CLAYTON—In a long-anticipated ruling, a state appeals court on Tuesday upheld a lower court ruling that said people who work for employers based in the city of St. Louis are entitled to refunds of the city’s 1% earnings tax for work done remotely outside the city limits. 

Plaintiffs first filed suit in March 2021, and a lower court dismissed some of the counts in January 2022.

The city appealed St. Louis Circuit Court Judge Jason Sengheiser’s ruling from January of 2023 when he said that the Collector of Revenue’s office decision to deny refunds who worked virtually during the COVID-19 pandemic, it unilaterally changed the criteria for refunds without formally changing the rule, or pursuing a change to the law that authorizes the earnings tax.

On Tuesday, the Eastern District Court of Appeals upheld the ruling.

“This court holds the Earnings Tax Ordinance’s language is clear and the remote work and/or services at issue were not performed or rendered in the city,” the three judge panel wrote in its opinion.

“Thus, Employees were not liable for the earnings tax for the days they worked remotely outside of the City and are entitled to refunds.”

The appeals court did reject the employees’ request for class action status, which means that at least for now, the financial impact is limited to six plaintiffs and that others who may have been denied refunds based on similar claims would need to file their own legal actions.

That decision means the current impact of the ruling is a matter of thousands of dollars, and not potentially as much as $150 million over a period of several years.

“People have been teleworking for years and the collector always issued refunds for teleworking days. And as the opinion points out there was no change in the law. If the city wanted to change the law, if the state wanted to change the applicability to non residents, they had an opportunity to go to the legislative branch both at the state level and the city to do that, they didn’t do it,” said attorney Mark Milton, a lawyer for the plaintiffs.

A city spokesperson said the city is reviewing the decision.

“In creating the 2025 budget proposal, the mayor took a financially prudent approach to take into account the potential impact of today’s decision. We do not believe this decision will require changes to the budget or will impact the current level of City services,” a spokesperson for Mayor Tishaura Jones said in a statement Tuesday.

According to the city, roughly 36% of the city’s general revenue comes from the Earnings Tax. A precise amount of how much is generated by teleworking employees working outside the city is unclear.

“I bleed for this city and I wish no ill will. I have good friends who are employees of the city,” said Christian Stein, one of the plaintiffs who lives in St. Louis County but worked for decades as a banker, often working remotely.

“I think there’s gotta be a way to step back and look at the bigger picture here and I hope the message to the other side of the table is that hey we want you to do it right and then collectively we as residents of the metro area we do what’s right.”

Both sides have 15 days to appeal.