an update for the week of january 24, 2005
today's workplace: the employee rights blog
Discrimination Victims' Hopes Dashed With Supreme Court Decision on Taxes: Late last year, when a measure to reduce the taxation of plaintiffs' discrimination awards by eliminating taxation of attorneys' fees was passed, those currently in legal battles against their employers, and the advocates who represent them, had a reason to celebrate. No longer would their victories run the same risk of being completely undone by taxation. Even then, however, the celebration was tempered by the measure's lack of retroactivity, which meant that cases won or settled before the new law's effective date still faced an excessive tax burden. Any hope of undoing that burden for those still subject to it faded considerably on Monday, when the U.S. Supreme Court issued its ruling in Commissioner v. Banks. In ruling unanimously against the plaintiffs in Banks, the Court essentially adopted a "tough luck" approach: if your case didn't settle or go to trial after the new law went into effect, sorry, you're out of luck.
this week in the courts
Comm'r v. Banks  (U.S. Supreme Court; No. 03-892 )
Decision Date: January 24, 2005
Respondent Banks settled his federal employment discrimination suit against a California state agency and respondent Banaitis settled his Oregon state case against his former employer, but neither included fees paid to their attorneys under contingent-fee agreements as gross income on their federal income tax returns. In each case petitioner Commissioner of Internal Revenue issued a notice of deficiency, which the Tax Court upheld. In Banks' case, the Sixth Circuit reversed in part, finding that the amount Banks paid to his attorney was not includable as gross income. In Banaitis' case, the Ninth Circuit found that because Oregon law grants attorneys a superior lien in the contingent-fee portion of any recovery, that part of Banaitis' settlement
was not includable as gross income.

Held: When a litigant's recovery constitutes income, the litigant's income includes the portion of the recovery paid to the attorney as a contingent fee.

McCombs v. Meijer, Inc.  (Sixth Circuit; No. 03-3612)
Decision Date: January 19, 2005
In a sexual harassment lawsuit, a jury verdict for plaintiff is affirmed over defendant's claims that the district court erred by 1) submitting improper instructions to the jury, and 2) making improper evidentiary rulings.
Loughman v. Malnati Org.  (Seventh Circuit; No. 04-1564)
Decision Date: January 18, 2005
Summary judgment against plaintiff's claims of sexual harassment by her coworkers is reversed where a reasonable jury could find that plaintiff's work environment was hostile.
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