Rivera v. Baker West, Inc., 430 F.3d 1253 (9th Cir. 2005)

Jack Rivera sued his former employer, Baker Concrete Construction, Inc., for race and national origin discrimination and wrongful termination. The matter was settled for “$40,000 less all lawfully required withholdings” during a settlement conference before a magistrate judge. Baker subsequently issued a settlement check in the amount of $25,140, withholding $14,860 for federal and state income tax and FICA contributions. Rivera cashed the check. However, Rivera opposed Baker’s motion to dismiss his claims on the ground that Baker had improperly withheld money from the settlement proceeds. The district court granted Baker’s motion to dismiss, holding that the settlement amount was lawfully classified as taxable wages since there was no evidence that Rivera had alleged or was being compensated for any personal physical injuries or physical illness. The Ninth Circuit affirmed and further held that awards for back pay under Title VII are subject to income tax withholding.