EMPLOYMENT AND BENEFITS RIGHTS OF
EMPLOYEES CALLED TO MILITARY DUTY

As part of the U.S. response to the September 11, 2001 terrorist attacks, the Defense Department has activated approximately 35,500 military reservists. Accordingly, many Americans will be temporarily leaving their civilian jobs for duty in the armed services. The responsibilities of employers to these employees are governed, in part, by the Uniformed Services Employment and Reemployment Rights Act of 1994 ("USERRA"). USERRA was enacted in the wake of Operations Desert Shield and Desert Storm to minimize the disadvantages to civilian employment that may result from military service. USERRA provides employment and benefit rights to members of the armed forces during and upon return from military service. This article provides a brief overview of USERRA's requirements and the implications of USERRA on your workplace.

(1) What Employees Benefit From The Rights Provided Under USERRA?

USERRA protects any employee who temporarily leaves a civilian job for "uniformed service," which includes service in the Army, Navy, Air Force, Marines, Coast Guard, Army and Air National Guard, and the commissioned corps of the Public Health Service. "Uniformed service" includes all forms of active duty, inactive training duty, and examinations to determine fitness to perform these duties. USERRA applies without regard to an employee's length of employment, but does not apply to a person who receives a discharge from uniformed service classified as other than "honorable." USERRA's protections do not apply if an employee's cumulative absence from employment with one employer due to military service exceeds five years; however, regular and previously anticipated National Guard and/or military training service cannot be counted towards the five-year statutory limit.

(2) How Does An Employee Invoke USERRA Rights?

To invoke USERRA's protections, an employee generally must provide his or her employer with advance notice, if practicable under the circumstances, that he or she will be serving in the uniformed services. The notice may be verbal or in writing and may also be provided by an officer of the uniformed services. Although USERRA does not prescribe how far in advance notice must be provided, employers should encourage their employees to provide statutory notice as soon as possible to ease the burden of transition during the military leaves of absence. The notice requirement does not apply if providing notice would be unreasonable.

(3) What Are An Employer's General Obligations Under USERRA?

USERRA prohibits any form of discrimination or adverse employment action by an employer against an employee for serving or applying to serve in the uniformed services. USERRA applies to all employers, both governmental and private, and offers no exceptions for small employers. An employee will not be entitled to USERRA's reemployment rights in certain limited situations (e.g., where the employer's circumstances have changed so as to make reemployment unreasonable or impossible, or where reemployment would impose an undue hardship on the employer because of the returning employee's disability incurred during military service). USERRA also contains specific provisions addressing the continuation of benefits, both during and after uniformed service leave, as described more particularly below.

In addition to reemployment and benefits rights, USERRA contains an exception to the "employment at will" doctrine. Specifically, a veteran returning from uniformed service may not be discharged, other than for cause, within: (i) one year of the date of reemployment if the employee's uniformed service was longer than 180 days; or (ii) 180 days of the date of reemployment if the employee's uniformed service was longer than 30 days, but no more than 180 days. Therefore, it is imperative that employers fully document all legitimate performance problems of employees that have returned from military leave in the event that termination may be required.

(4) How Are Employee Benefits Affected Upon Invoking USERRA Rights?

USERRA does not require that an employer continue to pay an employee who leaves employment for uniformed service. An employee who participates in an employer-sponsored group health plan (and/or its medical expense flexible spending account) and who would otherwise lose coverage under such plan because of uniformed service may elect to continue coverage under the plan, including coverage for dependents. Coverage may continue for a period of 18 months or, if shorter, a period that ends on the day after the employee fails to return to employment within the time period permitted by USERRA. USERRA does not displace COBRA rights that may apply to an employee (i.e., COBRA and USERRA continuation rights may run concurrently). If an employee elects to continue health coverage under USERRA, the employer generally may charge 102% of the full cost of coverage, which is the same amount that may be charged for COBRA continuation coverage. If the employee's uniformed service is for a period of 30 days or less, the employer may not charge the employee more than it charges other employees for coverage.

Although USERRA continuation coverage is similar to COBRA continuation coverage, certain differences are significant. Unlike COBRA, USERRA does not contain an exception for small employers and does not provide for coverage beyond 18 months. USERRA also does not require that an employer provide notice of the right to continuation coverage; however, any notice requirements under COBRA continue to apply relative to COBRA coverage only. Finally, employers should be aware that health plan coverage provided by the military does not terminate COBRA coverage. Thus, an employee may continue to pay for, and be covered by, the employer's health plan under COBRA or USERRA while also receiving coverage under plans offered by the military.

An employee who participates in a qualified retirement plan becomes an inactive participant in the plan upon entering the uniformed services. The employee is entitled to certain rights (as generally described below) with respect to the plan upon reemployment.

An employer is not obligated to continue coverage of a participant under other types of benefit plans (e.g., life insurance, disability insurance, and cafeteria plans), except to the extent and on the same terms that the employer offers coverage continuation to employees on other types of leave. Employers cannot require that employees use accrued vacation during their uniformed service, but must allow employees to use such accrued vacation at the employee's election. If vacation or sick leave accrual is related to the number of years of service with the employer, the period of time that the employee was absent for uniformed service must count towards the number of vacation or sick days that the employee is entitled to accrue upon returning to work.

(5) How Quickly Must Returning Uniformed Services Members Return To Work?

Upon returning to his or her residence after completion of uniformed service, a veteran generally must apply for reemployment within the following time periods to retain USERRA rights: (i) for uniformed service of 30 days or less, within one day and eight hours; (ii) for service from 31 to 180 days, within 14 days; and (iii) for service in excess of 180 days, within 90 days. The employee's failure to timely reapply for his or her position does not automatically extinguish the right to reinstatement. Instead, USERRA provides that the employee is "subject to conduct rules, established policy, and general practices of the employer pertaining to explanations and discipline with respect to absence from work." Therefore, in order to take full advantage of the limits placed on reinstatement rights, employers should consider modifying their handbooks and/or personnel policies to account for USERRA and its relationship with other leaves of absence.
USERRA also contains very narrow exceptions to the right to reinstatement if: (i) the employer's circumstances have changed so as to make reinstatement impossible or unreasonable; or (ii) the position held prior to service was "brief or for a non-recurrent period and without a reasonable expectation that such employment will continue indefinitely or for a significant period." It is very likely that these exceptions will be construed narrowly by the Department of Labor and reviewing courts.

(6) How Are Employee Benefits Affected Upon Reemployment?

Upon reemployment after uniformed service, an employee generally is entitled to reinstatement of all benefits that he or she would have had absent uniformed service. Health coverage for the returning employee and his or her dependents, if applicable, generally must be reinstated with no waiting periods or exclusions such as pre-existing conditions. An employer's pre-existing condition limitations can be applied to any injuries or illnesses determined by the Secretary of Veterans Affairs to have been related to uniformed service.

Upon reemployment, the employer must credit the employee with service for purposes of vesting and benefit accrual (as applicable) in the employer's qualified retirement plans. Furthermore, because a returning employee who participates in a retirement plan is not deemed to have had a "break in service," no waiting periods apply for participation in the plan.

A returning employee who participates in a defined benefit pension plan will be deemed to have compensation during the period of uniformed service at the level that the employee would have had absent such uniformed service. If the employee would have received an employer contribution to the plan absent military service, the employee is entitled to a "make-up" employer contribution. The employee also is entitled to make-up any missed employee salary deferrals (if applicable) under the employer's defined contribution plan. If the plan provides for employer matching contributions on salary deferrals, the employer must provide matching contributions (presumably at the time the make-up deferrals are made) on the make-up deferrals at the rate that was in effect for the plan year to which the make-up contributions relate. The employee and employer have a period of up to three times the employee's period of uniformed service (not to exceed five years) to make up any missed contributions. Although the normal annual deferral, contribution, and compensation limits do not apply to make-up contributions, the amount of an employee's make-up contributions related to any plan year cannot exceed the amount that the employee would have been allowed to make for such plan year absent military service.

In addition, an employer may suspend a plan loan repayment obligation for the duration of the employee's uniformed service. Upon completion of the employee's uniformed service, loan repayments must resume at the frequency and amount provided for in the original loan. Any such loan must be fully repaid by the end of a period equal to the original loan term plus the period of uniformed service.

(7) Upon Return From Uniformed Services To What Job Is The Employee Entitled?

When uniformed service members return to work in a timely manner (see the discussion within Question No. 5 above), in most cases they must be promptly reemployed in the job they would have had, if they had remained continuously employed but for military service. This "would have had" language commonly is referred to as the "escalator principle." Generally, the escalator principle means that if the employee's peers in the workplace received promotions and/or raises during the period of uniformed service, the returning veteran is entitled to the same promotions and/or raises, so long as the veteran is: (i) qualified for the job; or (ii) can become qualified for the escalated position following reasonable efforts made by the employer to qualify the employee.

An employee's reemployment rights are dependent on the length of uniformed service. For service of 90 days or less, an employee generally is entitled to: (i) a position in which he or she would have been employed if not for uniformed service (assuming the employee is qualified to perform the position's duties); or (ii) the position in which he or she was employed on the date on which uniformed service began (if the employee is not qualified, after reasonable efforts by the employer to qualify the employee to perform the duties of the position described in (i)). For service exceeding 90 days, an employee is entitled to: (a) the position in which he or she would have been employed but for uniformed service or a position of like seniority, status, and pay (assuming the employee is qualified to perform the position's duties); or (b) the position in which he or she was employed on the date on which uniformed service commenced or a position of like seniority, status, and pay (if the employee is not qualified, after reasonable efforts by the employer to qualify the employee to perform the duties of the position described in (a)). If the employee is not qualified for the job to which he or she would otherwise be entitled because of a disability incurred in, or aggravated by, uniformed service, the employee generally is entitled to another position of equivalent seniority, status, and pay.

Furthermore, if an employee becomes "disabled" during military service, the employer generally must provide reasonable accommodations that allow the employee to perform the escalator position, an equivalent position, or a position that most closely approximates the equivalent position. Therefore, USERRA requires that employers engage in the same interactive process contemplated by the Americans with Disabilities Act.

(8) What Are The Ramifications Of Failing To Comply With USERRA?

During the past few years, the Department of Labor received over 1,000 USERRA complaints annually. These figures should increase significantly given recent events.

The Department of Labor generally enforces USERRA, much like it has authority over other federal statutes such as the Fair Labor Standards Act. The protections afforded by USERRA importantly also may be enforced via federal court litigation brought either by private parties or the Attorney General of the United States. If a USERRA violation is found, damages include injunctive relief, the right to reinstatement, back pay, liquidated damages, attorneys' fees and all other costs of litigation.

Additional Information

For more information on USERRA's effects on your employment practices, please call Henry M. Perlowski at 404.873.8684, henry.perlowski@agg.com. For more information on USERRA's effects on your employee benefits practices, please call Roger Weitkamp at 404.873.8188, roger.weitkamp@agg.com.

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