Following the attacks of Sept. 11, 2001, President George W. Bush thanked “employers who understand that there is more to corporate life than just profit and loss.” 1 He was referring to the accommodation employers were making regarding employees serving in the military. Since that time, almost 530,000 members of the National Guard and Reserve have been mobilized.2 That’s over 500,000 employees pulled out of the workforce, most of whom will rejoin the workforce when their service has concluded.
The Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) was enacted to encourage uniformed service by eliminating or minimizing the detrimental impacts of uniformed service on civilian careers. To achieve this goal, USERRA provides rights in three major areas: discrimination; retaliation; and employment and benefits.3 This article provides a broad overview of the employer’s obligations under USERRA.
The Veterans’ Employment and Training Service (VETS) Division of the Department of Labor (DOL) issued two sets of final USERRA regulations on Dec. 19, 2005. These can be found at 70 Federal Register 75246-25317 and will be codified at 20 CFR Part 1002. The regulations became effective Jan. 18, 2006. The regulations include a model notice that employers may use to notify employees of USERRA rights. The poster is available on the Internet at www.dol.gov/vets/programs/userra/poster.htm.
USERRA Applies to All Employers
USERRA’s definition of employer is broad enough to include every employer in the United States and then some. Agencies to which the employer has delegated the performance of employment-related responsibilities may also be considered employers, unless those delegated functions are purely ministerial in nature, such as maintenance of personnel files. The definition also includes any successor in interest, individual supervisors and managers, and “insurance companies that administer an employer’s life, long-term disability, or health plans….” 4 This last inclusion is designed to prevent such entities from refusing to modify their policies so that employers may comply with requirements under USERRA.
Employers actively engaged in acquisitions of other businesses should be aware that the definition of “successor in interest” follows the definition of that term under the National Labor Relations Act (NLRA) and the Family and Medical Leave Act (FMLA), which depend on a sufficient continuity of operations from the employee perspective. A successor in interest can be liable even if it was unaware at the time of the merger, acquisition, or succession that an employee could claim reemployment rights.
The preamble to the regulations addresses employee leasing and notes that more than one entity may be the employer if more than one entity exercises control over employment opportunities and the employment relationship. “For example, if the employee is a security guard hired by a security company and he or she is assigned to a work site, the employee may report both to the security company and to the site owner. In such an instance, both employers share responsibility under USERRA.” 5
USERRA Applies, Primarily, to Employees Who Are in the Military or Perform Uniformed Service Covered by USERRA
The regulations state that an employee is “[a]ny person employed by an employer,” which includes managers, executives, and professional employees. USERRA does not apply to independent contractors. The USERRA regulations follow the Fair Labor Standards Act’s “economic reality test” and require an examination of the following six factors: (1) the degree of control exercised by the employer; (2) the opportunity for profit and loss by the individual; (3) the individual’s investment in equipment; (4) whether the service requires special skills; (5) the permanence of the working relationship; and (6) whether the service performed is integral to the employer’s business.6 It is important to note that this test differs from the common law “degree of control” test used under the Employment Retirement Income Security Act (ERISA).7 Thus, a person may be an independent contractor under ERISA but an employee under USERRA.
Temporary, part-time, probationary, and seasonal employees are entitled to the non-discrimination and benefits protections under USERRA but not the reemployment rights (including rights to benefits on reemployment) if the employee’s position was for “a brief, nonrecurrent period and there is no reasonable expectation that employment would have continued indefinitely or for a significant period of time.” 8
Absence Due to Uniformed Service
The reemployment rights and benefits under USERRA apply only if the employee’s absence from his or her job was a result of the performance of duties in the uniformed services. USERRA rights and protections apply whether the service is active or inactive, voluntary or involuntary. “Uniformed services” means: Armed Forces and Reserves; National Guard; commissioned corps of the Public Health Service; and any other category of persons designated by the president in time of war or national emergency.9 “Uniformed services” also includes employees who volunteer in the National Disaster Medical System (NDMS) (part of the Federal Emergency Management Agency or FEMA). NDMS teams were activated and deployed in response to the 2005 hurricanes.
The National Guard is both a U.S. Reserve component of the Army and Air Force and a state military force subject to call up by a state governor. Only the federal National Guard service is protected by USERRA; but this includes National Guard Service authorized by the federal government but under the command and control of state authorities.10 Many states, including Minnesota, however, have laws protecting state National Guard service.11
Protection from Discrimination
USERRA prohibits employers from discriminating against all individuals with respect to initial employment, reemployment, retention in employment, promotion, or any benefit of employment on the basis of membership in the military, application for membership in the military, or service in the military.12 The individual claiming discrimination bears the burden of proving that his or her protected status was one of the reasons that the employer took the adverse action—it need not be the only motivating factor. According to the preamble, discrimination claims will be analyzed under the case law involving mixed motive discrimination actions under the Civil Rights Act of 1991 and the NLRA. As under those statutes, the employer has an affirmative defense against a USERRA discrimination claim if it can show that it would have taken the same action absent the protected status.13
Protection from Retaliation
USERRA prohibits employers from retaliating against an employee (including an employee who has not performed uniformed services) because the employee:
1) Has taken an action to enforce a protection afforded any person under USERRA;
2) Testified or made a statement in connection with a proceeding under USERRA;
3) Assisted or participated in a USERRA investigation; or
4) Exercised a right provided for by USERRA.14
The employer has the same affirmative defenses available to it as under the anti-discrimination provisions and can avoid liability by showing that it would have taken the same adverse action absent the retaliatory motive.
Protection of Employment upon Reemployment
USERRA requires employers to promptly reemploy employees returning from leave in the position that the employee would have attained but for absence due to uniformed service (the “escalator principle”). The escalator could have moved “up” or “down” while the employee was on leave; either way, the principle applies. The regulations provide that, absent unusual circumstances, prompt reemployment must occur within two weeks of the returning service member’s application for reemployment.15 Having to remove another employee from the position is not a defense to prompt reemployment.
Prompt reemployment places certain obligations on employers beyond simple reinstatement. USERRA, for example, requires reasonable efforts to refresh skills or to train to help the employee qualify for reemployment. For purposes of determining whether a returning service member is qualified to fill a position, the DOL has adopted the regulatory definition of “essential functions” under the Americans with Disabilities Act (ADA).
USERRA also requires employers to make reasonable accommodations for disabilities incurred or aggravated while in uniformed service. Reasonable accommodations under USERRA include job training, job restructuring, and training for a different position if the original position is not capable of restructuring to accommodate the disability. USERRA, unlike the ADA, imposes the exclusive responsibility for accommodating the disability on the employer.
Finally, USERRA modifies an employer’s at-will relationship with a returning employee. Employees who have returned to work after a leave of between 31 and 180 days enjoy “just cause” protection (i.e., the employee can only be terminated for just cause) for 180 days following reemployment. Employees who returned to work following absences over 180 days enjoy just cause protection for one year. The time period does not start until the employee has been fully reemployed and benefits have been fully restored. The regulations provide examples of “just cause”: (a) the employee’s own conduct, provided the employee had notice that the conduct would be cause for discharge or (b) through the application of legitimate, nondiscriminatory reasons, the elimination of the employee’s position, or the placement of the employee on layoff status.16 The employer bears the burden of proving cause.
Protection of Benefits upon Reemployment
Employees are entitled to the following benefits upon reemployment: reinstatement of seniority-based benefits; the option to enroll in non-seniority benefits; and reinstatement of health plan coverage.
The escalator principle applies to seniority-based rights and benefits for the returning employee, not just the reemployment rights. A benefit is “any advantage, profit, privilege, gain, status, account, or interest (other than wages or salary for work performed) that accrues by reason of an employment contract or agreement or employer policy, plan or practice….” 17 Seniority refers to the longevity of the employment. Thus, seniority-based benefits are those benefits that are based on an employee’s length of service. The escalator principle requires that an employee’s uniformed service count as service for the employer for most purposes. For example, the employer’s vacation accrual schedule must count the employee’s period of uniformed service. An employee returning from USERRA leave must be given credit toward the FMLA 12-month/1,250 hour eligibility requirement.
Employees returning from USERRA leave must also be offered the right to enroll in any non-seniority benefits that were offered or became available during the USERRA leave. Although not specifically stated in the regulations, VETS’ informal guidance from VETS states: “Returning employees shall be entitled not only to non-seniority rights and benefits available at the time they left for uniformed service, but also those that became effective during their service.” 18
USERRA pension rights only apply upon reemployment. If an employee dies during uniformed service or loses reemployment rights, or the employer is excused from having to reemploy, the employee is not entitled to receive credit for the period between departure for service and the date that the reemployment rights are lost. Any vested accrued benefit to which an employee was entitled prior to his or her uniformed service remains intact whether or not he or she is reemployed.19
USERRA defines “pension plan” in accordance with ERISA and both defined contribution plans and defined benefit plans are covered. Recall, however, that USERRA’s definition of employer is broader than ERISA’s definition, so that USERRA also applies to pension plans sponsored by church and governmental employers. The regulations set forth in great detail an employer’s obligations regarding pensions. Briefly, a reemployed employee is entitled to the following pension plan benefits:
• credit toward employment service for periods of uniformed service
• contributions and benefit accruals based on deemed pay
• option to make up 401(k) contributions
• employer match on made up 401(k) contributions
• repayment of a defined benefit plan distribution and restoration of the benefit
The employer contribution for a year during which the employee was in uniformed service must be made by the later of: (1) 90 days after the date of reemployment; and (2) the date plan contributions are normally due for the year.20 If it is impossible or unreasonable for the employer to make the contribution within this time period, the contribution must be made as soon as practicable. If the period of uniformed service spans plan years, both employer contribution deadlines may apply, depending on the particular dates of uniformed service and reemployment.
For the purpose of determining benefits under the plan, the employer’s contribution, and the employee’s contribution, the employee’s compensation is calculated at the rate that the employee would have received but for the uniformed service.21 If the rate is not “reasonably certain,” such as when compensation is based on commissions earned, then the rate is the employee’s average compensation during the 12-month period before the military leave or, if the employee was employed for less than 12 months prior to the uniformed service, the average rate of compensation for the total employment period.
A reemployed employee has the right to make up contributions or elective deferrals that the employee would have been entitled to make had the employee remained continuously employed, but is not required to do so.22 An employer has no obligation to make matching contributions unless and until the employee makes up his or her contributions.
Employers and plan administrators must develop reasonable rules for the allocation of make-up contributions that are appropriate for the type and size of the particular plan. VETS declined to impose a requirement that employee makeup contributions be credited sequentially with the first makeup payments attributable to the earliest part of the absence.
An employee’s benefit under a non-contributory defined benefit plan (where the benefit is determined by a specific formula) will be the same as though he or she had remained continuously employed. In a contributory defined benefit plan, the employee will need to make up missed contributions to keep the same benefit. In a defined contribution plan, by contrast, the benefit may not be the same as if the employee had remained continuously employed even if all missed contributions and elective deferrals are made up because the employee is not entitled to a share of forfeitures and no adjustment is made for earnings or losses that accrued during the period of service.
Eligibility for Reemployment
An employee will be eligible for reemployment if: the absence from work is due to uniformed service; the employee provided advance notice to the employer (where practicable); the uniformed service did not exceed five years in the aggregate; the employee did not receive a disqualifying discharge; and the employee reports back to work or applies for reemployment in accordance with the statute.
Employers should note that USERRA does not require that an employee receive any particular form of discharge or separation from service to be covered by the discrimination provisions, but an employee has no reemployment rights if he or she receives a disqualifying discharge, including dishonorable or bad conduct discharge.23 A disqualifying discharge can later be upgraded by the military. If so, reemployment rights may be reinstated, but the employee will not be entitled to claim back wages or lost benefits from the employer.
After completion of uniformed service, the employee must report to work or submit an application for reemployment within the required time frame. The employee’s length of uniformed service determines both whether an employee is simply required to report to work or must first submit an application for reemployment and the time frame, as shown in the chart above.
For example, if an employee completes her uniformed service of less than 30 days on a Sunday at 5:00 p.m. and it takes her 20 hours of travel time to return home, she would arrive home at 1:00 p.m. on Monday. The eight-hour rest period provided under the statute ends at 9:00 p.m. on Monday. Tuesday is the first full calendar day after the completion of service, plus travel time, plus the eight-hour rest period. The employee normally works from 7:00 a.m. to 4:00 p.m. Monday through Friday. Thus the employee is required to report to work on Tuesday at 7:00 a.m.
An employee who does not return or report to work within the required time “does not automatically forfeit entitlement to USERRA’s reemployment rights and other benefits.” Instead, the employee becomes subject to the employer’s discipline policy and regular rules and practices regarding attendance.
As part of the reemployment application, an employer may request from an employee documentation showing that (1) the employee’s application is timely; (2) the employee’s total period of absence(s) with the employer due to uniformed service does not exceed five years; and (3) the employee’s separation from service was not disqualifying.24 The branch of the military in which the employee served is responsible for providing documentation that the employee requires to satisfy his or her obligation to the employer. An employer cannot require documentation for reemployment if the documentation does not exist or is not readily available at the time of the request of the employer. In this situation, the employer should reemploy the employee despite the missing documentation. If documentation later becomes available and establishes that any of the requirements stated above are not satisfied, the employer can terminate the employment and rights or benefits provided under USERRA.
Employer Defenses to Reemployment
An employer may deny reemployment if: reemployment is unreasonable or impossible; reemployment poses an undue hardship on the employer; or the employee’s prior position was brief and non-recurrent.25 As with other affirmative defenses, the burden to show that one of these conditions exists is on the employer.
a. Unreasonable or Impossible. Reemployment is impossible or unreasonable due to change in employer’s circumstances (e.g., an intervening reduction in force that would have included the employee). An employer cannot refuse to hire an employee simply because it has already hired someone else to fill the position. The employer may have to terminate the replacement employee.
b. Undue Hardship. Assisting the employee to become qualified for reemployment would pose an “undue hardship” on the employer as that term is defined by 20 CFR § 1002.5(n). The following factors may be examined when determining whether an undue hardship exists:
• Nature and cost of action needed;
• Overall financial resources of facility and employer;
• Type of employer operation.
c. Brief, Nonrecurrent Position. The position was for a brief, nonrecurrent period and there was no reasonable expectation that it would continue. A brief, nonrecurrent position is not synonymous with seasonal employment where the employee has a reasonable expectation of being recalled at the commencement of the next similar season.
The DOL’s VETS is responsible for compliance assistance. VETS does not have the authority to order compliance or to assess fines or penalties. VETS will investigate complaints by those who believe their USERRA rights have been violated and may refer cases to the U.S. Department of Justice for suit. Earlier this year, the Department of Justice filed a lawsuit against American Airlines, Inc., alleging violations of USERRA. The lawsuit was the first class action complaint filed by the United States under USERRA.
Aggrieved individuals may also file suit directly and may do so without first filing a complaint with VETS.
A court that finds a violation of USERRA may require an employer to: (1) comply with USERRA; (2) compensate the individual for lost wages and benefits; and (3) pay an additional penalty equal to lost wages and benefits.
USERRA does not contain a specific statute of limitations, and the position of VETS is that a complaint arising under USERRA has no statute of limitations. At least one federal court, however, has held that a federal four-year statute of limitations applies to USERRA actions.26
USERRA applies to all U.S. employers, and the recent regulations detail the USERRA requirements with respect to discrimination, retaliation, and employment and benefits. With over 500,000 uniformed service members who expect to return to their jobs some day, all employers must be aware of their obligations. This article has provided an overview of the scope of USERRA protection. Employers are encouraged to seek legal counsel to help them fully comply with USERRA.
1 Guard and Reserves “Define Spirit of America,” White House News Release dated Sept. 17, 2001, available at www.whitehouse.gov/news/releases/2001/09/print/20010917-3.html.
2 Preamble to USERRA Regulations (“Preamble”), 70 FR at 75313.
3 Employment and benefit protection occurs when the employee needs to take a leave and when he or she returns. This article only addresses reemployment and benefit protection upon return from leave.
4 Preamble, 70 FR at 75249.
5 20 CFR § 1002.37.
6 20 CFR § 1002.44.
7 Preamble, 70 FR at 75254.
8 20 CFR § 1002.41.
9 20 CFR § 1002.5(o).
10 See, e.g., Memorandum to Regional Administrators and Directors for Veterans’ Employment and Training from the Office of Assistant Secretary for VETS dated Sept. 8, 2005, regarding the mobilization of National Guard and NDMS members for Hurricane Katrina relief efforts.
11 See, e.g., Minn. Stat. § 192.261 subd. 6.
12 20 CFR § 1002.18.
13 20 CFR § 1002.23.
14 20 CFR §§ 1002.19 and 1002.20.
15 See 20 CFR § 1002.181.
16 See 20 CFR § 1002.248.
17 20 CFR § 1002.5(b).
18 VETS “Non-Technical Resource Guide to USERRA” at 9 (March 2003).
19 20 CFR § 1002.262(e).
20 20 CFR § 1002.262(a).
21 20 CFR § 1002.267.
22 20 CFR § 1002.262.
23 See 20 CFR § 1002.135.
24 20 CFR § 1001.121.
25 20 CFR § 1001.139.
26 See Rogers v. City of San Antonio, 2003 WL 1566052 *7 (W.D. Tex.) reversed on other grounds, 392 F.3d 758 (5th Cir. 2004).