Document ID: ./input/supremecourt_opinions/opinions/13pdf/12-1408_6468.pdf
Page Number: 8

Cite as:  572 U. S. ____ (2014) 

5 

Opinion of the Court 

sought  to  have  his  backpay  counted  as  taxable  wages  for 
the purpose of obtaining credits under the Social Security 
system.  The  Court  stated  that  the  term  “service,”  used 
with  respect  to  Social  Security,  “means  not  only  work 
actually  done  but  the  entire  employer-employee  relation-
ship for which compensation is paid to the employee by the
employer.”  Id., at 365–366. 

As  confirmation  of  that  principle,  severance  payments
often vary, as they did here, according to the function and
seniority  of  the  particular  employee  who  is  terminated. 
For  example,  under  both  termination  plans,  Quality
Stores employees were given severance payments based on
job  grade  and  management  level.    And  under  the  second 
termination plan, nonofficer employees who had served at
least  two  years  with  their  company  received  more  in  sev-
erance  pay  than  nonofficer  employees  who  had  not—a
standard  example  of  a  company  policy  to  reward  employ-
ees for a greater length of good service and loyalty. 

In this respect severance payments are like many other 
benefits  employers  offer  to  employees  above  and  beyond 
salary  payments.    Like  health  and  retirement  benefits, 
stock  options,  or  merit-based  bonuses,  a  competitive  sev-
erance  payment  package  can  help  attract  talented  em-
ployees.  Here,  the  terminations  leading  to  the  severance 
payments  were  triggered  by  the  employer’s  involuntary
bankruptcy  proceeding,  a  prospect  against  which  employ-
ees may wish to protect themselves in an economy that is 
always subject to changing conditions.

Severance  payments,  moreover,  can  be  desirable  from 
the  perspective  of  the  employer  as  an  alternative  or  sup-
plemental  form  of  remuneration.  In  situations  in  which 
Chapter  11  bankruptcy  reorganization  is  necessary,  an
employer may seek to retain goodwill by paying its termi-
nated employees well, thus reinforcing its reputation as a 
worthy employer.  Employers who downsize in a period of 
slow  business  may  wish  to  retain  the  ability  to  rehire