An employer’s late payment penalties made under state law to a terminated or quitting employee for failure to pay the employee’s final wages within a required time period were not wages for purposes of FICA, FUTA and federal income tax withholding. The late payment penalty differed from severance pay because it was based on the employer’s failure to pay the employee’s wages on a timely basis. The employee has no right to the payment of this penalty; it is only imposed on an employer if the employer has failed to pay wages in a timely manner. The penalty was not a part of the terms and conditions of employment; it was a separate statutorily imposed penalty on the employer. (Chief Counsel Advice Memorandum 201522004, May 29, 2015.)
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