Employers Must Gross Up Back Pay Awards

By Rose McCaffrey

The NLRB has beefed up the requirements for back pay payments when an employer loses a labor dispute in Latino Express, Inc. v. International Brotherhood of Teamers, Local 777, 359 NLRB No. 44 (2012). Employees who receive awards of back pay, for example for discrimination under the National Labor Relations Act, end up paying more taxes when they receive a lump sum payment than what they would have paid receiving the wages.  Also, employees who receive back pay awards have the wages misapplied to the current quarter for the calculation of Social Security benefits.

Now, the Board 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, and they likewise have to gross up payments for back pay awards covering periods longer than one year. The Board is applying this remedy retroactively “to all pending cases in whatever stage.”

This NLRB decision is another example of the remedies the NLRB can fashion (at least, according to the NLRB).  Naturally, the remedies end up costing employers more.

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