Alaska Employment Law

The 9th Circuit concludes today that the “ordinary and popular” meaning of the phrase “wages and salary” is “remuneration for services.”  Here, severance pay was not sufficiently linked to services (presumably services while employed).  The Court explained:

Gilliam’s severance pay was not for services, but for her voluntary termination of employment, confidentiality, non-competition, and waiver of claims against Nevada Power Company.

Gilliam v. Nevada Power Co., 2007 WL 1557483 (May 31, 2007).   The fact that severance pay might be subject to federal income tax was irrelevant, the court held.  The result was that Gilliam’s severance pay was not included in the calculation of her retirement bneefits.

While this holding arose in an ERISA context, the court applied contract common law.

The court had held, in an earlier case, that severance pay “in general is intended to tide an employee over while seeking a new job, [and] certainly could be considered an ‘unemployment benefit.’”  Jung v. FMC Corp., 755 F.2d 708, 711 n.2 (9th Cir. 1985).