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Final USERRA Regulations from Department of Labor Go into Effect January 18

  • January 18, 2006

While the Department of Labor's final regulations under the Uniformed Services Employment and Reemployment Rights Act of 1994 do not impose any new obligations on employers, they provide new and specific guidance on a number of technical issues and turn internal guidance into binding regulations.  In addition, the new USERRA regulations highlight lesser-known features, which likely will lead to an increase in complaints of violations.

With tens of thousands of reservists on active duty today -- most of whom will be seeking reemployment under the rights guaranteed by USERRA -- employers will continue to face the challenge of balancing business needs with  complying with their legal obligations. 

Other USERRA regulations recently issued by the Department of Labor require employers to provide notice of rights to their employees.  See New Notice for USERRA Rights Must Be Posted  (March 23, 2005).   To satisfy this requirement, the Department of Labor has published a poster which is available for downloading on www.jacksonlewis.com.

In December 2005, the United States Department of Labor issued final regulations under the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA), 38 U.S.C. §§ 4301-4333.  The regulations which take effect January 18, 2006 do not impose any new obligations on employers, according to the Department of Labor.  While this may be true, the USERRA regulations provide new and specific guidance on a number of technical issues and turn the Department of Labor's internal guidance on USERRA issues into binding regulations.  In addition, the new regulations highlight lesser-known features of USERRA which likely will lead to an increase in complaints of violations. 

Other regulations recently issued by the Department of Labor require employers to provide notice of USERRA rights to their employees. See New Notice for USERRA Rights Must Be Posted (March 23, 2005).To satisfy this requirement, the Department of Labor has published a poster.

Since September 2001, over 500,000 reservists have been called to active duty.  These reserve component members -- as well as active duty service members returning from the traditional three or four year enlistment -- have extensive reemployment and anti-discrimination rights under USERRA.  While an unprecedented number of reservists have served on active duty since 2001, the Department of Labor has seen only a 30% increase in complaints.  However,  Department of Labor complaints do not represent the entire picture, since employees independently may retain private counsel to commence a lawsuit under USERRA

Lawsuits will likely continue to increase with the Civil Rights Division of the Department of Justice assuming responsibility for litigation under USERRAMost recently, the Department of Justice filed a class-action lawsuit against a major airline alleging pilots on military leave were treated differently under a collective bargaining agreement than pilots on other forms of leave.

Like its predecessor statutes, the basic concept of USERRA is to permit service members to leave their civilian jobs for uniformed service and return to their civilian jobs with accrued seniority.  In general, USERRA provides the following rights to employees:

  1. Non-discrimination based on military status;
  2. Reinstatement under the "escalator principle," i.e., to the position and pay that the employee would have held if the continuous employment of such person had not been interrupted;
  3. Other rights and benefits that are generally provided to individuals of similar status on a leave of absence;
  4. Continuation of medical benefits under the same terms and conditions as when actively employed if service is 30 days or less;
  5. Optional continuation of medical benefits for up to 24 months under terms similar to those of COBRA
  6. All seniority, rights and benefits upon return to work as if the employee had remained continuously employed.  Typical benefits covered under USERRA would include seniority-based vacation allowances, pension credit and 401(k) contributions; and
  7. Protection from discharge upon return to work, except for cause, for a period of time depending on the length of service.

Each of these categories is discussed in more detail below.

The regulations provide coverage for employers and employees far broader than commonly believed.  The definition of employer under the regulations includes individual decision-makers, successor employers, pension plans, overseas subsidiaries of American companies, and even insurance companies that administer life, disability and health plans.  Employees covered under the regulations include those enlisted in extended active duty, mobilized reservists, ROTC students, those absent for pre-enlistment physicals, and volunteers in the National Disaster Medical System and NDMS authorized training programs.

Non-Discrimination Based on Military Status

Many commonly think of USERRA as a "military leave" statute. USERRA does provide protection for employees on military leave but also protects employees from discrimination based on their actual or potential service in the military.  The regulations highlight this protection and note that employers may not deny initial employment, promotion, retention, or any other benefit of employment based on an individual's membership, application for membership, performance of service, or obligation for service in the military.

Reinstatement under "The Escalator Principle" with Seniority, Rights and Benefits upon Return to Work

USERRA generally provides that eligible employees must be reinstated to the position and pay the employee would have held if continuous employment had not been interrupted by military service.   The statute appears to limit reemployment rights to a period of five years, but also contains various exceptions to the five-year period.  Generally, to be covered, employees must provide advance notice of the leave, receive a favorable discharge, and seek reinstatement in a timely manner.  Eligible employees cannot waive reemployment rights until after completing military service.

There are limited exceptions to the requirement to reemploy returning service members.  For example, the regulations recognize that the "escalator principle" may cause an employee to be reemployed in a lower position, laid off, or even terminated depending on the particular circumstances, such as an intervening reduction in force that would have affected that employee.  In addition, there is no obligation to reemploy someone who had worked for a brief, nonrecurring period in which there was no expectation that work would continue.  It should be noted that the need to terminate a replacement employee is not a basis to refuse reemployment.  Decisions not to reinstate an employee must be made on a case-by-case basis, and we recommend employers consult with legal counsel before making such a decision.

  Employees must be reinstated to the position they would have attained if his or her employment had not been interrupted.  The employee is also entitled to the seniority, status and rate of pay that the employee would ordinarily have attained if continuously employed.  In some cases, the position, status and rate of pay are easily determined.  In many other cases, the regulations recognize employers will be required to evaluate a number of factors.  For example, an employee may need additional time to train for skills for a promotion that the employee "missed" during service, or an employee's status may involve missed opportunities for advancement, responsibility, general working conditions or even job location.

The regulations provide guidance on how an employee's rate of pay is determined upon return from service taking into account any pay increases, step increases, merit increases, or periodic increases that the employee would have attained with "reasonable certainty" if continuously employed.  The regulations note that when considering whether merit or performance increases would have been attained with reasonable certainty, an employer may examine work history, merit increase history, and the work and pay history of employees in the same or similar position.

USERRA requires an employer provide an employee with all seniority-based rights and benefits as if the employee had been continuously employed.  For example, the period of military leave counts towards seniority for a higher tier of vacation accrual and FMLA eligibility requirements.  Employers are not required to use a formal seniority system, but the regulations require employers to determine an employee's entitlement to employee benefits by looking at the actual custom and practice based on longevity and employment.

Rights and Benefits Provided to Others in Similar Status

USERRA does not expressly require employers to pay or provide benefits for employees.  The statute and regulations do, however, require employers to provide non-seniority rights and benefits to similarly situated employees under "an employment contract, agreement, policy, practice or plan in effect at the employee's workplace."  If non-seniority benefits vary according to the type of leave, the employee must be given the most favorable treatment accorded to any comparable leave.  In response to comments, the Department of Labor provided additional guidance on "comparable leaves" and noted that the duration of the leave may be the most significant factor to compare.  For example, an employer who provides certain non-seniority benefits to individuals on a two-day funeral leave will probably not be required to provide those benefits to an individual on an extended military leave.  Also in response to comments, the Department of Labor noted that vacation accrual is generally a non-seniority benefit unless provided to similarly situated employees on comparable leaves of absence.  We note that the recent class action lawsuit filed by the Department of Justice involves the Department's claim that pilots on milita ry leave are entitled to vacation accrual and other non-seniority benefits that are provided to pilots on other forms of  leave.

Continuation of Medical Benefits

If an employee has coverage under an employer-based health plan, the plan must permit the employee to elect to continue coverage under certain circumstances.  For example, for service less than 31 days, the employee cannot be required to pay more than the regular employee share for health plan coverage.   In addition, the health plan must permit employees to elect COBRA-like coverage for up to 24 months.  The regulations do not provide specific guidance on procedures for employees to elect such coverage and for employers to collect payment for such coverage.  The regulations provide for retroactive reinstatement of coverage under certain circumstances when an employee failed to make a timely election due to military necessity.  Employers must reinstate plan coverage for returning employees without an exclusion or waiting period, but may impose an exclusion or waiting period for certain injuries covered under Veterans Administration disability programs.  In many cases employers will need to consult with benefits counsel regarding the need to amend health care plans to comply with the new regulations.

Reinstatement of Pension Benefits

USERRA provides that upon reemployment, employees must be treated as not having had a break in service for pension plan purposes to include vesting and accrual of benefits for the period of absence.  Employers are not required to make contributions until the employee is reemployed, but then must contribute no later than 90 days after the date of reemployment, or when plan contributions are normally due for the year in which the service was performed, whichever is later.  Employees are allowed to make up missed contributions or elective deferrals for up to three times the length of the absence, up to a maximum of five years.  Employer contributions that are attributable to the employee's makeup contribution must be made according to the plan's requirements for employer matching contributions.  As with health care benefits, many employers will need to consult with benefits counsel before amending pension plans to comply with the new regulations.

Protection from Discharge upon Return to Work

USERRA provides that employees returning from military service of more than 30-days duration cannot be discharged except for cause for the period following return of either the first 180 days or one year, depending on the length of the absence. The employer bears the burden of proving the employee was discharged for cause, and must establish the discharge was reasonable and the employee had notice the conduct would constitute cause for discharge.  In addition to conduct-based discharge, the regulations recognize cause may arise from other legitimate and non-discriminatory reasons, such as a reduction in force.

Jackson Lewis Comments Informed the Process

Comments submitted by Jackson Lewis in 2004 following the publication of the draft regulations were addressed by the DOL in the final version.  Those comments provided information clarifying several open issues and ultimately helped to draw the agency's attention to the employer's perspective on a number of important issues with the following results:  reducing the employer's potential exposure to claims from overseas operations; expressly permitting employers to address concerns to military authorities over the timing, frequency, or duration of military service; extending partial protection to employers from claims relating to retroactive upgrades of military discharges; avoiding technical violations on employee classifications; allowing employers additional time for certain pension contributions.

Key Points to Remember:

·        Review workplace practices and policies and collective bargaining agreements to ensure benefits such as vacation accrual are treated the same for employees on military leave as other employees;

 

·        Post the recent DOL-approved poster, which provides notice of USERRA rights to employees;

 

·        On reinstatement, place the employee in the position and pay he or she would have held if he or she had not gone on leave, including any discretionary pay raises and missed promotional opportunities;

 

·        Remember, returning reservists can only be discharged for cause during the first 180 or 365 days, depending upon the length of service (30 - 180 days of service = protection for 180 days; more than 180 days of service = protection for 365 days);  

 

      ·     Review medical, pension and other plans to ensure they comply with the new regulations.

©2006 Jackson Lewis P.C. This material is provided for informational purposes only. It is not intended to constitute legal advice nor does it create a client-lawyer relationship between Jackson Lewis and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material. This material may be considered attorney advertising in some jurisdictions. Prior results do not guarantee a similar outcome.

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