Public employers often ask IFMK attorneys to help interpret the language in the Public Employees Disability Act (PEDA) which states in part:
“Whenever an eligible employee suffers any injury in the line of duty which causes him to be unable to perform his duties, he shall continue to be paid by the employing public entity on the same basis as he was paid before the injury.”
Employers often want to know whether this means that the employees are paid just as if on the regular payroll, including all deductions for income taxes and any other deductions they had from regular payroll prior to the accident or whether they are to be paid without deductions. On September 18, 2025, the Court addressed this question in Bitner et al. v. City of Pekin 2025 IL 131039 (2025).
IFMK has previously advised our clients that state and federal income tax should not be withheld from PEDA payments. The justification for this advice came from the IRS stating that anything akin to a disability benefit for a work injury is not subject to income tax. PEDA has been deemed by our courts in the past as akin to temporary total disability benefits, and thus not subject to income tax. Until now.
In its unanimous decision, the Illinois Supreme Court turned to simple statutory interpretation of Section 1(b) of PEDA and a common legal maxim--the expression of one thing is the exclusion of any another. The language of Section 1(b) states nothing on the subject of whether income taxes are to be withheld from PEDA payments issued by the employer. It simply states the PEDA benefits shall be paid to the employee “on the same basis as he was paid before the injury.” So to the contrary, this implies it should just be paid as if the employee is being paid regular payroll. To imply otherwise would be a violation of that maxim.
The fact that the City of Pekin or any other the employer withholds income tax and all other withholdings just as employee had prior to the accident is, in the opinion of the Court, consistent with the plain language of the statute and not a violation, by contract or statute, on the part of the employer. Further, the Court instructs suggested that it is up to the
employee to take it up with the IRS (and implicitly the Illinois State Treasurer) if the employee believes these taxes should not have been withheld and seek a refund.
In light of this decision, we recommend these employers should now pay PEDA just as regular payroll to those employees but (1) clearly label those payments in the payroll as “PEDA” to delineate the start and stop times for those benefits and (2) make sure accrued vacation, sick leave, overtime, Kelly days, etc. are not used before or instead of those PEDA benefits while the employee is off for a line of duty or work-related injury.
This is a fairly significant shift in how our clients handle payment of PEDA. IFMK Law continues to defend the rights of public employers throughout Illinois and to advise our clients on those rights as well as their responsibilities under Illinois law.
Please reach out to us for guidance or questions you have regarding PEDA and any other areas of law that impact the rights and obligations of your public entity at [email protected]