UPPS No. 01.04.01
Issue No. 7
Effective Date: 9/12/2014
Next Review Date: 8/01/2018 (E4Y)
Sr. Reviewer: Vice President for Finance and Support Services
The Texas Tort Claims Act (Civil Practice and Remedies Code, Chapter 101) provides that a governmental entity may be liable for property damage, personal injury, and death proximately caused by the wrongful act or omission or the negligence of an employee acting within his or her scope of employment if such property damage, personal injury, or death arises from the operation or use of a motor-driven vehicle or motor-driven equipment, or if such personal injury or death was caused by a condition or use of tangible personal or real property.
The state’s liability under this Act is limited to $250,000.00 per person and $500,000.00 for any single occurrence for bodily injury or death, and $100,000.00 for any single occurrence for injury to or destruction of property.
Except when the university, its agents, or employees have received actual notice that death has occurred or the claimant received an injury or property damage, any person making a claim under the Act must give notice to the university within six months from the date of the incident.
Section 104.001 of the Texas Tort Claims Act (Civil Practice and Remedies Code, Chapter 104) provides that the state will indemnify state employees for actual damages, court costs, and attorney’s fees adjudged against them for claims arising from an act or omission by the state employee in the course of his or her employment with the state.
The state may not expend funds appropriated by the General Appropriations Act (GAA), including those made in GAA Article X, for payment of a judgment or settlement prosecuted or defended by the attorney general and obtained against the state or a state agency, except in certain cases described in GAA Article IX, Sections 16.02 and 16.03.
The law requires the university to report any employment-related judgments or settlements that the Internal Revenue Service (IRS) defines as wages, to the IRS and the Social Security Administration (SSA).
The university must follow the fiscal management policies of The Texas Comptroller of Public Accounts regarding plaintiffs’ awards from settlements and judgments, attorney fees, payments of a plaintiff’s back wages, interest and damages, punitive, compensatory or liquidated. The Texas comptroller requires that all agencies and institutions of higher education verify and report information to the IRS or SSA, and review all settlement and judgment payments to ensure the university reported them in accordance with current IRS instructions for information returns (Texas Comptroller FM 02-28, dated December 17, 2001).
University faculty members and staff employees often supervise students and other employees who engage in potentially dangerous activities or use potentially dangerous equipment. In such instances, such supervisors must give instruction and training in proper safety procedures to be followed.
In such instances, faculty members and staff employees must have each person who participates in hazardous activities, such as university-sponsored foreign travel or field trips or uses dangerous equipment, sign a release relieving the university from liability. Employees should consult The Texas State University System (TSUS) Office of General Counsel for preparation of these releases.
No university faculty member, administrator or other staff employee, other than the president of the university, has authority to make an admission of liability or bind the university to any settlement when another person suffers injury to his or her person or damage to his or her property.
Persons with knowledge of injuries to persons or damages to property that might result in university liability should report to the TSUS Office of the General Counsel, who will convey such information to the director of Human Resources, the appropriate vice president, the safety officer, and, through the vice president for Finance and Support Services, to the president of the university.
Since university employees are eligible for workers’ compensation (whether or not loss of work time or medical expenses are involved), persons with knowledge should report all work-related injuries to the appropriate administrative head. UPPS No. 04.04.43, Workers’ Compensation Injuries, Illnesses and Claims, contains specific details.
PROCEDURES FOR FILING A CLAIM FOR MONETARY DAMAGES AGAINST THE UNIVERSITY
One who seeks monetary damages against the university should take the following steps, in sequence, to present that claim for payment:
claimants may obtain claim forms from the TSUS Office of General Counsel, or on the TSUS Office of General Counsel website;
the claimant should complete the form and attach sufficient documents to support the amount of and the justification for this claim. Examples of supporting documents are written estimates of damages to property made by qualified experts, medical bills, police reports, and statements of witnesses describing the incident giving rise to the claim. The claimant should return the form to the TSUS Office of General Counsel;
the TSUS Office of General Counsel will investigate the claim and recommend to the vice president for Finance and Support Services whether the university should pay the claim. The vice president will notify the TSUS Office of General Counsel of his or her decision as to whether to pay or reject the claim. The TSUS Office of General Counsel will notify the claimant of the university’s decision; and
the TSUS Office of General Counsel will notify claimants if it requires additional information or if it requires the claimant to surrender the damaged property at the time the university pays the claim.
If the university determines that the claim is valid, the university may pay from local sources; ordinarily, from the account most directly linked with the activity that caused the claim.
The university requires that the claimant sign a release prepared or approved by the TSUS Office of General Counsel if the claim is paid.
CLASSIFYING THE CHARACTER OF JUDGMENT OR SETTLEMENT PAYMENTS
– provide that any payments made by an employer to an employee, on account of involuntary separation from the service of the employer, constitute wages for income tax withholding purposes regardless of whether the employer is legally bound by contract, statute, or otherwise, to make such payments.
– a payment made by an employer to an employee upon the involuntary termination of employment. Dismissal pay, severance pay, or other payments for involuntary termination of employment are wages for employment tax purposes, and for FICA and income tax withholding purposes.
– compensation paid to an individual for remuneration due at the time of settlement or court award and relates to a period when the individual performed no services for the employer. Back pay is wages for FICA and income tax withholding purposes, except when received on account of a personal physical injury or physical sickness. Back pay is allocated to periods in which the individual should have received wages for social security benefit purposes only, not the computation of FICA tax.
– payment paid to an individual to compensate for remuneration the individual would have received after the settlement date or court award. Front pay is wages for employment tax purposes. Back pay and front pay paid to individuals who are not hired as employees because of violation of workers’ rights or civil rights statutes are wages for employment tax purposes.
– compensatory damages include compensation for personal physical injuries, physical sickness and medical care related to emotional distress resulting from bodily injury. Consequential damages are compensation for damage, loss, or injury that are consequences or results of a negligent act. Compensatory or consequential damages related to personal physical injury or sickness are not considered taxable income. Compensatory damages may include taxable awards not related to physical injury, sickness or employment-related disputes.
– the IRS’s position is that, generally, fees awarded to prevailing plaintiffs under federal and state statutes belong to the plaintiff and not the attorney; therefore, attorney fees constitute an item of gross income to the client.
TAXABILITY OF JUDGMENT OR SETTLEMENT
The Office of Payroll and Tax Compliance must determine the correct treatment of employment-related judgment and settlement payments using the four-step process outlined in IRS published guidance:
determine the character of the payment and the nature of the claim that gave rise to the payment;
determine whether the payment constitutes an item of gross income;
determine whether the payment is wages for employment tax purposes; and
determine the appropriate reporting for the payment and any attorney fees (Form 1099 or Form W-2).
– A judgment or settlement payment may consist of wage and non-wage elements. The TSUS Office of General Counsel is responsible for allocating the elements of the payment in the settlement agreement. The settlement agreement must address and document tax issues. The TSUS Office of General Counsel is responsible for notifying the Office of Payroll and Tax Compliance before an employment-related settlement or judgment payment is paid to a claimant in order to determine whether or not the payment should be paid through the payroll process.
– responsible for properly paying employment-related settlement or judgment payments that are defined as wages by the IRS to the claimant through the payroll process, deducting and paying appropriate taxes, issuing tax reports according to federal regulations to the claimant using a W-2, and to the attorney using a 1099-MISC, if applicable.
– may disburse payments not defined as wages by the IRS. The tax specialist in the Office of Payroll and Tax Compliance is responsible for reporting settlement or judgment payments on a 1099-MISC statement to the claimant and the attorney, if applicable.
REVIEWERS OF THIS UPPS
Reviewers of this UPPS include the following:
|Vice President for Finance and Support Services||August 1 E4Y|
|Director, Payroll and Tax Compliance||August 1 E4Y|
This UPPS has been approved by the following individuals in their official capacities and represents Texas State policy and procedure from the date of this document until superseded.
Vice President for Finance and Support Services; senior reviewer of this UPPS