railroad employers and employees are subject to a Railroad Retirement tier I payroll tax of 7.65 percent (6.20 percent on earnings up to $132,900 for retirement, and 1.45 percent on all earnings for Medicare hospital insurance) and a tier II tax of 13.1 percent and 4.9 percent, respectively, on earnings up to $98,700. (An additional 0.9 percent in hospital insurance taxes, 2.35 percent in total, applies to an individual’s income exceeding $200,000, or $250,000 for a married couple filing a joint tax return).
If a railroad employee with no other earnings in 2019 is awarded $550,000 due to an on-the-job injury, of which $200,000 is attributable to lost wages (both past and future), the employer and employee would be required to pay $11,139.80 in tier I taxes ($8,239.80 retirement and $2,900 Medicare) and $12,929.70 and $4,836.30, respectively, in tier II taxes. (The additional Medicare tax would not apply as the award for lost wages did not exceed $200,000).
“What Every Railroader Should Know,” written by Lawrence Mann, rail safety coordinator to SMART Transportation Division’s Designated Legal Counsel (DLC), is an extensive and comprehensive survey of federal railroad safety law as it pertains to rail workers and is essential reading for TD members concerned about how the law protects them.
Mann, who has served as rail safety coordinator for the DLC since the position was created in 2008, has been recognized by peers as the “nation’s foremost authority on railroad safety legislation and regulation.”
If you are injured on the job, you have powerful rights under the Federal Employers’ Liability Act (FELA). All of SMART TD’s Designated Legal Counsel (DLC) are chosen because they specialize in handling FELA claims and are experienced in dealing with railroad claim agents and railroad lawyers.
A SMART TD DLC is your agent, and their job is to represent you. They are on your side.
SMART Transportation Division has added two lawyers to our DLC teams: Michael C. Terranova and Andrew J. Thompson.
Michael C. Terranova is the grandson of a Union City laborer and the son of a union sheet metal worker. He went to law school at the Chicago Kent College of Law where he focused on labor and employment law. While in law school, Terranova learned the ins and outs of the Railway Labor Act, National Labor Relations Act and FELA. He also worked for a law firm that was involved with collective bargaining agreements and helped injured union workers. Since being admitted to practice law, Terranova has focused his practice on representing injured union workers. He is a member of the Academy of Rail Labor Attorneys (ARLA) and currently works for the Cogan & Power, P.C. law firm in Chicago.
Andrew J. Thompson’s inspiration for advocating on behalf of railroad workers began generations ago, as his great-grandparents, grandparents and many extended family members worked on the railroad and were active in rail unions. He obtained a political science degree, followed by a law degree from Case Western Reserve University. He began working at the Chattman, Gaines & Stern, L.P.A., law firm where he learned the nuances of railroad law and sharpened his skills as a trial attorney. Thompson has successfully handled railroad cases in state and federal courts in Ohio, New Jersey, Pennsylvania, West Virginia, Florida and Illinois. He has experience handling union labor matters under FELA, the Federal Rail Safety Act (FRSA), Railway Labor Act and the National Labor Relations Act. Thompson also has experience with negotiating collective bargaining agreements, handling grievances before a Public Law Board, and arguing cases in arbitration.
Thompson regularly takes time to attend union meetings and other functions to speak to railroad employees about their legal rights. He is a member of the ARLA and practices law with the Shapero & Roloff Co., L.P.A. in Cleveland.
In cases brought by the law firm of Schlichter, Bogard & Denton, LLP of St. Louis on behalf of injured railroad workers, two courts have ruled favorably to workers that FELA judgments are not subject to tax withholding under the Railroad Retirement Tax Act (RRTA).
The Missouri Supreme Court in Mickey v. BNSF Railway Co., No. SC93591 (July 8, 2014), available here, stopped a trend of state supreme court rulings that had held FELA judgments for injured railroad workers received less than the full amount the jury awarded them.
In a detailed opinion, the Missouri Supreme Court explained that the contrary decisions of the Nebraska and Iowa courts were based on an incomplete analysis of the law, and that under a proper analysis of the law FELA judgments are not subject to tax withholding, but must be paid in full.
This decision comes one day after the United States District Court for the Eastern District of Missouri also ruled that FELA judgments are not subject to RRTA taxes (Cowden v. BNSF Railway Co., No. 08-1534, Doc. 289 (E.D.Mo. July 7, 2014)).
The decisions in Mickey, which involved a BNSF railroad employee from St. Louis, Mo., and Cowden, which involved a BNSF railroad employee from Springfield, Mo., (both of which were handled by Schlichter Bogard & Denton) should end the railroads’ recent attempts to short-change employees of the personal injury damages juries have awarded them with this now twice-repudiated, tax argument.
The U.S. Justice Department is weighing in on an appeal by BNSF railroad over a $145,000 judgment to a former employee hurt on the job, saying a judge’s order to pay the full amount without deducting federal railroad retirement taxes could be “harmful to the United States because … it may interfere with federal tax collection.”
The case stems from a lawsuit filed in 2004 by Eddie Heckman, who was injured on the job a year earlier.
It is no secret that railroads have tried with all their king’s horsemen and all their king’s men (and women) to send to the dust bin of history the Federal Employers’ Liability Act (FELA), considered the best friend of rail workers in forcing carriers to improve workplace safety.
That 1908 law allows railroaders to recover civil compensatory and punitive damages when railroads fail to maintain a safe workplace, resulting in injury, dismemberment or death.
The latest assault on FELA was a backdoor escape attempt by the Southeastern Pennsylvania Transportation Authority (SEPTA), which sought to declare itself an instrumentality of the State of Pennsylvania, and thus immune, under the U.S. Constitution’s 11th Amendment’s sovereign immunity clause, from such lawsuits.
The Pennsylvania Supreme Court termed the argument bogus, slamming that back door on SEPTA before it could wiggle out. Citing a history of U.S. Supreme Court decisions, Pennsylvania’s highest court ruled that SEPTA, as every other railroad operating in interstate commerce, is and remains subject to FELA.
SEPTA had sought to force its injured workers to file for workers’ compensation under the state’s federal/state workers’ compensation law, rather than bring a lawsuit under provisions of FELA.
Ruled the Pennsylvania Supreme Court:
‘We discern no threat to the dignity of the Commonwealth of Pennsylvania whenever a private individual commences a FELA suit in the courts of this Commonwealth, nor do we find the treasury of the Commonwealth to be threatened by a FELA suit in our courts. Accordingly, we conclude SEPTA is not an arm of the Commonwealth of Pennsylvania, and thus not entitled to claim immunity under the Eleventh Amendment.”
In June 2011, the U.S. Supreme Court declined a railroad attempt to weaken FELA by tightening the standards of proof injured rail workers must demonstrate to win an award under FELA. Attempts by railroads to have Congress scuttle FELA have not progressed beyond a committee hearing stage.
The UTU, Sheet Metal Workers’ International Association and other rail labor organizations joined in bringing the SEPTA case to the Pennsylvania Supreme Court for final determination.
SEPTA commuter rail service was transferred from Conrail to SEPTA, which also provides commuter bus and transit services, in 1983.
WASHINGTON — In a 5-4 decision, the Supreme Court June 23 declined to tighten the standard of proof injured rail workers must demonstrate to win an award under the Federal Employers’ Liability Act (FELA).
The ruling is a significant victory for injured rail workers.
The FELA — a railroader’s most cherished workplace safety assurance — was passed by Congress more than a century ago to make railroads liable if an employee injury or death results “in whole or in part” from the negligence of any of its officers, agents or employees, or from any defect or insufficiency in equipment or roadbed.
At the time of the FELA’s passage in 1908, more than 4,000 railroaders were killed annually, and some 63,000 more suffered serious injuries each year.
The Supreme Court previously held that the FELA was “designed to put on the railroad industry some of the costs of the legs, arms, eyes, and lives which it consumed in its operation.”
The June 23 Supreme Court decision turned on a crossover vote by conservative Justice Clarence Thomas, who joined liberals Ruth Bader Ginsburg, Sandra Sotomayor, Elena Kagan and Stephen Bryer to rule against CSX and in favor of an injured CSX locomotive engineer.
The engineer had won a monetary award from a federal district court after being injured on the job in 2004 while operating a locomotive that the engineer contended was not suited for switching operations.
CSX twice unsuccessfully appealed the trial court’s decision – the first before the 7th Circuit Court of Appeals and the second appeal before the Supreme Court. CSX contended in both unsuccessful appeals that injured rail workers should meet a more demanding standard of proof as is required in all non-FELA personal injury cases, not, as the trial court instructed the jury, that CSX was responsible for negligence if its negligence “played a part – no matter how small – in bringing about the injury.”
CSX sought a ruling that the employer’s action must be the “primary cause” of the injury. In fact, the “in whole or in part” language comes from the FELA itself, and that legislative language clearly impressed the Supreme Court’s majority in this case.
Writing for the majority, Justice Ginsburg said: “Juries in such cases are properly instructed that a defendant railroad ‘caused or contributed to’ a railroad worker’s injury ‘if [the railroad’s] negligence played a part – no matter how small – in bringing about the injury.’ That, indeed, is the test Congress prescribed for proximate causation in FELA cases.”
Earlier Supreme Court cases upheld the right of unions to advise injured workers to obtain expert legal advice, and the right of unions to designate legal counsel possessing specialized knowledge in railroad operations and the FELA.
A listing of UTU Designated Legal Counsel is provided at www.utu.org by moving the cursor to “About UTU” in the red horizontal bar at the top of the home page and then clicking on “Designated Legal Counsel.” A listing of Designated Legal Counsel also may be obtained from local union officers or your general chairpersons.
If you are injured on the job, the FELA and your UTU Designated Legal Counsel are the best friends you and your family have. These successful trial lawyers are specialists in handling FELA claims, and are fully experienced in dealing with railroad claim agents and railroad lawyers.
And remember: Contributory negligence is not a bar to recovering under the FELA; and the FELA prohibits railroads from retaliating against employees who provide Designated Legal Counsel with factual information on injuries to fellow employees, or who testify in support of injured workers.
Each FELA lawsuit sends to the carriers a message about improving workplace safety that they cannot ignore
To read the June 23 Supreme Court decision, CSX Transportation, Inc. v. Robert McBride, click on the following link:
Throughout America Monday, UTU members joined with brothers and sisters across craft and industrial lines in We Are One rallies reinforcing labor solidarity and raising public awareness of mean-spirited attacks on collective bargaining rights by right-wing extremists.
The word went forth that labor will not stand passive as anti-union zealots elected to state legislatures seek to dismantle public-employee unions through laws revoking collective bargaining rights, curtailing dues check-off and forcing costly annual representation elections.
There is an end-game: Reminding elected officials that organized labor remains a potent political force able to mobilize millions of voters, and to set the stage for recall elections of anti-union lawmakers and voter referendums to nullify the legislative assault on collective bargaining rights.
“The immense activity this week is a direct result of the backlash provoked by overreaching governors and legislators,” said AFL-CIO President Rich Trumka.
Labor leaders nationwide recognize that the assault on public-employee collective bargaining rights is part of a right-wing effort to extend the anti-union assault to private sector unions. Anti-union extremists already have urged an assault on Railroad Retirement Tier II and the Federal Employers Liability Act (FELA).
The UTU Collective Bargaining Defense Fund, established to help support public awareness of anti-union actions by right-wing extremists is just one example of union solidarity, being duplicated by dozens of other labor organizations in the public and private sectors.
Thousands of dollars already have been contributed to the UTU Collective Bargaining Defense Fund for this purpose, and UTU members and retirees are urged to add to the contributions already received from locals, general committees and state legislative boards.
In Ohio, where Gov. John Kasich signed into law a bill curtailing public-employee collective bargaining rights, the effort to nullify that law in a November voter referendum already has begun.
Over the next 90 days, union members and their supporters in Ohio will collect the necessary 231,000 signatures to put the Ohio legislation to a voter referendum in November.
Efforts also have begun in Wisconsin to recall legislators who voted in favor of curtailing public-employee collective bargaining rights in that state.
“If you believe in something strong enough, you fight for it,” said UTU International President Mike Futhey in urging donations to the UTU Collective Bargaining Defense Fund. “Together, in solidarity, we can and will win this fight and emerge stronger than ever.”
Checks to the UTU Collective Bargaining Defense Fund should be sent to:
UTU Collective Bargaining Defense Fund United Transportation Union Suite 340 24950 Country Club Blvd. North Olmsted, OH 44070-5333
WASHINGTON — The Supreme Court will hear an argument by CSX in 2011 challenging standards for rail workers bringing lawsuits under the Federal Employers’ Liability Act (FELA), reports Bloomberg.
The decision could affect future FELA cases.
The specific case to be heard, reports Bloomberg, involves a CSX engineer who won a $184,250 FELA award for a hand injury suffered while on duty.
Said Bloomberg, “The case centers on the test for determining whether a railroad’s negligence was the cause of an employee’s injury.”
The federal judge hearing that case, reports Bloomberg, told the jury “that the railroad was responsible for negligence if its negligence ‘played a part — no matter how small — in bringing about the injury.'”
CSX, according to Bloomberg, contends that injured rail workers should meet a more demanding standard, as is required in other types of personal-injury lawsuits not covered by the FELA, which applies only to railroads and their workers.
The more demanding standard would require the employer’s action to be the “primary cause” of the injury, known as “proximate cause” in legal jargon.
The tentative national agreement with BNSF, CSX, Kansas City Southern, Norfolk Southern, and Union Pacific, which you will vote on soon, was hammered out in an intense two-day bargaining session Jan. 22-23 because the carriers recognized the unity the UTU brought to the negotiating table.
Equally important to the process was our return to interest-based bargaining, whereby both sides choose mutual problem solving to confrontation.
A year had gone by without a single meeting between the two sides, and the situation looked bleak. There were credible signals from the carriers that they intended to cash-in their Bush administration IOUs and move for a presidential emergency board (PEB) by spring. After all, the carriers had established a pattern, holding ratified agreements from most of the other labor organizations.
The carriers reasoned they could count on a carrier-friendly PEB to recommend that the pattern be forced on us. In an election year, with Congress not wanting a rail strike dumped in its lap, the odds were similarly high that lawmakers would quickly pass legislation ordering us back to work under the precise recommendations of the Bush-appointed PEB.
With that unhappy chain of events looming, I met with CSX CEO Michael Ward and made clear that the UTU’s intent was to craft a win-win agreement. We both agreed that a mutually negotiated settlement is preferable to one imposed by a third party – even if the carriers thought the White House is on their side. I asked Mr. Ward to relay our message to the other CEOs and the industry’s labor negotiators.
Our bargaining team reaffirmed our intent to reach a negotiated settlement when we sat down Jan. 22 with the carriers’ chief labor negotiators in Jacksonville, Fla. We were told that they and their CEOs had been reading our leadership messages on the UTU Web site, and sensed a more positive approach from the UTU — and they were prepared to respond in kind.
Before the sun set on the second day, we had that win-win agreement. The carriers acknowledged that prolonged warfare in Congress and before the federal courts was counterproductive.
The carriers agreed to go beyond the pattern. They offered the UTU — and only the UTU — a continuation of a cost-of-living adjustment (COLA) during the period new agreements are being negotiated. The UTU also was the only union to achieve, in national negotiations, an increase in the meal allowance.
Also, the carriers agreed to provide full health-care insurance to new hires and their families after only one month, rather than four; and agreed to arbitrate the dispute over entry rates tied to training; and, for the first time, to make contributions to the yardmasters’ supplemental retiree medical insurance program.
We busted the pattern. But if we fail to ratify this agreement, we could lose it all — and more, because a PEB and Congress could embrace the carriers’ desire for one-person crews and elimination of the Federal Employers’ Liability Act (FELA).
In the days ahead, we will be providing much more information on the tentative agreement, including answers to questions posed by general chairpersons. Please, stay informed. This agreement deserves ratification. The alternative is unthinkable.
FELA Update By Mark Allen Coordinator of UTU Designated Legal Counsel
The Federal Employers’ Liability Act (FELA) was enacted by Congress in 1908 to give railroad employees the right, under federal law, to recover damages from their employers for injuries occurring at work.
However, generally, there must be proof of negligence on the part of the railroad that caused or contributed to the employee’s injury. Simply put, this means that the railroad must exercise reasonable care for the safety of its employees. The railroad must provide its employees with a reasonably safe place to work. Its failure to do so is negligence.
The duty to provide a safe place to work includes the furnishing of safe tools and equipment, the selection of proper methods to do the work, the furnishing of sufficient help, and the adoption and enforcement of proper procedures. The railroad may also be negligent if it fails to adopt and enforce safety rules and practices, or by allowing unsafe practices to exist. The fact that unsafe practices and customs are standard in the industry is no defense.
An exception to the requirement for proof of negligence under FELA exists when an injury occurs because the railroad has violated either the Safety Appliance Act or the Locomotive Inspection Act.
The Safety Appliance Act relates to railroad cars and their safety devices and requires devices such as couplers, power brakes, grab irons, etc., to be free from defects. The Locomotive Inspection Act requires that the railroad keep its locomotives and tenders in proper and safe condition.
If the violation of either one of these laws causes injury to an employee, proof of negligence is not required and the railroad is strictly held at fault.
When you have a question about whether an action of the railroad was negligent that caused you injury or whether proof of negligence is required, contact a UTU Designated Legal Counsel. Go to www.utu.org and click on “Designated Legal Counsel” on the left side of the page; or ask your local union officers for the list.
FELA Update By Mark Allen Coordinator of UTU Designated Legal Counsel
I frequently hear about injured railroad workers who are confused by statements made to them by railroad claims department persons or supervisors that if they don’t see doctors chosen by the railroad, their medical bills won’t be paid.
Let’s be clear. You have the right to see a doctor of your own choice.
You have your own insurance plan and can submit payment for the medical bills to your own insurance carrier.
If some railroad official or claims-department person says, “We won’t pay the bills” unless you see a doctor of THEIR choice, it means simply that the claims department will not pay for it.
It does not prevent you from using your own insurance to see a doctor of YOUR choice.
In my experience, hurt workers often are sent to doctors or clinics that the railroad uses on a frequent basis. Many times, such doctors or clinics seem to be more interested in returning the injured worker back to the job than in doing a thorough diagnostic evaluation to determine what injuries the worker might have.
While a speedy return to work is a goal upon which we all can agree, it also is of great importance that a worker have confidence that his or her doctor will pay attention to the worker’s problems, and will make a sincere effort to find out what is causing the pain or symptoms before sending the worker back on the job.
No one wants to risk additional injury or aggravation because a doctor who cares more about getting referrals from the railroad rushes an injured worker back to the job too soon.
Don’t be misled by “we won’t pay for it” statements. If you are not satisfied with the railroad’s choice of doctors or if you don’t have confidence in them, take out your insurance card and go to the doctor of your own choice.