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The Puerto Rico Supreme Court reversed the trial court and affirmed the appeals court decision, holding that severance compensation received by an employee upon termination is exempt from income tax withholding, and ordered the Secretary of the Treasury to reimburse the employee for excess contributions paid.
Orsini García v. Secretary of the Treasury
What Happened
Orsini García worked for Pfizer, Inc. and was terminated from employment. When he received severance pay—money given to employees upon job loss—the government withheld income taxes from it. García disagreed with this tax treatment and disputed whether severance compensation should be subject to income tax withholding.
What the Court Decided
The Puerto Rico Supreme Court ruled in García's favor. The court determined that severance compensation received when an employee is fired is exempt from income tax withholding. The court ordered the Secretary of the Treasury to refund García the excess taxes he had paid, awarding him $32,345 in damages.
Why This Matters for Workers
This ruling protects employees in Puerto Rico by clarifying that severance pay—money meant to help workers transition after job loss—should not have taxes automatically deducted. Workers who received severance with taxes withheld may be entitled to refunds. This decision ensures that severance compensation is treated fairly and that workers receive the full benefit intended to help them during unemployment.
This summary was generated to explain the ruling in plain English and is not legal advice.
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