Equal Pay Issues Addressed by President Obama on “National Equal Pay Day,” When He Signed An Executive Order and Presidential Memorandum Affecting Federal Contractors

On April 8, 2014, President Obama signed a Presidential Memorandum that will require federal contractors and subcontractors to provide to the U.S. Department of Labor compensation data based on their employees’ sex and race.  The President also signed that day an Executive Order preventing federal contractors from retaliating and discriminating against employees who discuss their compensation with their co-workers.  The President stated that when employees are prohibited from discussing their compensation with fellow employees, “compensation discrimination is much more difficult to discover and remediate, and more likely to persist.”

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US v. Quality Stores, Inc.: Supreme Court Finds Severance Payments Taxable Wages Under FICA

In an 8-0 decision[1] issued March 25, 2014 in United States v. Quality Stores, Inc., the Supreme Court held that severance payments made to employees who are involuntarily terminated are taxable wages for the purposes of withholding Federal Insurance Contributions Act (“FICA”) taxes, i.e., Social Security and Medicare.  This decision resolves a circuit split created when the Sixth Circuit ruled in 2012 that these kinds of severance payments did not constitute “wages” under FICA[2] while the Third, Eighth and Federal Circuits had all previously held that at least some severance payments were “wages” subject to FICA taxes.[3]

In the wake of this decision, employers should, under most circumstances, treat severance payments made to involuntarily terminated employees as taxable wages subject to FICA taxes. There are exceptions to the general rule, however, and it is important for employers to seek competent legal counsel to assist in determining the tax status of a specific severance program.

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Davis-Bacon CityCenterDC Case

In a recent decision out of the U.S. District Court for the District of Columbia, Judge Amy Jackson held that the Davis-Bacon Act (“Davis-Bacon”) did not apply to a privately-funded development of privately-maintained buildings to be occupied by private citizens and businesses.  Judge Jackson’s decision overturned the original decision of the Department of Labor’s (“DOL”) Administrative Review Board (“ARB”), which found that Davis-Bacon applied to the project because it served the interests of the general public.

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Severance Payments are Taxable under FICA

On Tuesday, March 25, 2014, the U.S. Supreme Court ruled in favor of the Internal Revenue Service in a dispute over the payroll tax treatment of certain types of severance compensation.  The justices, in an 8-0 vote, overturned the Sixth Circuit’s opinion in Quality Stores, Inc., which had held that severance pay made in connection with an involuntary separation from employment due to a reduction in force, plant shutdown or similar condition (so–called “supplemental unemployment compensation benefits”) is not subject to tax under the Federal Insurance Contribution Act (FICA).

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Federal Contractors Face New Requirements Regarding Recruitment, Hiring, and Identification of Individuals with Disabilities

Effective March 24, 2014, a new rule from the Office of Federal Contract Compliance Programs will require federal contractors and subcontractors to take additional steps to recruit, hire, and retain individuals with disabilities, including surveying employees regarding their disability status and making efforts to employ a minimum of seven percent disabled workers.

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United States Supreme Court Holds That Section 806 of the Sarbanes-Oxley Act Extends to Employees of Private Companies Who Are Contractors or Subcontractors for Covered Public Companies

In Lawson v. FMR, LLC, No. 12-3, 2014 WL 813701 (U.S. Mar. 4, 2014), the Supreme Court of the United States, in a 6-3 decision reversing the United States Court of Appeals for the First Circuit, held that the whistleblower protection provision in Section 806 of Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1514A (“SOX”), protects employees of publicly traded companies and employees of privately held companies that are contractors or subcontractors for a covered publicly traded company.  In reaching this decision, the Supreme Court has clarified the definition of “covered employee” under the whistleblower provisions of SOX and expanded the scope of SOX.

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