Sometimes, settling a discrimination complaint may mean paying the employee several thousand dollars. That payment may or may not be taxable. Employers often send a 1099 miscellaneous income form to the IRS.
Some employees think this is a deliberate effort to alert the IRS to their miscellaneous income and amounts to retaliation. Courts disagree.
Recent case: Habtnesh Ezra worked for the California Department of Health until she retired after settling a discrimination claim against the agency. She received a check and signed an agreement that was not specific about the payment’s tax status.
When the state sent the IRS a 1099 form, Ezra sued, alleging retaliation.
The court tossed out her case. It reasoned that the state had acted out of business necessity, not retaliation because it did not know whether the amount was taxable or not. (Ezra v. California, No. B216144, Court of Appeal of California, 2010)