The Supreme Court said today that medical students in residency programs are employees for tax purposes, and they must therefore pay Medicare and Social Security taxes. Doctors in residency have already graduated from medical school, and the residency programs provide 3 to 5 years of hands-on training.
According to Chief Justice John Roberts, the author of the opinion, doctors in residency “often spend between 50 and 80 hours a week caring for patients,” and they were paid between $41,000 and $56,000 per year in 2005, when the lawsuit was filed. Residents also received normal employment benefits.
The payments were called “stipends” by Mayo, but in 2004 the Treasury Department issued a rule saying that a person is a student, and therefore exempt from these taxes, only when “[t]he educational aspect of the relationship … as compared to the service aspect of the relationship, [is] predominant.” The Treasury also said that anyone working more than 40 hours a week was not involved in an educational program but was working.
Chief Justice Roberts ruled that when Congress wrote the law giving an exemption for students, it did not define the term, and therefore it was within the Treasury Department’s discretion to decide who qualifies. Roberts noted in his opinion that the Justices “do not doubt that Mayo’s residents are engaged in a valuable educational pursuit or that they are students of their craft.” But, he said, the question of exemptions is one that the Treasury Department has the power to answer.
The decision was unanimous, though Justice Elena Kagan did not participate. The case was Mayo v. US.