USERRA part II

Michael Sciotti, Esq. & Tyler G. Brass, Esq.
May 15, 2006 — 1,988 views  
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Introduction

     This is the second part of a two-part article reviewing the recent regulations (the “Regulations”) promulgated by the United States Department of Labor (the “DOL”) implementing the Uniformed Services Employment Rights and Reemployment Act (“USERRA”).  USERRA provides extensive rights to employees who are forced to leave their employment position for service in the uniformed services.  Due to the recent expansion in military activity around the world, employers of every size and type should become familiar with USERRA and its specific requirements.

B.   Review of Regulations
1.   Subpart C – Eligibility for Reemployment

     To be eligible for reemployment, the employee need not actually prove that the employer discriminated against him or her based upon service in the uniformed services.  The employee merely needs to meet the five (5) general criteria set out in § 1002.32:  (1)  with certain exceptions, the employer must be provided advance notice of the employee’s uniformed service; (2) the employee must have less than five (5) years of cumulative service with that specific employer; (3) the employee must timely return to work; (4) upon returning from service, the employee must timely report to work or apply for reemployment; and (5) the employee must not have received a disqualifying discharge from the uniformed services. 

     Even if the employee meets these reemployment criteria, he or she may not be entitled to reemployment if the employer establishes one of several affirmative defenses set out in § 1002.139.  Employers should be aware that they are responsible for proving any applicable defenses.  The first affirmative defense permits an employer to refuse reemployment where the employer establishes its circumstances have changed to make such reemployment impossible or unreasonable.  However, this exception should be narrowly construed and it is the employer’s responsibility to prove the changed circumstances relate to the employer’s pre-service conditions and not to the individual circumstances of the employees.  It is not a defense if no opening exists at the time the employee returns from service or that another person was hired to fill the returning employee’s position.  However, an employer is not required to create a “useless job” for the employee to fill.  Any other undue hardship created by reemployment also relieves an employer from having to reemploy that individual.  The Regulations define an undue hardship as “an action requiring significant difficulty or expense,” when considered in light of various factors, including the nature and cost of the action needed and the financial resources of the employer.[i]  This undue hardship defense generally applies when the returning service member is not qualified for a position after the employer has made reasonable efforts to help the employee become qualified.  Finally, the employer is not required to reemploy a returning service member if the employment position was “for a brief, nonrecurrent period and there is no reasonable expectation that such employment will continue indefinitely.”[ii]

     USERRA’s coverage is extremely broad and it applies to virtually every employer.  Pursuant to § 1002.34, USERRA applies to “all public and private employers in the United States, regardless of size.”  There are no size limitations for covered employers and it only takes one employee to create a potential liability under USERRA.  The coverage also applies to foreign employers either doing business in the United States or maintaining a physical location or branch office in the United States as well as American companies operating “either directly or through an entity under its control in a foreign country”.[iii]  USERRA’s definition of employer is broad enough to include states, their political subdivisions, the District of Columbia, Puerto Rico, Guam, the Virgin Islands and all United States territories.

     Even successors in interest to employers are covered by USERRA.  The test for determining whether an employer is a successor in interest involves a multi-factor test considering the following factors:  (1) whether there has been a substantial continuity; (2) whether the current employer uses the same or similar facilities, machinery, equipment and methods; (3) whether there has been a substantial continuity of employees; (4) whether there is a similarity of jobs and working conditions; (5) whether there is a similarity of supervisors and managers; and (6) whether there is a similarity of products and services.[iv]  Employers should be aware of the fact that as a successor in interest they may be liable for a USERRA reemployment claim even without having had notice of the claim at the time of merger, acquisition, or other form of succession.

     A single employment position may encompass more than one employer under USERRA.  The definition of employer is broad enough to cover any entity that has control over the employee’s employment opportunities, including “a person or entity to whom an employer has delegated the performance of employment-related responsibilities.”[v]  The Regulations provide the example of a security guard hired by a security company and assigned to a third party’s work site.  The security guard may report to both companies and, therefore, both employers would be responsible for complying with USERRA.  Hiring halls also will be considered employers if the job assignment functions have been delegated by an employer to the hiring hall.  

     An employer need not actually employ an individual to be considered his or her “employer” under USERRA.  Employers are prohibited from denying initial employment to an individual based upon his or her “membership, application for membership, performance for service, application for service, or obligation for service in the uniformed services.”[vi]  In addition, employers are prohibited from denying initial employment to an individual due to that individual taking any action to enforce USERRA’s protections for any person. 

     Employees on layoff, strike and leave of absence are provided certain reemployment rights under USERRA.  As long as he or she meets the other eligibility criteria, an employee on layoff when the period of service begins will be entitled to reemployment, if the employer would have recalled the employee during the period of service.  This also applies to employees on strike or on leave of absence.  The employee is entitled to reemployment even if he or she does not respond to any recall notices sent during the period of uniformed service.  However, the employee is not entitled to be recalled if he or she would not have been recalled during the period of service because USERRA “cannot put the employee in a better position than if he or she had remained in the civilian employment position.”[vii] 

     Although USERRA protects a wide range of employees, including executive, managerial and professional employees, it does not apply to independent contractors.  When determining whether an individual is an independent contractor, several factors will be considered, including the extent of the employer’s control over the manner in which the work is performed, the individual’s managerial skill and the effect on profit or loss, the individual’s investment in equipment, and whether the position requires a special skill.

     USERRA’s protections also apply to a wide range of uniformed services.  This includes all military fitness examinations, funeral honors duty authorized by Federal Statute, service with the National Disaster Medical System, service in the commissioned corps of the Public Health Service and National Guard duty with the Air National Guard and Army Reserve, but not National Guard service under authority of State Law.  In addition, the President has the authority, in time of war or national emergency, to designate any category of persons as a uniformed service for purposes of USERRA.  Membership in the Reserve Officers Training Corps (“ROTC”) and attendance at any of the military service academies is also protected under USERRA. 

     An employee will be protected under USERRA even if the service is not the sole reason for leaving the employment position.  He or she may use the absence for other purposes, including working at another job or visiting relatives.  These actions will not negate any reemployment rights to which the employee is entitled. 

     Employers must provide employees with enough time after leaving the employment position to travel safely to the place of service and to arrive fit for duty.  Often, this will mean time off from shifts prior to the employee leaving.  In addition, in the case of an extended period of service, the employer should provide the employee with “a reasonable period of time off from the civilian job to put his or her personal affairs in order.”[viii]

     Unless prevented by military necessity or otherwise made impossible or unreasonable, the employee must provide the employer with advance notice of the service.  The determination of a military necessity may only be made by a designated authority and this designation is not subject to judicial review.  Although USERRA does not provide a specific time frame for notice of service, the notice should be given “as far in advance as is reasonable under the circumstances.”[ix]  The Department of Defense has its own set of USERRA regulations which strongly recommend that such notice be provided at least thirty (30) days before the employee departs for the uniformed service.  As USERRA provides no specific form of the notice, it may be either oral or in writing and employers may not require that the notice be in any specific form.   Therefore, the employer may not take action against an employee simply because no advance notice was provided, or that the notice was not provided in the form the employer required.  

     Although the employee is to provide advance notice of the service, he or she does not need to seek the employer’s permission for the service.  In addition, the employee is not required to inform the employer of his or her intention to return to the employment position upon completion of the service.  Employers should note that they may not even rely on an employee’s statement that he or she does not intend to return upon the completion of service as the employee “is not required to decide in advance . . . whether he or she will seek reemployment after completing uniformed service.”[x]  Therefore, even if the employee states that he or she does not intend to return after completing the uniformed service, the employee would still be entitled to reemployment, provided the other eligibility criteria are met. 

     USERRA’S protections apply for a cumulative period of up to five (5) years of uniformed service.  This means that the employee is entitled to a length of absence of up to five (5) years with each individual employer.  The five (5) year period only applies to the time the employee spends in uniformed service.  Any time between notice of service and actual service does not count and neither does the time between the completion of service and the employee’s return to work.  Various types of uniformed service do not count towards this five (5) year limitation.  These include military specialties which require an initial period of obligated service greater than five (5) years and situations where the employee is ordered to or retained on active duty in certain national emergencies or during wartime.[xi] 

     Employers have no control over the timing, frequency or duration of uniformed service and may not refuse to reemploy the employee due to concerns that the timing, frequency or duration of the leave was unreasonable.  However, employers may bring such concerns to the attention of the appropriate military authority, and pursuant to the Department of Defense USERRA regulations, military authorities are required to provide assistance to employers with these types of concerns.    

     If the employee intends to return to the pre-service employer, he or she must timely notify the employer, or an agent with apparent responsibility for employment applications, of this intention.  USERRA contains specific rules for returning to work and they are dependent upon the duration of the uniformed service.  The table below illustrates the applicable rules:
                                                                

Period of Service

Reporting Deadline

Uniformed service for less than 31 days or where absence is due to physical examination to determine fitness for uniformed service:

Must report to employer no later than first full regularly-scheduled work period on first full calendar day following completion of uniformed service. 

Work period cannot begin until 8 hours after employee has arrived at his or her residence after traveling from place of uniformed service.

Uniformed service for more than 30 days but less than 181 days:

Must submit an application for employment or reemployment no later than 14 days after completing service.

Uniformed service for more than 180 days:

Must submit an application for reemployment no later than 90 days after completing service.

     The above time limitations will be extended if the employee is hospitalized for, or recovering from an illness or injury related to the uniformed service.  Under those circumstances, the employee must generally report to the employer or submit an application for reemployment at the end of the necessary recovery period, but such period may not to exceed two (2) years, except where there are extenuating circumstances.

     In addition to an application for employment, if the period of service exceeded thirty (30) days, the employee must provide the employer with specific documentation.  This documentation must establish that the reemployment application is timely, the employee has not exceeded the five (5) year time limit and that the employee did not receive a disqualifying discharge.  The employer may not deny reemployment by demanding documentation which does not exist or is not readily available from the uniformed services and the Regulations are clear that the employee “is not liable for administrative delays in the issuance of military documentation.”[xii]  However, if the employee has been absent from employment for more than ninety (90) days, the employer may require the documentation prior to treating the employee as having had continuous employment for pension purposes.  Obviously, an employee may be terminated if the documentation is received subsequent to reemployment and shows ineligibility for reemployment.  A wide range a documents will satisfy this requirement, including, a Department of Defense Certificate of Release or Discharge from Active Duty, a Copy of duty orders and a letter from the commanding officer.

     An employee will not be eligible for reemployment if he or she receives a disqualifying discharge from service.  A disqualifying discharge includes a dishonorable or bad conduct discharge, a separation from the uniformed service under other than honorable conditions, certain commissioned officer dismissals and commissioned officers dropped from the rolls due to a court martial or related confinement.  However, reemployment rights will be restored if a military review board upgrades the disqualifying discharge or release, but, the employee is not entitled to any back pay.

2.    Subpart D – Rights, Benefits and Obligations of Persons Absent from Employment

     It is important for employers to understand the specific rules relating to the rights and benefits of employees in the uniformed services.  While on leave for uniformed service, an employee is to be considered on furlough or leave of absence and is entitled to the same non-seniority rights and benefits, such as the accrual of vacation time, as are “provided to similarly situated employees on furlough or leave of absence.”[xiii]  If these non-seniority benefits vary depending on the type of leave, the employee on leave for the uniformed services is entitled to the most favorable treatment accorded to any comparable form of leave.  Employers must provide all of these non-seniority benefits, regardless of whether the employer provides additional benefits, such as full or partial pay for performing service.  Providing rights and benefits above and beyond those required does not permit the employer to take away any other rights provided under USERRA.  Employers should note that if the employee provides written notice of his or her intent not to return to the position following the uniformed service, the employer is not required to provide these benefits, but the employee retains his or her entitlement to reemployment. 

     USERRA also governs the types of accrued leave and/or time employees are allowed to use during their uniformed service.  Although employees must be allowed to use any accrued or similar leave with pay during the period of uniformed service, he or she is not entitled to use sick leave which accrued during the period of service unless the employer allows the use of sick leave for any reason or “allows other similarly situated employees on comparable furlough or leave of absence to use accrued paid sick leave.”[xiv]  Despite the employee’s ability to use such sick leave, employers may not actually require employees to use accrued leave during their uniformed service. 

     A broad range of health plans are protected by USERRA.  The definition of a health plan includes “an insurance policy or contract, medical or hospital service agreement, membership or subscription contract, or arrangement under which the employee’s health services are provided or the expenses of those services are paid.”[xv]  Group health plans as defined the Employee Retirement Income Security Act of 1974 (ERISA)[xvi] as well as group health plans which are not subject to ERISA are covered by USERRA.  Multiemployer plans maintained pursuant to any collective bargaining agreements are also protected by USERRA. 
    
     Employees entering the uniformed services are entitled to continuing coverage for themselves and their dependents, if applicable.  The plan must permit the employee to continue the coverage for the lesser of the following:  (1) twenty-four (24) months from the date he or she leaves the employment position; or (2) for the period beginning on the date the employee leaves the employment position until he or she either returns to employment or fails to return to employment.  USERRA does not specify how this election must be made and health plan administrators are free to develop “reasonable requirements” addressing how continuing coverage may be elected, provided such requirements are consistent with the plan and USERRA’s other notice requirements.[xvii]  Although USERRA’s requirements with respect to health plans appear to be similar to those provided under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA),[xviii] there are important distinctions.  Initially, USERRA applies to all employers whereas COBRA requires at least twenty (20) employees.  In addition, COBRA’s coverage period can vary, but USERRA has an outside time limit of twenty-four (24) months. 

     USERRA also contains specific rules regarding the amount employees may be required to pay for such coverage.  The following chart sets forth these limits:

Length of Service
Payment for Coverage

Less than 31 days

No more than the regular employee share, if any

31 or more days

No more than 102% of the full premium (the employee’s share plus 2% for administration expenses).

     Employers and plan administrators may take a variety of actions with respect to employees who fail to either elect coverage or fail to pay for coverage.  The options vary depending upon whether the employee provided notice of the uniformed service.  If the employee failed to provide the employer with notice of the uniformed service and has failed to elect continuing coverage, the health plan coverage may be canceled upon the employee’s departure.  However, if the notice was excused for any reason set forth in the Regulations, the health coverage must be reinstated upon the employee’s election to continue coverage and the payment of all outstanding amounts.  If the employee provided notice of service, but failed to elect continuing coverage, employers and plan administrators may “develop reasonable requirements addressing how continuing coverage may be elected.”[xix]  Where a health plan is also covered by COBRA, the plan administrator may adopt COBRA-compliant rules, provided those rules do not conflict with USERRA’s other requirements. 

3.    Subpart E – Reemployment Rights and Benefits

     Employees returning from the uniformed service are entitled to prompt reemployment.  Prompt means “as soon as practicable under the circumstances of each case.”[xx]  Generally, this means within two (2) weeks of the employee’s application for reemployment.  However, the time period may be extended where the employer is required to make reassignments, etc. to accommodate an employee who has been absent for an extended period of time.

     There are very specific requirements with respect to the position to which the returning employee is entitled.  Employers would be well advised to become very familiar with these requirements as the onus is on the employer to find a suitable position for the returning employee.  The employee is generally entitled to reemployment in the “escalator position” which is defined as the position “that he or she would have attained with reasonable certainty if not for the absence due to uniformed service.”[xxi]  This position is intended to reflect the pay, benefits, seniority and other benefits the employee would have received if he or she had never left for uniformed service.  Even missed opportunities for promotion must be considered.  For example, if the employee missed the opportunity for a promotion based upon a skills test, he or she must be provided an opportunity to take the skills test after a reasonable period of time to adjust to the employment position.  If the employee is successful on the skills test and there is a reasonable certainty the employee would have been promoted or even made eligible for promotion, the promotion or eligibility for promotion must be made effective as of the date it would have occurred.  However, the escalator position may result in adverse employment consequences in certain situations, such as where the employee would have been laid off or even terminated. 
    
     The specific escalator position is dependent upon the length of the employee’s uniformed service and it places a heavy burden upon employers to accommodate the returning service member.  In each instance, the employer must find a suitable employment position for the employee based upon a detailed set of priorities.  If the employee is not quailed for a certain position, it is the employer’s responsibility to make reasonable efforts to help the employee become qualified.  An employee will be qualified for a position if he or she has the ability to perform the essential tasks of the position.  The Regulations contain various criteria for determining whether a task is essential, such as the amount of time spent on the task, work experience and the consequences of not requiring those tasks.  If, after the employer has made reasonable efforts, the employee is unable to qualify for any of the enumerated employment positions, the employer is not required to reemploy the individual.  The escalator provisions are outlined below:

Length of Service
Reemployment Position

Less than 91 days

First, to the escalator position.

 

If not qualified for the escalator position, the employee should be reemployed in his or her pre-service position.

 

If not qualified for the pre-service position, the employee should be reemployed in the nearest approximation first to the escalator position and then to the pre-service position.

More than 90 days

First, to the escalator position.

 

If not qualified for the escalator position, the employee should be reemployed in the pre-service position or a position with similar seniority, status and pay.

 

If not qualified for the pre-service position, the employee should be reemployed in a position which is the nearest approximation first to the escalator position and then to the pre-service position. 

     The returning employee is entitled to the same seniority rights and benefits he or she would have received if there had not been a break in employment.  In the absence of a formal seniority system, USERRA will look to custom and practice in the place of employment to determine the employee’s entitlement to any benefits which are based upon the length of employment. 

     Not only must employers ensure compliance with the Americans with Disabilities Act,[xxii] but they also need to comply with USERRA’s specific rules regarding the treatment of disabled employees returning from the uniformed services.  In addition to being entitled to employment in the escalator position, if the employee has a disability incurred in or aggravated during the uniformed service, the employer is required to make reasonable efforts to accommodate the disability and help the employee become qualified for the applicable reemployment position.  If, after the employer’s reasonable efforts, the disabled employee is unable to become qualified for the escalator position due to the disability, he or she is entitled to reemployment in a position that is equivalent to the escalator position as far as seniority, status and pay.  If the employee is unable to qualify for that position, he or she will be entitled to the nearest approximation to the equivalent position, consistent with his or her circumstances.   

     With respect to compensation for returning employees, the employer should use the same escalator provisions which determine the reemployment position.  If the employee is reemployed in the escalator position, he or she is entitled to be compensated at the rate associated with that position.  However, the employer needs to take into account any pay, merit or periodic increases the employee would have attained as well as his or her work history and history of merit increases.  If a skills test or examination was involved in any pay or merit increase, the employer should follow the same criteria as set forth above with respect to skills tests for promotions.  Where the employee is reemployed in the pre-service position or any other position, the employee must be compensated as any other employee in that position, taking into account the same factors as would be considered for the escalator position. 

     In addition to reemployment rights, USERRA protects employees from discharge, with such protection period being dependent upon the length of uniformed service.  For service between thirty (30) and 180 days, thee employee is protected from discharge for a period of 180 days.  This protection is extended to one (1) year following reemployment, if the uniformed service was longer than 180 days.  During these periods, the employee may only be discharged for cause. 

     As with most other areas governed by USERRA, the employee is treated as though there were no break in employment for purposes of pension plans.  In addition to the period of uniformed service, the time between the date the employee left the uniformed service and the date the employee returned to work is counted as employment.  It is important to note that an employee may take up to ninety (90) days to report to work, depending upon the length of uniformed service.  Even a period of hospitalization, up to two (2) years may be included in the calculation of employment time. 

     With limited exceptions, the employer is liable to the pension plan to fund any obligation the plan may have for providing benefits attributable to the period of service.  However, the employer is not required to make any plan contributions until the employee is reemployed.  Employees enrolled in contributory plans are allowed, but not required, to make up missed contributions or elective deferrals.  The period for making these contributions is up to three (3) times the length of uniformed service, but not to exceed five (5) years.  The employee is not required or permitted to pay interest on any missed contributions or elective deferrals, but is allowed to repay a previous distribution or elective deferral.  For purposes of the calculation of contributions, the employee’s compensation is the rate he or she would have received if continuously employed.  If that amount is uncertain, the compensation should be based upon the average of the twelve (12) month period preceding the service.  For employees not employed for a period of twelve (12) months prior to service, the average compensation should be calculated based upon whatever shorter period the employee was employed.

4.     Subpart F – Compliance Assistance, Enforcement and Remedies

     USERRA provides two (2) options for an aggrieved employee.  He or she may file a complaint with the DOL’s Veterans’ Employment and Training Services (“VETS”) or the employee may file a private lawsuit in the appropriate court as set forth in the Regulations.  VETS will investigate any complaints and has the power to subpoena witnesses as well as documents.  If VETS is unable to successfully resolve the complaint, the individual may request that VETS refer the complaint to the Attorney General or the individual may file a private lawsuit.  It is important to note that employers are not entitled to bring claims under USERRA.

     In any legal action, whether it is brought by the Attorney General or by the employee, courts are authorized to award compliance with USERRA and to award damages for lost back pay and benefits, liquidated damages for willful violations and attorneys’ fees and costs.  In addition, courts may award other equitable relief the Court may deem appropriate. 

     Employers should also be aware that there is no statute of limitations for a claim under USERRA.  However, one court has held that the general four (4) year Federal statute of limitations applies.[xxiii]

C.   Conclusion

     USERRA is extremely broad and can have a dramatic impact on employers.   This article merely provides an outline and description of the recent USERRA regulations.  Employers should read and review these regulations in detail and take any steps necessary to ensure that all policies, procedures, handbooks, etc. are in full compliance USERRA.



*Michael J. Sciotti, Esq. is a partner and Chair of the Labor & Employment Practice Group for Hancock & Estabrook, LLP.  He can be reached at (315)425-3502 or [email protected]. Tyler G. Brass, Esq. is an associate and member of the Labor & Employment Practice Group for Hancock & Estabrook, LLP. He can be reached at (315)471-3151 or [email protected].  The firm’s website is www.hancocklaw.com.               

[1]       20 C.F.R. § 1002.5(n).
[1]       Id. at § 1002.139(d)
[1]       Id. at § 1002.34(c).
[1]       Id. at § 1002.35.
[1]       Id. at § 1002.35.
[1]       Id. at § 1002.40.
[1]       Id. at § 1002.42(c).
[1]       Id. at § 1002.74(b).
[1]       Id. at § 1002.85(a).
[1]       Id. at § 1002.88.
[1]       Id. at § 1002.103.
[1]       Id. at § 1002.122.
[1]       Id. at § 1002.149(a).
[1]       Id. at § 1002.153(a).
[1]       Id. at § 1002.163(a).
[1]       Id. at § 1191(a). 
[1]       Id. at § 1002.165.
[1]       26 U.S.C. § 4980B.
[1]       20 C.F.R. § 1002.167(b).
[1]       Id. at § 1002.181.
[1]       Id. at § 1002.191.
[1]       42 U.S.C. §§ 12101, et seq.
[1]       See Rogers v. City of San Antonio, 2003 WL 1566502 (W.D. Texas). 

Michael Sciotti, Esq. & Tyler G. Brass, Esq.

Hancock & Estabrook, LLP