Employers Must Gross Up Back Pay Awards in NLRB Cases


In another bold move, the National Labor Relations Board (NLRB) has beefed up the requirements for back pay payments when an employer loses a labor dispute.[1] Employees and their lawyers have long complained of the tax consequences of back pay awards under the National Labor Relations Act.  In many instances, a charging party, who has successfully claimed to have been discriminatorily fired under the Act, has been required to pay more tax on a lump sum back pay award than he or she would have otherwise paid on the wages stretched out time.  Also, an employee who has received a back pay award has had the wages applied to the current quarter, not the period of the alleged loss, for the calculation of Social Security benefits. 

Now, the NLRB has decided, employers must gross up payments for back pay awards covering periods longer than one year.  Also, the NLRB has held that employers have to file reports with the Social Security Administration ("SSA") for back pay awards, to ensure that the SSA allocates the back pay compensation to the appropriate time frame.  The Board is applying this remedy retroactively "to all pending cases in whatever stage." 

According to the Board, the new ruling is based on the NLRB's inherent authority to fashion remedies (at least, according to the NLRB).

[1]Latino Express, Inc. v. International Brotherhood of Teamers, Local 777, 359 NLRB No. 44 (2012).  


Topics:  Back Pay, NLRA, NLRB, Payroll Taxes, Social Security

Published In: Administrative Agency Updates, Civil Rights Updates, Labor & Employment Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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