No Room For Error - Employers' Obligations To Called-Up Reservists

April 14, 2003

Rothschild2
In 1994, in the wake of Desert Storm, Congress passed The Uniformed Services Employment and Reemployment Rights Act, (USERRA.) Its purpose is to encourage participation in the United States armed forces, minimize disruption in the lives of those who participate in our military, as well as their families and employers, and also to prohibit discrimination against military personnel. This act provides specific and strict guidelines, which dictate the conduct of employers relative to continued benefits, seniority and reemployment of service men and women who are activated and/or deployed for military duty up to a maximum of five years, which may be extended at the discretion of the President of the United States. Employers are required to adhere to these guidelines, and in the event that an employee brings forth a claim against an employer for non-compliance, the burden of proof is on the employer to prove that they have not violated the employee’s rights under USERRA, not the other way around.

USERRA is broad-sweeping and clearly designed to protect the rights of employees. It requires employees to give reasonable notice of activation orders (whether voluntary or involuntary) to their employer, but provides no definition of ‘reasonable’. Employers are expected to absorb any hardships resulting from the loss of an activated employee and simply make due. This applies to all US businesses anywhere in the world, and neither small businesses nor foreign affiliates are exempted.

It is reasonable to assume that most, if not all, American business owners understand their obligation to release their employees (full or part time, but not temporary) to report for military service, but details of further obligations remain fuzzy to many employers. Many requirements apply to all called-up reservists, but some vary relative to length of activation. For example, while employers are required to offer continued health insurance coverage for up to 18 months under COBRA to all former employees at the employer’s cost, employees on military duty are required to pay only their normal contribution towards health insurance for the first 30 days. Thereafter, activated employees have the right to continue health benefits under the same conditions as COBRA, by paying a maximum contribution of 102% of the premium cost for themselves, and their families, if relevant. Employers are also required to reinstate health insurance coverage immediately upon activated employees’ return to employment, and employees cannot be excluded for a pre-existing condition.

Continued benefits are often a complicated issue for employers. USERRA provides that employees on military leave are entitled to the same benefits provided to employees who are on other forms of leave. Employees may use vacation, personal or sick time to continue to receive compensation from their employer, but they are not required to do so. In addition, employers are not required to allow absent employees on military duty to accrue vacation or sick time unless this policy is in effect for employees on other leaves of absence. There is also no mandate requiring employers to continue compensation of their activated employees, but some employers choose to continue such employees’ salaries, and some choose to make up the difference between military pay and what employees customarily earn.

Continued participation in company sponsored retirement plans is also clearly defined by USERRA. It is important to stress that USERRA protects the rights that individuals would have had if they had remained continuously employed. With respect to retirement plans, such as 401Ks and others, this means the protection of the accrual of contributions. Employers are not required to make contributions while employees are absent; however upon return, employees have three times the length of their military service, or up to five years, to make up for lost contributions, whichever is shorter. Employers must also make their customary matching contributions. In addition, there is no waiting period for reemployed employees to begin contributions to their retirement plans. Also important to note is the fact that employers have the option but are not required to suspend loan payments against a company sponsored retirement plan without violating loan terms, and there is a 6% cap on the interest rate that military personnel can be charged on obligations and liabilities incurred before activation occurred. Also key is the protection of vesting rights of employees absent due to military duty. Employees must be treated as though there was no break in their employment status.

The most complicated issue for employers will be the reinstatement rights of employees who return from military duty. Employees are obligated to report back to their former employer within a specific time frame, determined by the length of their activation.

  • Up to 30 days -employees must report back to their job on the next business day following their return home, which must include at least an 8-hour rest period.
  • 31-180 days -employees must submit a verbal or written application for reemployment within 14 days of completing service and returning home.
  • 181 days+ - employees must submit a verbal or written application for reemployment within 90 days of completing service and returning home.

These deadlines may be extended up to two years in the event that employees must recover from illness or injury that occurred or was aggravated by their military duty.

Employers have specific requirements upon the return of activated employees. Such employees must be promptly reinstated to the position that they would have held had they remained on the job, generally within days of notifying their former employer. All benefits must have accrued for former employees as though they had been present the whole time. This includes seniority as well as rate of compensation, including any increases that would have been earned while they were gone, in addition to status and pension vesting. Training or retraining must also be available to ready employees for their return.

There is a provisional change in the legal status of employees returning from active duty. They are temporarily not "at-will," for up to one year, depending on length of service in the military, except for cause, and this protects them from discharge. Employees who served in the military for 31 to 180 days are protected from discharge except for cause for 180 days, and those who served for more than 180 days are protected from discharge except for cause for a whole year following their return to work. Cause would include commission of a felony, disloyalty, excessive absenteeism, gross negligence, theft or dereliction in their performance of duties. Again, it is important to note that employees are protected by USERRA, and the burden of proof would be on employers to show that termination did not result from activation in the military.

It is also important to note that employers must be especially sensitive to USERRA’s protection of employees from discrimination in hiring. It is unlawful to discriminate from hiring employees because they serve in the military reserves, and it is also unlawful to terminate employees who are called for active duty.

With the increasing numbers of employees being called-up for active duty, it is important for employers to understand their obligations with respect to the rights of military personnel. These people are entitled to all the benefits available to employees on non-military forms of leave, and they must be offered the option of continued health insurance benefits under COBRA. Upon return they must be promptly reinstated to their former position or a comparable one, and they must be afforded the opportunity to make up for lost retirement plan contributions. Violations of The Uniformed Services Employment and Reemployment Rights Act will not be tolerated by the government, and the burden of proof will be on the employer in the event that a lawsuit occurs. This article offers an overview of the highlights of the act, and any specific inquiries should be discussed with legal counsel.

Paul H. Rothschild, Esquire
Paul is Chairman of the firm's Litigation Department. His practice is concentrated in general litigation, including employer/employee disputes, as well as personal injury and product liability. He also represents a number of employers in general business and higher education, providing advice on issues relating to termination, discrimination, and avoidance of disputes.

by: Paul H. Rothschild, Esq.