Claim of Miscalculated Military Leave Pension Contributions Can Go to Trial

By Jeffrey Rhodes Jun 14, 2017
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​A Navy reservist who worked for FedEx could go to trial on his claim that the company miscalculated its contributions to his pension during his military service under the Uniformed Services Employment and Reemployment Rights Act (USERRA), the 6th U.S. Circuit Court of Appeals ruled.

FedEx employed Kenneth Savage as an aviation mechanic from August 2001 to September 2012, while he also served as a United States Naval Reserve lieutenant. Savage was one of many service members employed by FedEx. During his employment, he participated in the FedEx Corporation Employees' Pension Plan, a defined benefit plan covering FedEx employees. The pension plan was administered by Mercer, an actuarial and retirement benefits consulting firm, which made calculations and handled benefits under the plan.

By early June 2012, Savage had complained about a discrepancy in his pension contribution calculations to his manager, a human resource advisor and other individuals in FedEx's benefits department. He also raised the issue with the FedEx Retirement Center, which is a group of Mercer employees. Savage continued to complain through July and August 2012. He was not the first to complain about FedEx's pension contributions for military service members. A co-worker and fellow service member had previously complained about FedEx's calculation of pension benefits, and, in 2008, the company had settled a dispute with its pilots union over its failure to make the correct USERRA pension contributions for pilots serving in the military.

[SHRM members-only toolkit: Managing Military Leave and Military Family Leave]

As a benefit to employees, FedEx allowed employees, their spouses and their dependents to use its shipping services at a reduced rate. This discount could not be used for any commercial benefit or commercial purpose not related to the company, either for profit or nonprofit. The company's policy stated that "[v]iolation of guidelines and policy for employee reduced rate shipping may result in severe disciplinary action up to and including termination." The policy was listed in FedEx manuals and handbooks that Savage had access to throughout his employment.

According to Savage, the policy changed on Sept. 2, 2012, to specifically bar employees from using the discount to ship merchandise sold on eBay. Savage claimed that he was not notified of the change. On Sept. 4, 2012, Savage's wife used the employee discount to ship one or two items she had sold on eBay. Prior to that time, Savage and his wife had used the discounted shipping rate to transport various items they had sold through eBay and Craigslist.

FedEx routinely investigates whether employees abuse their shipping privileges. Savage used his reduced-rate shipping discount 90 times between March and August 2012 and appeared on FedEx's audit for this high volume of shipments. A FedEx security specialist interviewed Savage, and he admitted that he and his wife sold items online using his discount. He claimed that they were not running a business with the transactions and claimed that many employees found the shipping policy vague and confusing.

At the end of the interview, FedEx suspended Savage with pay. Savage was terminated on Sept. 20, 2012, 42 days after completing military service and a little over a month after he last complained about the calculation of his retirement benefits.

Savage filed suit against FedEx in federal court on Jan. 26, 2014, alleging USERRA discrimination and retaliation claims and a claim under USERRA's pension provisions. FedEx filed a motion for summary judgment on all of the claims, which was granted by the district court. Savage appealed the decision to the 6th Circuit.

The appellate court considered the district court's decision on Savage's discrimination and retaliation claims. While the court found that Savage stated a prima-facie case of discrimination and retaliation, it also found that the decision-makers concerning his suspension and termination were not aware of his complaints about the calculation of his military service pension benefits.

Regarding Savage's pension benefit claim, the appellate court found that FedEx may have miscalculated his contributions. USERRA requires that when an employee's compensation during military service is not reasonably certain due to shift differential pay, overtime pay or premium pay, the employer must use the "12-month look-back methodology" to calculate the employee's compensation during service. While FedEx used a look-back methodology to calculate Savage's rate of pay, it multiplied that rate by an estimate of the number of hours that Savage would have worked were it not for his military service. Savage claimed on appeal that FedEx should have calculated his military leave hours using the average of the hours he worked during the 12-month look-back period. The appellate court ruled that Savage had stated a legitimate issue that a jury would have to decide and reversed the judgment of the district court.

Savage v. Federal Express Corp., 6th Cir., No. 16-5244 (May 10, 2017).

Professional Pointer: Unlike other employment laws, USERRA requires an employer to continue pension contributions at the same rate as if the employee were still performing work. This can present challenges for employers whose employees work varying hours or shifts or significant overtime. Based on this decision, employers should calculate employee hours as well as rates of pay for pension contributions using averages from the last 12 months to avoid potential claims.

Jeffrey Rhodes is an attorney with Doumar Martin in Arlington, Va.

 

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