The Missouri Supreme Court held that a railroad may not withhold Railroad Retirement Taxes or other employment taxes from payment in satisfaction of an FELA on July 8, closely tracking an amicus brief filed by CCL Senior Counsel Jeffrey White on behalf of the American Association for Justice. Mickey v. BNSF Ry. Co., --- S.W.3d ----, 2014 WL 3107443 (Mo. July 08, 2014). 

A jury awarded former brakeman Lawrence Mickey nearly $400,000 against BNSF Railway under FELA for a permanently disabling back and knee injuries. BNSF tendered payment in satisfaction in the amount of the judgment less an amount it withheld for Tier 1 and Tier 2 Railroad Retirement taxes and Medicare tax. The trial court declined to credit BNSF for payment of the full judgment. On appeal, the railroad argued that a FELA judgment that includes damages for lost wages is deemed “compensation” under the Railroad Retirement Act and taxable under the Railroad Retirement Tax Act. The United States filed an amicus brief supporting BNSF; AAJ’s brief was filed in support of Mickey. The appeals court affirmed without reaching the issue of the taxability of the FELA award, Mickey v. BNSF R. Co., 2013 WL 2489832 (Mo. App. 2013), and the case was transferred to the Supreme Court of Missouri.   

The Missouri Supreme Court held that the FELA damage award was not subject to Railroad Retirement taxes and thus was not subject to withholding by BNSF, as CCL’s brief argued. Because damages paid on account of personal injury are not “income,” pursuant to Internal Revenue Code § 104, they cannot be “wages” or “compensation,” which are narrower categories, for purposes of employment taxes. The railroad’s reliance on the Railroad Retirement Act was inapposite because that statute governs the calculation of retirement benefits, not taxes.