Legal News Line Jan. 9, 2015, 10:34am



SAN FRANCISCO (Legal Newsline) - A class action lawsuit filed against a healthcare facility alleges the organization failed to file tax refund claims for its former employees after a court ruled the employees were exempt from the Federal Insurance Contribution Act (FICA).




Eric Joseph Rodriguez, Patrick Fredenberg and Edward Gerace, Jr. filed the lawsuit Dec. 30 against Dignity Health and its subsidiary St. Joseph's Hospital and Medical Center.








The lawsuit is seeking class status for medical residents who were at the healthcare facility between Jan. 1, 1996, and May 31, 2005. According to the lawsuit, Dignity withheld FICA taxes from the plaintiffs' paychecks and paid the employee share and employer share of the taxes.




However, the hospitals argued that medical residents were students and should be exempt from the FICA taxes under the student exception in the IRS code. A circuit court ruled in favor of the hospitals in 1998, and the hospitals began filing for refund claims for the taxes paid by them and the medical residents.




Dignity did not file the FICA claims for the plaintiffs, the lawsuit said. In 2010, the IRS officially acknowledged that medical residents were exempt from the FICA tax, the lawsuit said, and agreed to refund the taxes paid plus interest if hospitals applied for the refunds in a timely matter.




“Plaintiffs have not received, and will not receive, FICA refunds because defendants failed to file refund claims and further failed to advise plaintiffs that defendants did not intend to file refund claims,” the lawsuit said. “If plaintiffs would have known that defendants were not going to file refund claims, they could have filed their own individual claims. But by the time plaintiffs finally discovered defendants’ failure, the time for plaintiffs to file their own individual claims with the IRS had expired.”




The lawsuit seeks more than $5 million in damages from Dignity. The plaintiffs are represented by Todd M. Schneider, Michael C. McKay and Patrick J. Van Zanen, of Schneider, Wallace, Cottrell, Konecky, Wotkyns, LLP.




United States District Court for the Northern District of California case number 3:14-cv-05661.


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