Compensation & Benefits Alert - March 2014

March 2014

In a unanimous decision on March 25, 2014, the Supreme Court held in favor of the government that the broad definition of wages in section 3121, for purposes of taxes under the Federal Insurance Contributions Act (“FICA”), includes severance payments made to the Quality Stores employees (United States v .Quality Stores, Inc., No. 12- 1408 (2014)).The Court’s opinion tracks very closely to the analysis and arguments in the government’s brief, including reliance on Rowan Cos. V. United States, 452 U.S.247 (1981). This decision established the principle that (i) simplicity of administration and (ii) consistent interpretation of statutory language dictate that the definition of “wages” should generally be the same for purposes of FICA taxes and federal income tax withholding.