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SUPREME COURT OF THE UNITED STATES
_________________
No. 17–1042
_________________
BNSF RAILWAY COMPANY, PETITIONER
v.
MICHAEL D. LOOS
on writ of certiorari to the united states
court of appeals for the eighth circuit
[March 4, 2019]
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), 35Stat. 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. ___ (2018). Compare
Hance v.
Norfolk S. R. Co., 571 F.3d 511, 523 (CA6
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 (CA8 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 (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), 50Stat. 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), 50Stat. 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. ___, ___ (2018)
(slip op., at 1);
Helvering v.
Davis,
301 U.S.
619, 641 (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), 49Stat. 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. 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 (1946), and
United States v.
Quality Stores,
Inc., 572 U.S. 141 (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. The Social Security Board refused to credit the
backpay award in calculating the employee’s benefits.
Id.,
at 365–366. 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. 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.
In
Quality Stores, we again trained on
the meaning of “wages,” reiterating that “Congress chose to define
wages . . . broadly.” 572 U. S., at 146 (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. 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.
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 relationship.”
Nierotko, 327 U. S.,
at 366.
B
Damages awarded under the FELA for lost wages
fit comfortably within this definition. The FELA “makes railroads
liable in money damages to their employees for on-the-job
injuries.”
BNSF R. Co. v.
Tyrrell, 581 U. S.
___, ___ (2017) (slip op., at 1); see 45 U. S. C. §51. If
a railroad negligently fails to maintain a safe railyard and a
worker is injured as a result, the FELA requires the railroad to
compensate the injured worker for,
inter alia, working time
lost due to the employer’s wrongdoing. FELA damages for lost wages,
then, are functionally equivalent to an award of backpay, which
compensates an employee “for a period of time during which” the
employee is “wrongfully separated from his job.”
Nierotko,
327 U. S., at 364. Just as
Nierotko held that backpay
falls within the definition of “wages,”
ibid., we conclude
that FELA damages for lost wages qualify as “compensation” and are
therefore taxable under the RRTA.
III
A
The Eighth Circuit construed “compensation”
for RRTA purposes to mean only pay for “services that an employee
actually renders,” in other words, pay for active service.
Consequently, the court held that “compensation” within the RRTA’s
compass did not reach pay for periods of absence. 865 F. 3d,
at 1117. In so ruling, the Court of Appeals attempted to
distinguish
Nierotko and
Quality Stores. The Social
Security decisions, the court said, were inapposite because the
FICA “taxes payment for ‘employment,’ ” whereas the RRTA
“tax[es] payment for ‘services.’ ” 865 F. 3d, at 1117. As
noted, however,
supra, at 3–4, the FICA defines “employment”
in language resembling the RRTA in all relevant respects. Compare
26 U. S. C. §3121(b) (FICA) (“any service, of whatever
nature, performed . . . by an employee”) with §3231(e)(1)
(RRTA) (“services rendered as an employee”). Construing RRTA
“compensation” as less embracive than “wages” covered by the FICA
would introduce an unwarranted disparity between terms Congress
appeared to regard as equivalents. The reasoning of
Nierotko
and
Quality Stores, as we see it, resists the Eighth
Circuit’s swift writeoff.[
3]
Nierotko and
Quality Stores apart,
we would in any event conclude that the RRTA term “compensation”
covers pay for time lost. Restricting “compensation” to pay for
active service, the Court of Appeals relied on statutory history
and, in particular, the eventual deletion of two references to pay
for time lost contained in early renditions of the RRTA. See also
post, at 6–7 (presenting the Eighth Circuit’s statutory
history argument). To understand the Eighth Circuit’s position, and
why, in our judgment, that position does not withstand scrutiny,
some context is in order.
On enactment of the RRTA in 1937, Congress made
“compensation” taxable at the time it was earned and provided
specific guidance on when pay for time lost should be “deemed
earned.” Congress instructed: “The term ‘compensation’ means any
form of money remuneration
earned by an individual for
services rendered as an employee . . . , including
remuneration paid for time lost as an employee, but [such]
remuneration . . .
shall be deemed earned in the
month in which such time is lost.” 1937 RRTA, §1(e), 50Stat. 436
(emphasis added). In 1946, Congress clarified that the phrase
“pa[y] for time lost” meant payment for “an identifiable period of
absence from the active service of the employer, including absence
on account of personal injury.” Act of July 31, 1946 (1946 Act),
§2, 60Stat. 722.
Thus, originally, the RRTA stated that
“compensation” included pay for time lost, and the language added
in 1946 presupposed the same. In subsequent amendments, however,
Congress removed the references to pay for time lost. First, in
1975, Congress made “compensation” taxable when paid rather than
when earned. Congress simultaneously removed the 1937 language that
both referred to pay for time lost and specified when such pay
should be “deemed earned.” So amended, the definitional sentence,
in its current form, reads: “The term ‘compensation’ means any form
of money remuneration
paid to an individual for services
rendered as an employee . . . .” Act of Aug. 9, 1975
(1975 Act), §204, 89Stat. 466 (emphasis added).
Second, in 1983, Congress shifted the wage base
for RRTA taxes from monthly “compensation” to annual
“compensation.” See Railroad Retirement Solvency Act of 1983 (1983
Act), §225, 97Stat. 424–425. Because the “monthly wage bases for
railroad retirement taxes [were being] changed to annual amounts,”
the House Report explained, the RRTA required “[s]everal technical
and conforming amendments.” H. R. Rep. No. 98–30, pt. 2, p. 29
(1983). In a section of the 1983 Act titled “Technical Amendments,”
Congress struck the subsection containing, among other provisions,
the 1946 Act’s clarification of pay for time lost. 1983 Act, §225,
97Stat. 424–425. In lieu of the deleted subsection, Congress
inserted detailed instructions concerning the new annual wage
base.
As the Court of Appeals and the dissent see it,
the 1975 and 1983 deletions show that “compensation” no longer
includes pay for time lost. 865 F. 3d, at 1119; see
post, at 6–7. We are not so sure. The 1975 Act left
unaltered the language at issue here, “remuneration . . .
for services rendered as an employee.” That Act also left intact
the 1946 Act’s description of pay for time lost. Continuing after
the 1975 Act, then, such pay remained RRTA-taxable “compensation.”
The 1983 Act, as billed by Congress, effected only “[t]echnical
[a]mendments” relating to the change from monthly to annual
computation of “compensation.” Concerning the 1975 and 1983
alterations, the IRS concluded that Congress revealed no
“inten[tion] to exclude payments for time lost from compensation.”
59 Fed. Reg. 66188 (1994). We credit the IRS reading. It would be
passing strange for Congress to restrict substantially what counts
as “compensation” in a manner so oblique.
Moreover, the text of the RRTA continues to
indicate that “compensation” encompasses pay for time lost. The
RRTA excludes from “compensation” a limited subset of payments for
time lost, notably certain types of sick pay and disability pay.
See 26 U. S. C. §3231(e)(1), (4). These enumerated
exclusions would be entirely superfluous if, as the Court of
Appeals held, the RRTA broadly excludes from “compensation” any and
all pay received for time lost.
In justification of its confinement of
RRTA-taxable receipts to pay for active service, the Court of
Appeals also referred to the RRA. The RRA, like the RRTA as enacted
in 1937, states that “compensation” “includ[es] remuneration paid
for time lost as an employee” and specifies that such pay “shall be
deemed earned in the month in which such time is lost.” 45
U. S. C. §231(h)(1). Pointing to the discrepancy between
the RRA and the amended RRTA, which no longer contains the
above-quoted language, the Court of Appeals concluded that Congress
intended the RRA, but not the RRTA, to include pay for time lost.
Accord
post, at 7. Although “ ‘[w]e usually presume
differences in language . . . convey differences in
meaning,’ ”
Wisconsin Central, 585 U. S., at ___
(slip op., at 4), Congress’ failure to reconcile the RRA and the
amended RRTA is inconsequential. As just explained, the RRTA’s
pinpointed exclusions from RRTA taxation signal that nonexcluded
pay for time lost remains RRTA-taxable “compensation.”
B
Instead of adopting lockstep the Court of
Appeals’ interpretation, Loos takes a different approach. In his
view, echoed by the dissent, “remuneration . . . for
services rendered” means the “package of benefits” an employer pays
“to retain the employee.” Brief for Respondent 37;
post, at
3–4. He therefore agrees with BNSF that benefits like sick pay and
vacation pay are taxable “compensation.” He contends, however, that
FELA damages for lost wages are of a different order. They are not
part of an employee’s “package of benefits,” he observes, and
therefore should not count as “compensation.” Such damages, Loos
urges, “compensate for an injury” rather than for services
rendered. Brief for Respondent 20;
post, at 3–4. Loos argues
in the alternative that even if voluntary settlements qualify as
“compensation,” “involuntary payment[s]” in the form of damages do
not. Brief for Respondent 33.
Our decision in
Nierotko undermines
Loos’s argument that, unlike sick pay and vacation pay, payments
“compensat[ing] for an injury,” Brief for Respondent 20, are not
taxable under the RRTA. We held in
Nierotko that an award of
backpay compensating an employee for his wrongful discharge ranked
as “wages” under the SSA. That was so, we explained, because the
backpay there awarded to the employee redressed “the loss of wages”
occasioned by “the employer’s wrong.” 327 U. S., at 364; see
supra, at 5. Applying that reasoning here, there should be
no dispositive difference between a payment voluntarily made and
one required by law.[
4]
Nor does
United States v.
Cleveland
Indians Baseball Co.,
532 U.S.
200 (2001), aid Loos’s argument, repeated by the dissent. See
post, at 8. Indeed,
Cleveland Indians reasserted
Nierotko’s holding that “backpay for a time in which the
employee was not on the job” counts as pay for services, and
therefore ranks as wages. 532 U. S., at 210.
Cleveland
Indians then took up a discrete, “secondary issue”
Nierotko presented, one not in contention here,
i.e.,
whether for taxation purposes backpay is allocable to the tax
period when paid rather than an earlier time-earned period. 532
U. S., at 211, 213–214, 219–220. Moreover,
Quality
Stores, which postdated
Cleveland Indians, left no doubt
that what qualifies under
Nierotko as “wages” for benefit
purposes also qualifies as such for taxation purposes. 572
U. S., at 146–147.
C
Loos presses a final reason why he should not
owe RRTA taxes on his lost wages award. Loos argues, and the
District Court held, that the RRTA’s tax on employees does not
apply to personal injury damages. He observes that the RRTA taxes
“the
income of each employee.” 26 U. S. C.
§3201(a)–(b) (emphasis added). He then cites a provision of the
Internal Revenue Code, 26 U. S. C. §104(a)(2). This
provision exempts “damages . . . received . . .
on account of personal physical injuries” from federal income
taxation by excluding such damages from “gross income.” Loos urges
that the exclusion of personal injury damages from “gross income”
should carry over to the RRTA’s tax on the “income” of railroad
workers, §3201(a)–(b).
The argument is unconvincing. As the Government
points out, the District Court, echoed by Loos, conflated “the
distinct concepts of ‘gross income,’ [a prime component of] the tax
base on which income tax is collected, and ‘compensation,’ the
separately defined category of payments that are taxable under the
RRTA.” Brief for United States as
Amicus Curiae 15. Blending
tax bases that Congress kept discrete, the District Court and Loos
proffer a scheme in which employees pay no tax on damages
compensating for personal injuries; railroads pay the full excise
tax on such compensation; and employees receive full credit for the
compensation in determining their retirement benefits. That scheme,
however, is not plausibly attributable to Congress.
For federal income tax purposes, “gross income”
means “all income” “[e]xcept as otherwise provided.” 26
U. S. C. §61; see §§1, 63 (imposing a tax on “taxable
income,” defined as “gross income minus . . .
deductions”). Congress provided detailed prescriptions on the scope
of “gross income,” excluding from its reach numerous items, among
them, personal injury damages. See §§101–140. Conspicuously absent
from the RRTA, however, is any reference to “gross income.” As
employed in the RRTA, the word “income” merely distinguishes the
tax on the employee, an “income . . . tax,” §3201, from
the matching tax on the railroad, called an “excise tax.” §§3201,
3221. See also 1937 RRTA, §§2–3 (establishing an “income tax on
employees” and an “excise tax on employers”); S. Rep. No. 818,
75th Cong., 1st Sess., 5 (1937) (stating that the RRTA imposes an
“income tax on employees” and an “excise tax on employers”);
H. R. Rep. No. 1071, 75th Cong., 1st Sess., 6 (1937)
(same).
Congress, we reiterate, specified not “gross
income” but employee “compensation” as the tax base for the RRTA’s
income and excise taxes. §§3201, 3221. Congress then excepted
certain payments from the calculation of “compensation.” See
§3231(e);
supra, at 9. Congress adopted by cross-reference
particular Internal Revenue Code exclusions from “gross income,”
thereby carving out those specified items from RRTA coverage. See
§3231(e)(5)–(6), (9)–(11). Tellingly, Congress did not adopt for
RRTA purposes the exclusion of personal injury damages from federal
income taxation set out in §104(a)(2). We note, furthermore, that
if RRTA taxes were based on “income” or “gross income” rather than
“compensation,” the RRTA tax base would sweep in
nonrailroad
income, including, for example, dividends, interest accruals, even
lottery winnings. Shifting from “compensation” to “income” as the
RRTA tax base would thus saddle railroad workers with
more
RRTA taxes.
Given the multiple flaws in Loos’s last ditch
argument, we conclude that §104(a)(2) does not exempt FELA damages
from the RRTA’s income and excise taxes.
* * *
In harmony with this Court’s decisions in
Nierotko and
Quality Stores, we hold that
“compensation” for RRTA purposes includes an employer’s payments to
an employee for active service and for periods of absence from
active service. It is immaterial whether the employer chooses to
make the payment or is legally required to do so. Either way, the
payment is remitted to the recipient because of his status as a
service-rendering employee. See 26 U. S. C. §3231(e)(1);
45 U. S. C. §231(h)(1).
For the reasons stated, FELA damages for lost
wages qualify as RRTA-taxable “compensation.” The judgment of the
Court of Appeals for the Eighth Circuit is accordingly reversed,
and the case is remanded for proceedings consistent with this
opinion.
It is so ordered.