On September 20, 2004, the United States Department of Labor ("DOL") issued proposed rules interpreting the Uniformed Services Employment and Reemployment Rights Act of 1994 ("USERRA" or "the Act"). USERRA is the primary federal law that provides employment and benefit protection for employees who are absent from work because of military service.
Prior to the proposed regulations, only limited guidance has existed to implement and interpret USERRA. Employers have had to rely on the relatively small number of reported cases and analogize current provisions to case law developed under two predecessor statutes, the Vietnam Era Veterans' Readjustment Assistance Act of 1974 and the Veterans' Reemployment Rights Act. The proposed regulations are intended to provide a more substantive resource for interpreting USERRA's provisions.
The full text of the proposed rules can be obtained at www.dol.gov or www.regulations.gov. Interested parties may submit their concerns and/or support for specific regulations to the DOL during the 60 day notice-and-comment period, which ends on November 19, 2004. Highlights of the proposed regulations are provided below.
Anti-Discrimination & Anti-Retaliation
USERRA prohibits employers and potential employers from discriminating against individuals who are members of, apply to be members of, perform, apply to perform, or have service obligations in a "uniformed service." (A uniformed service includes, in essence, any type of federal military service, including the commissioned corps of the Public Health Service). The Act also precludes retaliation against individuals because they have exercised their right to perform military service, testified or made a statement in connection with any proceeding under USERRA, or participated in an investigation under USERRA.
The proposed regulations make clear that the prohibition against discrimination applies to any employment position, including jobs that are for brief, nonrecurrent periods of time and for which there is no reasonable expectation of continued employment. The proposed regulations also make clear that potential employers are prohibited from denying initial employment to job applicants for permanent or temporary positions based on the exercise of their USERRA rights.
Coverage of Employers & Positions
The proposed regulations reiterate that all public and private employers in the United States are covered by USERRA regardless of the number of employees, including employers with only one employee. The regulations further clarify that "successors in interest" are included in the definition of "employer," and lay out a multi-factor test to determine whether an employer is a successor.
Additionally, the regulations acknowledge the possibility of joint employer liability under USERRA. Union hiring halls are further considered employers under USERRA to which the reemployment obligations, anti-discrimination and anti-retaliation provisions of USERRA apply.
Qualified National Guard Service Under USERRA
For those employers unfamiliar with the various organizations for military reservists, the proposed regulations explain the difference between state and federal service while an individual serves in the National Guard. The National Guard is a Reserve component of the U.S. Army, and the Air National Guard is a Reserve component of the U.S. Air Force. Persons within these organizations may also serve as state-controlled military forces that can be called to duty by a state governor for non-federal service. This includes emergency service in the event of floods or riots in a state. The regulations clarify that only federal service in the National Guard is covered by USERRA. However, a number of states provide additional protections for state reserve duty through state military leave statutes.
Leave Activities Unrelated to Military Service
Unlike other types of leaves mandated by statute, the proposed regulations specifically state that USERRA leave need not be taken for the sole purpose of military service. An employee on a leave that is "necessitated" by military service may, while on leave, participate in non-military activities, such as other work. Thus, for example, an employee on a USERRA qualified leave may spend off-duty time "moonlighting" at another job and such activities will not disqualify the person from USERRA leave.
Regarding time taken off from work prior to the actual commencement of the service, the regulations enforce the concept that a person entering military service requires a period of time to organize personal affairs and travel safely to the site of the military service. Such time will be considered as being "necessitated by reason of service," and, therefore, covered by USERRA. The appropriateness of the amount of preparation time prior to reporting for duty is determined on a case-by-case basis.
Returning service members may also obtain employment with entities other than their pre-service employers prior to the deadline for submitting their reemployment application, without forfeiting their reemployment rights. Thus, an employee returning from military service is entitled under the regulations to pursue employment with another employer. The employee still retains his return-to-work rights with respect to his pre-leave employer until such time as those rights expire under USERRA's return to work provisions. This is a substantial distinction between USERRA leave and other types of statutory leaves.
Exceptions to the Five-Year Limit on Military Service
USERRA provides eight exceptions to the five-year limit on uniformed service that may extend a person's military leave beyond the statutory five-year maximum. The proposed regulations recognize a ninth exception based on equitable considerations. For example, where an individual remains in or returns to the service in order to mitigate the economic damages suffered as a consequence of an employer's violation of the Act, the additional service will not be counted against the five-year limit.
Implementing the "Escalator Principle" Upon Reemployment
The proposed regulations provide guidance on determining the position to which the employee is entitled to return upon reemployment. They emphasize that the starting point for determining the appropriate position for the returning employee is the "escalator position" required under USERRA. This is the position the individual would have attained if the person had been continuously employed during the military leave. Depending on other factors, such as length of service, qualifications or a disability, the employer may instead be required to reemploy the returning employee in his or her pre-service position, a position comparable to either the pre- or post-service position, or the nearest approximation to either. In some circumstances, a returning employee may be entitled to be promoted into a position that he or she would have attained had they not been called to military service. That type of determination is heavily dependent upon the facts of a particular situation. For example, if a group of employees having the same position as the employee on military leave were promoted during his or her absence, and there is a logical argument that the employee on leave would have been promoted as well, then that employee would be entitled to the higher position upon returning from leave.
Unacceptable Delays Prior to Reemployment
The proposed regulations generally require that the returning employee must be reinstated within two weeks after requesting a return to work. Employers are prohibited from delaying reinstatement for reasons such as the lack of a vacancy due to the filling of the pre-service position or because a hiring freeze is in effect, unless the employer can show "unusual circumstances." If the period of service was less than 31 days, then the employee must be immediately reinstated.
Employer Statutory Defenses to Denying Reemployment
USERRA provides three statutory justifications supporting an employer's refusal to reemploy a person returning from military leave. The proposed regulations provide additional guidance on these three defenses. For example, USERRA provides that an employer is not required to reemploy a returning service member if the employer's "circumstances have so changed as to make such reemployment impossible or unreasonable." The proposed regulations explain that the defense of changed circumstances is available where there has been a reduction in the employer's workforce that would have reasonably included the returning service member. However, the defense is not available in situations where no opening exists at the time of the reemployment application or where the replacement employee must be terminated in order to reinstate the returning service member.
The second statutory defense arises in a situation where the employer can establish that assisting the individual to become qualified for the appropriate reemployment position would impose an "undue hardship" on the company. The factors for assessing whether an action poses an "undue hardship," such as the nature and cost of the necessary action and the overall financial resources of the affected facility and the employer, are set forth in the body of the statute. In conjunction with the statute, the regulations specify that only after the employer makes reasonable efforts, such as providing training, may it determine that the individual is not qualified for the reemployment position. Additionally, such reasonable efforts must be made at no cost to the individual seeking reemployment. The legislative history of USERRA explains that this defense is only available where a person is not qualified for a position due to a disability or other bona fide reason.
The third statutory defense arises in the situation where the position from which the person leaves for military leave is for a "brief, nonrecurrent period and there is no reasonable expectation that such employment will continue indefinitely or for a significant period." The statute does not define "significant period." However, the DOL is taking the position, based on a case from the United States Court of Appeals for the Sixth Circuit, that a person holding a seasonal job may have reemployment rights if there was a reasonable expectation that the job would be available next season.
Applying Accrued Paid Time-Off to Military Leave Is the Employee's Option
Unlike other federal leave statutes, the proposed regulations clarify that under USERRA, employers may not unilaterally require employees taking military leave to apply accrued time-off to military leave. However, if an employee asks to use his accrued time-off during the military leave, an employer must allow the employee to do so.
Pension Plan Benefits
Regulations governing the administration and contributions to employee benefit pension plans, including profit sharing and stock bonus plans, are also being proposed. It is important to note that some plans excluded from ERISA coverage may be subject to USERRA. For example, plans sponsored by religious organizations, and established under state or federal laws for governmental employees, may be covered by USERRA but not by ERISA. Plan administrators and trustees should be aware of these proposed regulations and participate in the public comment, if any aspect of the guidelines is determined to be actuarially or administratively detrimental to the plan.
Conclusion
As an unprecedented number of Reservists have been ordered to active duty and the need for service members at various military bases at home and abroad continues, employers of all sizes will undoubtedly confront issues related to applicants and employees taking and returning from military leave. A clear understanding of the rights and obligations in this area is essential to the individuals who provide important service to our nation, and to the businesses that seek to maintain successful operations in a challenging economic environment.
We will continue to keep you apprised of the status of the proposed regulations, and invite you to contact us with any questions.