Legal Trends: Military Leave Compliance

Military leave compliance may make your head spin, but it's in service of a higher purpose.

Our nation’s public policy on the workplace rights of employees who leave their civilian employment to serve in the military is embodied in the appropriately sweeping provisions of the Uniformed Services Employment and Reemployment Rights Act (USERRA).

USERRA, enacted in 1994, applies to all public and private employers in the United States, regardless of size. Even employers with only one employee are covered. And there is no minimum service requirement for employee eligibility.

On Dec. 19, 2005, the U.S. Department of Labor (DOL) published final regulations implementing the law and attempting to clarify what it takes for employers to comply. The regulations, codified in 29 C.F.R. Part 1002, became effective Jan. 18.

While the DOL presents the regulations in a question-and-answer format to make them accessible and understandable, they are still painfully complicated in some areas.

This article teases out some of the tangles for employers and suggests ways to craft straightforward compliance policies. Not a primer on USERRA generally, the article assumes a general understanding of USERRA and some familiarity with the regulations.

For a more detailed treatment of the final regulations, see the March–April 2006 issue of the Society for Human Resource Management’s Legal Report.

Avoid Temporary Lapses

Unlike other laws, such as the Family and Medical Leave Act (FMLA), USERRA has no minimum hours requirement for employee coverage. USERRA protects all employees, no matter how new and regardless of whether they are part time or full time.

But what about employees hired with the understanding that their employment will be temporary?

USERRA does not require an employer to re-employ a temporary employee who had been employed for a brief, nonrecurrent period, with no reasonable expectation of an indefinite or significant period of continued employment, according to the regulations. (§1002.139(c).)

Some employers have concluded, on the basis of this provision, that USERRA does not protect temporary employees—a dangerous leap in two respects:

• First, USERRA does protect temporary employees. The cited regulation is an exception only to the statute’s re-employment requirement, not a general exclusion from USERRA coverage.
• Second, the exception to the re-employment requirement does not apply to all temporary employees. As the DOL cautioned in the regulations’ preamble, employers need to be careful not to equate “brief, non-recurrent” employment with “temporary” or “seasonal” employment. Some temporary and seasonal work may be brief but not “non-recurrent.” In those circumstances, USERRA’s re-employment provisions would protect the temporary or seasonal employee. (Note that comments in the lengthy preamble to the regulations are not legally binding, but they do provide insight into the DOL’s likely enforcement positions.)

Take care to draft policies to reflect the fact that USERRA protects all employees.

If Employee Leave Leaves You Wondering

USERRAs definition of “service in the uniformed services” covers all categories of military training and service, whether voluntary or involuntary, during peace and during war. (§1002.6.) Do not include any language in company policies that might be interpreted to mean that only involuntary or wartime service is protected.

Because leave not protected by federal law may nonetheless be protected under state law, policies should take both into account. USERRA does not supplant state law provisions that mandate additional coverage, requirements or benefits.

For example, the authority for an individual’s National Guard service determines whether the person has USERRA protection. Service under federal authority invokes USERRA protection; service under state authority does not. But state law may very well apply. (§1002.57.)

Finally, remember that USERRA protects some employees who are not even members of the uniformed services, such as those who perform as intermittent disaster-response appointees on activation of the National Disaster Medical System (part of a program coordinated by the Federal Emergency Management Agency). (§1002.56.)

Don't Dictate Deadlines

USERRA regulations severely restrict an employer’s freedom to set deadlines and formal notice rules regarding an employee’s need for leave.

An employer can request advance notice of military leave, for example, but cannot require it. Moreover, while the regulations specify that employees should give notice “as far in advance as is reasonable under the circumstances,” an employer cannot mandate a specific number of days’ notice—even if the need for leave is foreseeable.

The regulations permit employees to give either oral or written notice, so don’t insist on written notice. (§1002.85(c).)

Nevertheless, USERRA does not obligate employers to surrender all reasonable attempts to secure notice of an employee’s impending leave. Employerscan and should request notice as far in advance as possible, but without stating or implying that a certain amount or form of notice is required, or that employees need to secure the employer’s permission to take military leave.

Note also: Employers that continue to compensate employees during military leave beyond what the law requires can require specific notice or documentation as a condition of receiving such discretionary payments. The key is to be clear that the notice or documentation is required only to qualify for payment, not to initiate or continue the leave itself.

Perspectives on Pay

USERRA and its final regulations do not obligate employers to continue to compensate employees on military leave. (§1002.7(c).) Nevertheless, employers cannot consider pay issues without taking other laws into account.

Under the Fair Labor Standards Act (FLSA), for example, employers must pay exempt employees their full salary (minus military pay) if they perform any work during a week when they are also on temporary military leave. An employer that fails to do so puts at risk the exempt status not only of the employee on leave but also of all other exempt employees who report to the employee’s manager (even if their pay has not been subject to an improper deduction).

Service members’ access to and use of e-mail and other forms of electronic communication also can raise FLSA issues. If exempt employees on temporary military leave remain in regular communication with the workplace, that would entitle them to continued compensation as exempt employees in any workweek in which they have such communication.

Note that this obligation with respect to exempt employees applies only to “temporary” military leave. The problem is that the regulations do not define “temporary.” A starting point for an employer is to consider for how long it continues to classify its own employees as temporary. It is unlikely, for example, that an employer who routinely classifies employees as temporary for up to six months would succeed in court by arguing that military leaves shorter than six months are not temporary.

Again, with respect to pay, employers must look to both federal and state law. Under the Louisiana Code, for example, an employer has no duty to pay employees on military leave. But if it elects to pay any employees during military leave (such as full-time employees only), the statute appears to require the employer to pay all employees to the same extent.

Under USERRA, employees on leave are entitled to use paid personal and vacation days (and perhaps sick days, depending on the terms of the employer’s policy). But, unlike under the FMLA, the employer cannot require them to do so. Employers’ policies and practices should reflect this distinction.

Health Care Continuation: Best Coverage Trumps

Generally speaking, employees have the right to continue their employer-sponsored health insurance cover- age during USERRA leave. COBRA’s health care continuation rules also apply—up to a point. There are material distinctions between an employer’s USERRA and COBRA obligations; employees get the benefit of the better coverage.

Here are just two of the many differences between COBRA and USERRA that an employer will need to consider:

• If an employee’s coverage terminated because of a reduction in hours owing to a leave of absence, COBRA coverage generally lasts only for 18 months. In contrast, USERRA coverage may continue for up to 24 months.
• Under COBRA, an employer may charge an employee up to 102 percent of the cost of continued coverage (the employer and employee portions of the premium plus a 2 percent administrative fee) for the entire period. Under USERRA, an employer can do the same, except where the leave is for fewer than 31 days. In that case, the employer can require the employee to pay the employee’s portion but not the employer’s portion or the 2 percent fee. (§1002.166.)

And once more, don’t forget to consider state law. Under Pennsylvania law, for example, an employer must pay the full cost of health insurance for the first 30 days of military leave (unless the leave is for active-duty training).

Semper Seniority

Under USERRA, employees are entitled to seniority-based rights and benefits that they had on the date their military service began, plus any seniority and seniority-based benefits they would have attained had they remained continuously employed. (§1002.210.)

USERRA also guarantees employees on military leave the non-seniority employment rights and benefits that are available to other employees with similar seniority, status and pay who are on furlough or a leave of absence. (§1002.149.) In other words, employers must give employees on military leave the most favorable treatment accorded employees on any comparable form of leave. (§1002.150(b).)

The DOL declined to provide clear guidance on what constitutes a “comparable” form of leave, but it did state factors that may be relevant: the duration of the absence, the purpose of the leave and the employee’s ability to choose when to take the leave. A policy granting extended personal leaves of absence probably would be a comparable leave for these purposes, for example. But a policy establishing short bereavement leaves probably would not be.

With that background in mind, assume an employer allows an employee to accrue additional vacation during an extended personal leave of absence. An employer probably would have to do the same during military leave. The same analysis arguably would apply to paying for health insurance or even salary continuation.

The DOL also declined to answer definitively whether legally mandated leave, such as FMLA leave, might be considered “comparable” leave for purposes of USERRA. To the contrary, the DOL expressly stated in the preamble that it views the issue as one that “must be decided on a case by case basis.”

If FMLA and USERRA leave are indeed comparable, logically it would mean an employer would have to pay its portion of the cost of health insurance for the first 12 weeks of military leave just as it must do for FMLA leave. But that is contrary to USERRA’s express terms.

Because of the DOL’s reluctance to provide guidance in this area, however, it’s not possible to give a definitive answer. Anticipate litigation on this troublesome issue.

It Doesn't All Add Up

Generally, employees are eligible for a five-year cumulative maximum of job-protected USERRA leave from each employer. (§1002.99.) The five-year cap includes only the time spent in uniformed service. It does not include the time an employee is off work either before or after such service. (§1002.100.)

Accordingly, employers must exclude time away from work but not in service in calculating the five-year maximum, but must include it when calculating service credit for purposes of retirement benefits.

More specifically, the regulations provide that an employee must be treated as not having a break in service for purposes of participation, vesting and accrual of benefits in the employer’s pension or other retirement plan. (§1002.259(a).)

This is but one example of what may be described as internal inconsistency within the USERRA regulations: The principles articulated in one area do not necessarily apply in another.

The regulations also include nine exceptions to the five-year maximum leave. Accordingly, if an employee reaches the five-year cap, check to see if one of the exceptions applies before concluding that the employee no longer has automatic re-employment rights.

On and Off the Escalator

As a general rule, employees are entitled to re-employment in the position (including potential promotions) that they would have attained with reasonable certainty if not for the military absence. The regulations refer to this position as the “escalator” position.

The escalator position includes the seniority, status and rate of pay (including potential pay increases) that the employee, given the same job history, ordinarily would have attained in that position. (§1002.191.)

While the escalator position is the starting point, it is not always the end point. Once the employee’s escalator position is determined, other factors may allow, or even require, the employer to re-employ the employee in a position other than the escalator position—the position the employee held before military service, for example.

Factors that employers must consider in making this assessment include the length of the employee’s service and whether the employee has a disabling condition. (§1002.192–1002.198 and §1002.225–1002.226.)

Here’s how this plays out in one situation: If the period of service was less than 91 days, the employee must be employed in the escalator position unless the employee is not qualified to perform its duties after the employer has made reasonable efforts to help the employee become qualified.

In that case, the employee must be re-employed in the position held on the date when military service began.

If the employee is unable to perform the duties of the pre-service position, even after the employer’s reasonable efforts to help the employee qualify, the employee must be re-employed in any other position that is the nearest approximation, first, to the escalator and, then, to the pre-service position, also with the employer’s reasonable efforts to help the employee become qualified for such other positions. (§1002.196.)

If this makes your head spin, imagine the effect on a rank-and-file employee if the company included all these ifs-ands-or-buts in the employee handbook!

And, the standard is even more mind-bending with respect to leaves of 91 or more days. Moreover, in both cases, USERRA includes a specific reasonable accommodation requirement for returning employees who have become disabled.

Avoid the temptation to put all of the detail in the company policy. Instead, simply state that “an employee will be reinstated in accordance with federal and state law” and then solve the puzzle when the employee returns. Sometimes, less is more.

Be Careful Before Closing the Door

There are a number of circumstances in which an employer may deny re-employment, but the exceptions are not necessarily as broad as they first may appear.

An employer is not required to re-employ an employee who was separated from uniformed service with a dishonorable or bad conduct discharge, or under other than honorable conditions, as characterized by military regulations. (§1002.135.)

While USERRA indicates what kinds of discharge may cancel an employee’s re-employment rights, the law does not require any particular form of discharge or separation from service to be eligible for re-employment.

Employers need to keep this distinction in mind with regard to their policies and practices. For example, an employer should not state that an employee is eligible for re-employment only if honorably discharged.

An employer also may deny re-employment to an employee if the employer’s circumstances have changed so as to make re-employment impossible or unreasonable.

For example, an employer may be excused from re-employing the employee where there has been an intervening reduction in force that would have included the employee. (§1002.139(a).)

Be careful not to apply this exception too expansively. The regulatory preamble is clear that an employer cannot lawfully fail to reinstate an employee solely by showing that it hired another person to fill the veteran’s vacated position—even if reinstatement requires terminating the replacement employee.

Finally, if assisting an employee in becoming qualified for re-employment would impose an undue hardship, an employer may deny re-employment. (§1002.139(b).) However, as stated in the preamble, this defense “only applies where a person is not qualified for a position due to disability or other bona fide reason, after reasonable efforts have been made by the employer to help the person become qualified.”

In other words, USERRA does not provide the employer with a general undue-hardship defense on the basis of the length of an employee’s absence or the importance of a position.

Conclusion

These are just some of the tricky issues that employers must consider as they make their best efforts to comply with USERRA. As tough as this may be, it is nothing compared with what employees protected by the regulations may experience. From this perspective, the regulations are a walk in the park.

Authors Note: This article should not be construed as legal advice or as pertaining to specific factual situations.

Jonathan A. Segal, Esq., a contributing editor of HR Magazine, is a partner in Philadelphia and the vice chair of the Employment Services Group of Wolf, Block, Schorr and Solis-Cohen LLP. His practice concentrates on counseling clients, developing policies and strategic plans, and training managers to avoid litigation and unionization.