Nevada Supreme Court Rules Untaxed Tip Income Is Includible in Calculating Workers' Compensation Benefits - Las Vegas Employment Law Attorney Andre Lagomarsino
The Nevada Supreme Court has ruled that NRS 616B.227 requires untaxed tip income to be included in the average monthly wage calculation to determine workers' compensation benefits, as long as the employee reported the tips to his employer. Sierra Nevada Administrators v Asen Negriev.
Asen Negriev worked as a bartender at the Big Inning Sports Pub in Las Vegas. Negriev was paid $8.00 an hour by the pub. He also received tips from his customers which he reported to the pub. The pub did not report Negriev's tips on his Form W-2, nor did Negriev report the tips on his federal or state income tax returns.
When Negriev fell and injured his back while going into the pub's kitchen, Negriev filed a workers' compensation claim with the pub's workers' compensation carrier, Sierra Nevada Administrators. In calculating Negriev's workers' compensation benefits, Sierra refused to include any compensation Negriev received from his unreported tips. Negriev appealed Sierra's average monthly wage calculation to an administrative hearing officer who affirmed Sierra's average monthly wage calculation. According to the hearing officer, because Negriev did not pay taxes on his tips the tips were not compensation under NRS 616B.227. Negriev appealed. The appeals officer reversed the hearing officer's decision and ordered Sierra to include Negriev's unreported tip income in the calculation of Negriev's workers' compensation benefits. According to the appeals officer, the unreported tips met the requirements of NRS 616B.227 because Negriev faithfully reported his tips to the pub, and it was the pub's fault for not including Negriev's tips on his paychecks or Form W-2.
Sierra filed a petition for judicial review in the district court that was denied. Sierra appealed.
NRS 616B.227( 4) provides, in pertinent part, that a "private carrier ... shall calculate compensation for an employee on the basis of wages paid by the employer plus the amount of tips reported by the employee." NRS 616B.227(1) further requires that an employer make a copy of each report that an employee files regarding his or her tips in order to report this amount to the IRS. The Supreme Court thus concluded that NRS 616B.227 requires a workers' compensation carrier to include tip income in an employee's average monthly wage calculation if the employee reported the tip income to his or her employer, which Negriev did. Further, that an employee, such as Negriev, did not actually pay taxes on the tip income is irrelevant to the average monthly wage calculation.