Wyatt Employment Law Report

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Is It Time for an Internal Audit to See if Your Company’s Compensation is in Compliance with the Law? What We Can Learn From the U.S. Women’s Soccer Team Suit

By Sharon L. Gold

wage increaseThis month, five members of the U.S. Women’s National Soccer team filed a wage disparity complaint with the EEOC against the U.S. Soccer Federation.  The Women’s team alleges that despite the fact that they are doing equal work, they are not receiving equal pay as the Men’s National Soccer Team.  The Women’s team alleges their top-tier players earn between 38% and 72% of their male counterparts, although the Women’s Team is more successful.  One article noted that in 2015, they were paid far less for winning the tournament than the men were paid to lose their tournament.  The EEOC will investigate the complaint and then make a decision as to the validity of the women’s claims.

The EEOC has jurisdiction over claims alleging discrimination in pay under the Equal Pay Act of 1963, Title VII, ADEA, and ADA.  The EPA requires that men and women be given equal pay for equal work.  In order for jobs to be considered equal, they must be substantially equal.  In order to make this assessment, the EEOC looks to Continue reading

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Supreme Court to Decide if Severance Pay is Subject to FICA Tax

By James A. Nitsche

The Supreme Court has announced that it will review a decision of the Sixth Circuit Court of Appeals that payments made by a company to employees pursuant to a severance plan were not “wages” subject to Federal Insurance Contribution Act (“FICA”) taxes.

In the Sixth Circuit case, In Re Quality Stores, Inc., 693 F2d 605 (6th Cir. 2012), an employer made severance payments to employees whose employment was terminated involuntarily when the employer closed its stores and discontinued business.  The employer withheld income and FICA taxes from payments made to the terminated employees, and paid the employer’s share of FICA taxes with respect to such payments, but subsequently filed claims requesting refunds of all such FICA taxes.  When the IRS denied the refund claims, the employer filed a suit for refund as part of a bankruptcy proceeding.  The bankruptcy court ordered a full refund, holding that the payments made by the employer to its terminated employees constituted supplemental unemployment compensation benefits that are not treated as wages for FICA tax purposes.  The Sixth Circuit affirmed the bankruptcy court’s decision.

The Quality Stores decision hinged on the courts’ analysis of the relationship between the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), that require withholding of income and FICA taxes on “wages” paid to employees.  In general, Code Section 3402(a) requires an employer to withhold income taxes on “wages,” as defined by Code Section 3401(a), paid to employees.  Meanwhile, Code Section 3102(a) requires that FICA taxes be withheld from “wages,” as defined by Code Section 3121(a), paid to employees.  While the definition of wages under Code Section 3401(a) may be substantially similar to the definition of wages under Code Section 3121(a), the two are not identical.  Nevertheless, in Rowan Cos. v. United States, 452 U.S. 247 (1981), the Supreme Court examined the language and legislative history of Code Sections 3401(a) and 3121(a) to conclude that Congress intended the term “ wages” to carry the same meaning for purposes of income tax and FICA tax withholding. Continue reading