We recently presented on the topic of settlement and severance agreements as part of Nexsen Pruet’s Employment Law Certificate Series: Building Workplaces That Win.
Verdicts & Settlements
A plaintiff has been awarded $4.45 million for an age discrimination, disability discrimination, and retaliation action he filed under state law in a court in Iowa against his former employer. Gregory Hawkins v. Grinnell Regional Medical Center, et al., No. 08791 LALA002281. The award included $220,009 in back pay, $2 million in emotional distress damages, and $2.28 million for future emotional distress damages.
Last month, a federal court in Texas approved a settlement between the U.S. Equal Employment Opportunity Commission and Bass Pro Outdoor World LLC in a lawsuit filed by the EEOC that alleged widespread hiring discrimination and retaliation.
In Sharp v. Commissioner,1 the United States Tax Court once again demonstrated the importance of carefully crafting settlement agreements and reaffirmed that emotional distress damages are taxable income to the recipient.
On August 30, 2013, the IRS reiterated its longstanding positions on the proper tax treatment of litigation settlements with current or former employees. In its Chief Counsel Advice (CCA) Memorandum 20133501F, the IRS presented and answered three questions: