Document ID: ./input/supremecourt_opinions/opinions/13pdf/12-1408_6468.pdf
Page Number: 1

(Slip Opinion) 

OCTOBER  TERM,  2013 

1 

Syllabus 

NOTE:  Where  it  is  feasible,  a  syllabus  (headnote)  will  be  released,  as  is
being  done  in  connection  with  this  case,  at  the  time  the  opinion  is  issued.
The  syllabus  constitutes  no  part  of  the  opinion  of  the  Court  but  has  been
prepared  by  the  Reporter  of  Decisions  for  the  convenience  of  the  reader. 
See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337. 

SUPREME COURT OF THE UNITED STATES 

Syllabus 

UNITED STATES v. QUALITY STORES, INC., ET AL. 

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR 
THE SIXTH CIRCUIT 

No. 12–1408.  Argued January 14, 2014—Decided March 25, 2014 

Respondent  Quality  Stores,  Inc.,  and  its  affiliates  (collectively  Quality
Stores) made severance payments to employees who were involuntar-
ily  terminated  as  part  of  Quality  Stores’  Chapter  11  bankruptcy.
Payments—which were made pursuant to plans that did not tie pay-
ments to the receipt of state unemployment insurance—varied based
on job seniority and time served.  Quality Stores paid and withheld, 
inter alia, taxes required under the Federal Insurance Contributions 
Act  (FICA),  26  U. S. C.  §3101  et  seq.  Later  believing  that  the  pay-
ments  should  not  have  been  taxed  as  wages  under  FICA,  Quality
Stores sought a refund on behalf of itself and about 1,850 former em-
ployees.  When  the  Internal  Revenue  Service  (IRS)  did  not  allow  or
deny  the  refund,  Quality  Stores  initiated  proceedings  in  the  Bank-
ruptcy  Court,  which  granted  summary  judgment  in  its  favor.  The 
District Court and Sixth Circuit affirmed, concluding that severance 
payments are not wages under FICA. 

Held: The  severance  payments  at  issue  are  taxable  wages  for  FICA 

purposes.  Pp. 4–15. 

(a) FICA defines “wages” broadly as “all remuneration for employ-
ment.”  §3121(a).  As a matter of plain meaning, severance payments
fit this definition: They are a form of remuneration made only to em-
ployees in consideration for employment.  “Employment” is “any ser-
vice  . . .  performed  . . .  by  an  employee”  for  an  employer.    §3121(b).
By varying according to a terminated employee’s function and senior-
ity, the severance payments at issue confirm the principle that “ser-
vice”  “mea[ns]  not  only  work  actually  done  but  the  entire  employer-
employee relationship for which compensation is paid.”  Social Secu-
rity Bd. v. Nierotko, 327 U. S. 358, 365–366.  This broad definition is 
reinforced by the specificity of FICA’s lengthy list of exemptions.  The