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New York court awards work comp for psychic injury

Many people may assume that workers’ compensation benefits are available only to workers who suffer physical injuries during the course of their employment. However, benefits may also be available to those who suffer only mental harm. For example, a New York court of appeals recently ruled that a woman who suffered mental injuries after receiving distressing news about personal tax liability incurred because of her employer’s error is entitled to workers’ compensation benefits.

The woman worked in a human resources position at the New York Insurance Department in Albany. She was frequently required to make overnight trips to Manhattan for her job, and the department reimbursed her for her travel expenses. In 2011, someone made an anonymous complaint about the woman’s expense reimbursement claims. Following an investigation, no wrongdoing on the woman’s part was found to have occurred, but the matter was referred to the state Comptroller’s Office to assess whether the department’s reimbursement policy had any tax implications.

It was that assessment that led to the woman’s psychic injury. The Comptroller’s Office found that while the woman herself had done nothing wrong, the department’s practices violated IRS rules and, as a result, the woman should be taxed for an additional $100,000 in earned income. The shock of learning about the additional tax liability and penalties resulted in mental injury to the woman, and she filed a claim for worker’s compensation benefits.

In ruling on the woman’s claim, the appeals court found there was no dispute that the woman suffered an injury. Instead, the case turned to whether or not the injury was compensable under the state’s workers’ compensation law. In ruling that it was, the court found that the injuries did not stem from work-related stress, which is not compensable, but from the fact that the woman incurred serious financial liabilities as a result of her employer’s practices through no fault of her own. In cases such as these, individuals often benefit from consulting with a personal injury attorney prior to filing a claim.

Source: Courthouse News Service, “Tax Penalty Gives Rise to Workers’ Comp Award“, Marlene Kennedy, July 01, 2013

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