October 24, 2014

Mo. Supreme Court rules FELA awards not taxable

scales_gavelIn 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.