WASHINGTON, D.C. - (Mealey's) The U.S. Supreme Court on
Jan. 11 upheld a U.S. Treasury Department determination that medical residents
should be treated as full-time employees when it comes to payroll taxes (Mayo
Foundation for Medical Education and Research, et al. v. United States, No.
09-837, U.S. Sup.; 2011 U.S. LEXIS 609).
The Mayo Foundation for Medical Education and Research,
the Mayo Clinic and the Regents of the University of Minnesota sued the United
States, challenging the Treasury Department's determination in 2004 that
full-time employees, including medical residents, are not students for the
purpose of payroll taxes. The U.S. District Court for the District of
Minnesota agreed with the plaintiffs that the rule was invalid, but an Eighth Circuit
U.S. Court of Appeals panel reversed. The Mayo Foundation and other
plaintiffs petitioned the U.S. high court.
Siding with the Eighth Circuit, all of the high court
justices, except Justice Elena Kagan, who took no part in the consideration or
decision of the case, opined that Mayo's argument that the Treasury Department
should engage in a case-by-case inquiry to determine the role of schooling and
employment for each resident is not plausible.
"[R]egulation, like legislation, often requires drawing
lines. The Department reasonably sought to distinguish between workers
who study and students who work. Focusing on the hours spent working and
those spent in studies is a sensible way to accomplish that goal. The
Department thus has drawn a distinction between education and service, not
between classroom instruction and hands-on training. The Treasury
Department also reasonably concluded that its full-time employee rule would
'improve administrability,' 69 Fed. Reg. 76405, and thereby 'has avoided the
wasteful litigation and continuing uncertainty that would inevitably accompany
[a] case-by-case approach' like the one Mayo advocates, United States v.
Correll, 389 U.S. 299, 302. Moreover, the rule reasonably takes into
account the Social Security Administration's concern that exempting residents
from FICA [Federal Insurance Contributions Act] would deprive them and their
families of vital social security disability and survivorship benefits," Chief
Justice John G. Roberts Jr. wrote for the court.
[Editor's Note: Full coverage will be in the
January issue. In the meantime, the opinion is available at www.mealeysonline.com or
by calling the Customer Support Department at 1-800-833-9844. Document
#73-110114-011Z. For all of your legal news needs, please visit www.lexisnexis.com/mealeys.]
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