BNSF Ry. Co. v. Loos

139 S.Ct. 893

203 L.Ed.2d 160

BNSF RAILWAY COMPANY, Petitioner

v.Michael D. LOOS

No. 17-1042

Supreme Court of the United States.

Argued November 6, 2018

Decided March 4, 2019

Lisa S. Blatt, Washington, DC, for Petitioner.

David C. Frederick, for Respondent.

Rachel P. Kovner for the United States as amicus curiae, by special leave of the Court, supporting the Petitioner.

Charles G. Cole, Alice E. Loughran, Steptoe & Johnson LLP, Washington, DC, William Brasher, Boyle Brasher LLC, St. Louis, MO, Thomas R. Jayne, Fort Worth, TX, Lisa S. Blatt, Elisabeth S. Theodore, Andrew T. Tutt, Arnold & Porter, Kaye Scholer LLP, Washington, DC, R. Reeves Anderson, Arnold & Porter, Kaye Scholer LLP, Denver, CO, for Petitioner.

Michael A. Wolff, Jerome J. Schlichter, Nelson G. Wolff, Schlichter Bogard, & Denton LLP, St. Louis, MO, Michael F. Tello, Tello Law Firm, Anoka, MN, David C. Frederick, Brendan J. Crimmins, Daniel S. Severson, Kellogg, Hansen, Todd, Figel & Frederick, P.L.L.C., Washington, DC, David M. Burke, Centreville, VA, for Respondent.

Justice GINSBURG delivered the opinion of the Court.

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. ––––, 138 S.Ct. 1988, 201 L.Ed.2d 246 (2018). Compare Hance v. Norfolk S.R. Co. , 571 F.3d 511, 523 (C.A.6 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 (C.A.8 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. Hisquierdo , 439 U.S. 572, 575, 99 S.Ct. 802, 59 L.Ed.2d 1 (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 Railroad 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 RRTA's enactment in 1937. See Carriers Taxing Act of 1937 (1937 RRTA), § 1(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 RRTA's 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." § 31.3231(e)–1(a)(3) (2017). In 1994, the IRS added, specifically, that "compensation" includes "pay for time lost." § 31.3231(e)–1(a)(4); see 59 Fed. Reg. 66188 (1994).

Congress created both the railroad retirement system and the Social Security system during the Great Depression primarily to ensure the financial security of members of the workforce when they reach old age. See Wisconsin Central Ltd. v. United States , 585 U.S. ––––, ––––, 138 S.Ct. 2067, 2070, 201 L.Ed.2d 490 (2018) ; Helvering v. Davis , 301 U.S. 619, 641, 57 S.Ct. 904, 81 L.Ed. 1307 (1937). Given the similarities in timing and purpose of the two programs, it is hardly surprising that their statutory foundations mirror each other. Regarding Social Security, the Federal Insurance Contributions Act (FICA), 26 U.S.C. § 3101 et seq. , taxes employers and employees to fund benefits, which are distributed pursuant to the Social Security Act (SSA), 49 Stat. 620, as amended, 42 U.S.C. § 301 et seq. Tax and benefit amounts are determined by the worker's "wages," the Social Security equivalent to "compensation." See Davis , 301 U.S. at 635–636, 57 S.Ct. 904. Both the FICA and the SSA define "wages" employing language resembling the RRTA and the RRA definitions of "compensation." "Wages" under the FICA and the SSA mean "all remuneration for employment," and "employment," in turn, means "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). Reading these prescriptions together, the term "wages" encompasses "all remuneration" for "any service, of whatever nature, performed ... by an employee." Ibid.

II

A

To determine whether RRTA-qualifying "compensation" includes an award of damages for lost wages, we begin with the statutory text.² The RRTA defines "compensation" as "remuneration paid to an individual for services rendered as an employee." 26 U.S.C. § 3231(e)(1). This definition, as just noted, is materially indistinguishable from the FICA's definition of "wages" to include "remuneration" for "any service, of whatever nature, performed ... by an employee." § 3121.

Given the textual similarity between the definitions of "compensation" for railroad retirement purposes and "wages" for Social Security purposes, our decisions on the meaning of "wages" in Social Security Bd. v. Nierotko , 327 U.S. 358, 66 S.Ct. 637, 90 L.Ed. 718 (1946), and United States v. Quality Stores, Inc. , 572 U.S. 141, 134 S.Ct. 1395, 188 L.Ed.2d 413 (2014), inform our comprehension of the RRTA term "compensation." In Nierotko , the National Labor Relations Board found that an employee had been "wrongfully discharged for union activity" and awarded him backpay. 327 U.S. at 359, 66 S.Ct. 637. The Social Security Board refused to credit the backpay award in calculating the employee's benefits. Id., at 365–366, 66 S.Ct. 637. In the Board's view, "wages" covered only pay for active service. Ibid. We disagreed. Emphasizing that the phrase "any service ... performed" denotes "breadth of coverage," we held that "wages" means remuneration for "the entire employer-employee relationship"; in other words, "wages" embraced pay for active service plus pay received for periods of absence from active service. Id., at 366, 66 S.Ct. 637. Backpay, we reasoned, counts as "wages" because it compensates for "the loss of wages which the employee suffered from the employer's wrong." Id., at 364, 66 S.Ct. 637.

In Quality Stores , we again trained on the meaning of "wages," reiterating that "Congress chose to define wages ... broadly." 572 U.S. at 146, 134 S.Ct. 1395 (internal quotation marks omitted). Guided by Nierotko , Quality Stores held that severance payments qualified as "wages" taxable under the FICA. "[C]ommon sense," we observed, "dictates that employees receive th[ose] payments ‘for employment.’ " 572 U.S. at 146, 134 S.Ct. 1395. Severance payments, the Court spelled out, "are made to employees only," "are made in consideration for employment," and are calculated "according to the function and seniority of the [terminated] employee." Id., at 146–147, 134 S.Ct. 1395.

In line with Nierotko , Quality Stores , and the IRS's long held construction, we hold that "compensation" under the RRTA encompasses not simply pay for active service but, in addition, pay for periods of absence from active service—provided that the remuneration in question stems from the "employer-employee...