June 20, 2005

Not long ago, the topic of military leave barely registered on the radar screens of most employers. Then 9/11 happened. Since that time more than 420,000 citizen-soldiers have been mobilized. Nearly overnight, the Uniformed Service Employment and Reemployment Rights Act of 1994, better known as USERRA, moved to the forefront of employment law topics. With complaints under the Act by returning veterans up11% over last year, employers and their legal counsel need to become familiar with this often overlooked law.

The Act grants broad rights to employees who are absent due to military service and applies to all employers in the public and private sectors, including federal employers. The statute's labyrinthine provisions are riddled with exceptions, qualifications and other traps for the unwary, so a complete discussion of the statute cannot be undertaken here, but its major highlights are:

• Prohibits discrimination or retaliation against employees and applicants based, in whole or in part, on their past, present, or future application for, or membership in a uniformed service.
• Grants employees who are absent for military service the right, with limited exceptions, to reemployment in their old job or an equivalent position at the level they would have been if the employee had continued working during the period of military service.
• Provides for an employee's right to continued medical coverage while absent and to reinstatement in the health plan without exclusions or a waiting period if coverage lapses during the leave.
• Requires that the period of military service count as service with the employer for vesting and accrual purposes under retirement plans and allows the returning veteran to make up any missed employee 401(k), 403(b) or after-tax contributions.
• Prohibits employers from terminating a returning veteran, except for cause: (a) during the first year of employment after an absence of more than 180 days; and (b) during the first 180 days of employment after an absence of 31 to 180 days.

In September, 2004, the United States Department of Labor issued long-awaited proposed rules interpreting USERRA and in November Congress amended the statute to enhance employee rights. The regulations add some clarity to the decade-old law. Previously, uncertain employers had only a scant number of court decisions and interpretations of previous military leave laws to guide them. Some of the highlights of the amendments and proposed rules are:

The proposed regulations make clear that all employers, including foreign employers doing business in the United States and U.S. companies or their affiliates doing business in foreign countries, are covered by the Act. An "employer" under the Act also includes successors in interest, regardless of whether the successor knew about the potential reemployment claim at the time of the merger, acquisition or other succession. The definition of "employee" is equally broad and applies to all levels of employment, including executive, managerial and professional employees. The law does not, however, apply to independent contractors, a status that will be determined on a case-by-case basis.

Employees are not required to be engaged solely in uniformed service to preserve USERRA reemployment rights. For example, an employee who reports to an out-of-state location for military training may spend her off duty time during that assignment moonlighting at another job or visiting relatives without affecting her reemployment rights. Similarly, the employee's reemployment rights are preserved so long as she makes a timely reemployment application, even if she seeks or obtains employment with another employer prior to the time her reemployment application must be made under the Act.

The recent amendments to the Act extend a covered employee's right to elect continued health care coverage from 18 to 24 months. Health plan administrators may develop "reasonable requirements" which address how coverage may be elected, consistent with the terms of the plan and the Act's requirements.

The draft regulations emphasize that "the starting point" for determining a returning employee's proper position and benefits upon reemployment is based on the so-called "escalator principle". That is, the employee is entitled to reemployment in the job position that he would have attained with "reasonable certainty" if not for her/his absence due to military service. Reasonable certainty can be established by showing that other employees with seniority similar to that which he would have had if he had remained continuously employed received the right or benefit. By the same token, the draft regulations acknowledge that applying the escalator principle can result in adverse consequences upon reemployment, such as being reinstated to lay off status or transferred to another shift or location.

The recent USERRA amendments add the requirement that all employers post a notice of rights and duties under the law in a location where other workplace notices are posted. The Secretary of Labor must develop the notice language by March 2005.

The regulations, like USERRA itself, are extremely detailed and deal with many specifics not addressed here. Employers and attorneys unfamiliar with USERRA's many twists and turns are well advised to carefully review the statute and regulations before determining the rights of any employees returning from service.