In Cifuentes v. Costco Wholesale Corporation, Cifuentes won a judgment for lost wages against his former employer, Costco. Costco withheld federal and state payroll taxes from the award when paying it. Cifuentes claimed the judgment was not satisfied, citing the decision in Lisec v. United Airlines, Inc. (1992) 10 Cal.App.4th 1500, 1507, that an employer is not required to withhold payroll taxes from an award of lost wages to a former employee. Believing it was bound byLisec, the trial court ruled the withholding was improper and denied Costco’s motion for acknowledgment of satisfaction of the judgment. The Appellate Court concluded it was an error. It stated that in the 23 years since Lisec, the Internal Revenue Service (IRS) and the vast majority of federal appellate courts have broadly interpreted the applicable Internal Revenue Code (IRC) provisions as requiring an employer to withhold payroll taxes for all “wages” arising from the employer-employee relationship, even after that relationship has terminated. Persuaded by these authorities, the Court adopted this prevailing view and concludes Costco properly withheld the payroll taxes.

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