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SHRM Newsletter: Surpreme Court Rules Severance Pay is Taxable
Posted on Apr. 9, 2014

This is Utah SHRM Legal-mail no. 2014-6 prepared for Salt Lake SHRM, the Human Resources Association of Central Utah (HRACU), the Northern Utah Human Resources Association (NUHRA), the Color Country Human Resources Association (CCHRA), the Bridgerland Society for Human Resource Management and Utah at-large members of the national Society for Human Resource Management (SHRM).

CONTENTS:

-  SUPREME COURT RULES SEVERANCE PAY IS TAXABLE

-  PUT ME IN COACH, OR I WILL FILE A UNION GRIEVANCE

-  WATCH FOR NEW EXECUTIVE ORDERS REGARDING WAGE ISSUES

-  RECENT SETTLEMENTS

-  DOES YOUR HR PASS THE SMELLS TEST?

SUPREME COURT RULES SEVERANCE PAY IS TAXABLE: The United States Supreme Court has issued an opinion holding that severance payments are taxable wages under the Federal Insurance Contributions Act (FICA). The case involved a layoff of thousands of employees where the involved employer paid severance pay and reported that pay on a W-2 form. The employer also paid the employer’s share of FICA taxes and withheld the employee’s share. The employer then filed FICA tax refund claims on behalf of itself and a number of the employees, seeking over id="mce_marker" million in refunds. The lower courts allowed the refund request, but the Supreme Court did not and held the payments were properly taxed as wages.

PUT ME IN COACH, OR I WILL FILE A UNION GRIEVANCE: A regional office of the National Labor Relations Board has ruled that the football players of Northwestern University actually are employees and should be allowed to form a union. The key question was whether the athletes perform services for another under a contract of hire, subject to the other’s control or right of control, and in return for payment. The NLRB office based its ruling on the fact that the college players received a substantial economic benefit (scholarships) for playing football-- a revenue-generating sport-- and are subject to the college’s control (team rules, practice schedules). The NLRB regional office distinguished graduate assistants (earlier ruled to be students, not employees) “because the players’ football-related duties are unrelated to their academic studies unlike the graduate assistants whose teaching and research duties were inextricably related to their graduate degree requirements.” Northwestern has said it will appeal the adverse ruling to the full NLRB and thereafter to the courts as needed. Thus, this case likely will not be finally resolved for several years.

WATCH FOR NEW EXECUTIVE ORDERS REGARDING WAGE ISSUES: News reports indicate that President Obama plans to sign two new executive orders impacting federal contractors (about 25% of the workforce) on employment issues. The first order will prohibit federal contractors from retaliating against employees for discussing their wages with each other. A similar protection already applies to most employers under the federal National Labor Relations Act. The other order will require the Department of Labor to issue new rules requiring federal contractors to provide the government with compensation data based on employee sex and race. The two new executive orders are said to be in response to the likelihood that the Senate will vote on, but not pass, equal pay legislation during the same week.

RECENT SETTLEMENTS: The City of New York has agreed to pay some $98 million to resolve claims that it engaged in a pattern or practice of discrimination against African-American and Hispanics entry level job applicants. The case focused on whether entry-level examinations improperly screened out minority applicants. A Western car dealership has agreed to pay $2 million to resolve a same sex sexual harassment case. The claim alleged that male managers subjected male employees to egregious sexual comments, solicitations and inappropriate touching and biting. Some 50 men will receive compensation as a result of the settlement.

DOES YOUR HR PASS THE SMELLS TEST? News reports indicate that a federal agency recently disciplined one of its employees for "conduct unbecoming a federal employee" and "creating a hostile work environment" because of that employee’s repeated passing of gas at work. The flatulent employee was admonished after numerous complaints (with some 60 documented instances) from nearby co-workers and when resolution efforts like use of a fan or a pre-emission race to the bathroom did not cause the odor problem to dissipate. The employee attributed the situation to lactose intolerance. The employer obtained medical letters for the employee but after reviewing them told him that “…nothing that you have submitted has indicated you would have uncontrollable flatulence.”  When the disciplinary letter was posted online, the federal agency announced that it had retracted the discipline. Certainly there is a humorous aspect to this story. However, “smells-at-work” problems actually can present an employer with a number of tricky and sensitive legal issues, notably under the Americans With Disabilities Act (ADA) and the Family and Medical Leave Act (FMLA). This HR work can really stink at times, eh?

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Author

mikeAttorney Michael
Patrick O'Brien

Mike O’Brien is an experienced and accomplished employment attorney, media lawyer and courtroom litigator.  He is active in SHRM and has received the highest possible reviews from rating services like Martindale - Hubbell (AV rating), Chambers USA, Utah Business Legal Elite, Best Lawyers in America, Who’s Who Legal USA, and SuperLawyers.  HR Executive Online has named him as one of America’s most powerful 100 employment lawyers, but keep in mind, this does not mean he is good at moving heavy furniture.

Awards and Recognition

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Chambers 2011 Attorney

Super Lawyers
Michael Patrick O'Brien
 

Best Lawyers In America, “Salt Lake City Best Lawyers Employment Law Lawyer Of The Year,” 2011-2012

Best Lawyers In America, First Amendment Law, Labor And Employment Law, 2005-2012

Chambers USA, Labor & Employment, 2003-2011

Employment Lawyer Of The Year, Utah State Bar, 2001

Human Resources Executive, Nation’s Most Powerful Employment Lawyers In America, 2010

Mountain States Super Lawyers, 2007-2012

Utah Business Magazine, Legal Elite, Labor And Employment, 2006-2012