Employment Rights and Returning Armed Forces Members

The United States Department of Justice (DOJ) recently increased enforcement efforts against employers believed to have discriminated against armed forces members returning from active duty and seeking to reenter the civilian workforce.

These DOJ enforcement actions include lawsuits under the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA). This statute generally applies to every employer regardless of size. It prohibits discrimination against service members and entitles them to return to civilian employment at the same level of pay, benefits, and status they would have attained if continuously employed ' subject to only a few exceptions.

USERRA's Goals and Requirements

USERRA's primary goal is to facilitate non-career military service by minimizing disruption to civilian careers and prohibiting discrimination based on uniformed service. A central feature of the law is that service members released from service generally are entitled to prompt reemployment by their civilian employer. Moreover, returning service members generally must be reemployed at the position and with the benefits, pay and seniority to which they would have been entitled if never called to duty. This so-called “escalator principle” aims to achieve parity in the civilian workforce between service members and their continuously employed civilian counterparts, even if this parity requires promoting (or demoting) service members from previously held positions. The bedrock concept is that a returning service member does not step back on the seniority escalator at the point he stepped off. He instead steps back on at the precise point he would have occupied had he kept his civilian position continuously during active uniformed service.

USERRA thus entitles reemployed service members to any rights and benefits determined by seniority as if continuously employed. This applies, for example, where the number of vacation days is determined by seniority. It also applies to employee pension benefit plans, with any period of uniformed service counting as service with the employer for purposes of vesting and benefit accrual. Further, the employer must make any contributions to such benefits to which the service member would have been entitled if continuously employed.

Four Significant Limitations

There are four significant limitations on the right to reemployment. It does not apply if changed circumstances have made reemployment of the person impossible or unreasonable; if qualifying the returning service member for reemployment would impose undue hardship on the employer; if the service member's former employment was for only a brief, nonrecurrent period; or if the military service rendered by the returning service member was below certain basic standards (e.g., if the service member was dishonorably discharged).

Despite USERRA's protections, an October 2007 Department of Defense survey of more than 58,000 reservists demobilized between 9/11 and June 2006 revealed that 10% of respondents reported loss of workplace seniority and pay, 10% reported reduced pensions, 7% reported the absence of reasonable efforts by the employer to refresh their skills, 5% reported loss of health insurance, and 5% reported denial of prompt reemployment ' all of violates the USERRA.

USERRA's Procedures

USERRA provides service members with several avenues of redress when they believe their rights have been violated. They can seek informal mediation through the Department of Defense. They also can file a complaint with the Department of Labor Veterans' Employment and Training Services (VETS). This department will conduct an investigation, and if the investigation supports the claim, it will attempt to reach a settlement through negotiation or mediation.

In addition, if the VETS administrative process fails to resolve the claim, the service member can ask the DOJ to take up the case and serve as the service member's counsel in a private lawsuit in federal court. Finally, service members can choose to opt out of these administrative processes and file private suit in federal district court.

DOJ Enforcement

In the first six months of 2009, the DOJ was busy filing at least 14 lawsuits based on USERRA violations, compared with a total of 12 in all of 2008, seven in 2007, and three in 2006. These lawsuits run the gamut of USERRA causes of action, including claims based on failure to reemploy, failure to apply the “escalator” principle, failure to accommodate a disability, wrongful failure to promote, unlawful termination, and unlawful retaliation. The DOJ is demonstrating that it will pursue claims on behalf of service members for willful and unintended violations alike.

The prototypical USERRA lawsuit brought by the DOJ involves failure to reemploy promptly or failure to apply the escalator principle. In June of this year, the DOJ filed suit on behalf of a colonel in the Army Reserves who allegedly was denied reemployment as a deputy chief comptroller for the State of Nevada. According to the complaint, this reservist instead was offered a chief accountant position in which he would have reported to and been paid less than the deputy chief comptroller, provided he pass a qualifying examination and complete a one-year probationary period. Moreover, when the reservist complained to VETS, he was terminated. DOJ is seeking reinstatement in the higher position, lost wages and benefits, and multiple damages for a willful violation of the law.

Similarly, in March 2009, the DOJ sued a Pennsylvania employer based on allegations that it reemployed a reservist belatedly and at an inadequate wage. Allegations are that the employer offered the reservist his former job as a medical technician only after a year, and only after the reservist filed a claim with VETS. In addition, the reservist allegedly was offered a wage lower than that given to newly hired medical technicians and lower than that received by medical technicians of the reservist's experience (assuming continuous employment). The employer also allegedly attempted to terminate the service member at the beginning of his active duty period, but relented only after being contacted by a judge advocate. The government is seeking increased compensation, lost wages and benefits, and multiple damages for the employer's willful breach of the USERRA.

The government also has pursued USERRA claims where employers have failed to reemploy and provide accommodation for an injury sustained during active duty. In May 2009, the United States sued the State of California for allegedly failing to promptly reemploy an injured Air Force reservist. The employer allegedly forced the reservist to undergo a six-month, unpaid medical evaluation period, refused to reemploy him in the same position because of his physical limitations, and failed to retrain him for a position of like seniority and status. Also, the employer allegedly offered no reemployment at all until the reservist filed a complaint with VETS and then offered only lower paying and less senior positions. The complaint seeks lost wages and benefits.

In another lawsuit filed that same month, the DOJ alleged that an Oklahoma employer imposed unlawful re-hiring prerequisites on a reservist returning from duty. When he was called to active duty in 2005, this reservist was in the process of being reassigned to a less strenuous position to accommodate an on-the-job injury. According to the government's lawsuit, the employer violated the USERRA by requiring the reservist to undergo a medical evaluation and release his full medical records before considering him for any job openings. Moreover, even after this medical evaluation, the employer allegedly took almost a year before reemploying the reservist in a position that matched his physical capabilities. The complaint asks for lost wages and benefits.

The government has also pursued less conventional legal theories
under the USERRA. In May 2009, the DOJ sued a Utah company based on allegations that it attempted to dissuade an employee from joining the National Guard by offering a promotion, a raise, and increased benefits to withdraw his enlistment. Also, this employer allegedly terminated the employee when he refused to withdraw his enlistment. In addition to suing the company that served as the employer, which had since dissolved, the DOJ also sued the owner and operator of the company individually. The complaint seeks lost wages and benefits.

In another case filed in March 2009, the DOJ sued a Michigan employer on behalf of a reservist based on allegations that the employer tried to get him to sign a “reinstatement memorandum” forbidding future leave for voluntary military service. This reservist already had been reemployed by the employer under the USERRA previously after volunteering for a six-month tour on the U.S.-Mexico border, and he allegedly was terminated when he refused to sign the memorandum. The complaint seeks lost wages and benefits as well as multiple damages for willful conduct.

USERRA Remedies

The consequences of a USERRA lawsuit can vary. Employers can be subject to a variety of remedial measures, including being compelled to pay lost wages and benefits; being compelled to reinstate, promote, reassign, and/or provide a reasonable accommodation to an injury; being forced to pay multiple damages if the violation was willful; and being compelled to pay the litigation costs and attorneys' fees of the employee.

The magnitude of possible liability is illustrated by a March 2009 Connecticut federal district court judgment against Wachovia Securities. In that case, an Air Force reservist has been awarded what is believed to be the largest USERRA judgment ever ' at least $1.13 million for double back pay, interest, costs, and attorneys' fees. The reservist was a civilian financial adviser who was called to active duty in September 2001. He alleged that when he sought reemployment with Wachovia after his discharge two years later, his accounts had been assigned to other advisers and Wachovia refused to restore his book of business.

After the jury returned a verdict in favor of the reservist, the court undertook an extensive economic analysis to determine damages appropriate for this particular employee, whose compensation primarily was commission-based and dependent on the assets he managed and the return on those assets. The court initially found that he was entitled to back pay in the amount of $680,312, but it reduced that amount to $389,453 because the reservist had mitigated his damages by earning other income elsewhere. The court then doubled that amount to $778,906 because of Wachovia's willful misconduct. The claimed difficulty inherent in applying USERRA's provisions to a commissioned-based employee provided no defense for a sophisticated employer like Wachovia. Although, as of July 2009, the court has yet to decide on the final award amount, the employee is seeking $968,653 in litigation costs and attorneys' fees while Wachovia has argued that $349,940 is a more reasonable number.

Implications for Employers

Since 9/11, more than 1.5 million service members have been deployed to Iraq or Afghanistan and more than 630,000 military reservists and National Guard members have been mobilized as well.

With tens of thousands of these service members returning home from these wars in the context of an economy shedding thousands of jobs each month, employers need to be aware of USERRA's requirements and recognize that our legal and political institutions, and the wider public, are showing a greater willingness and purpose in enforcing this aspect of the law.

David C. Henderson is a partner in the Litigation Department and a member of the Employment, Labor, and Benefits practice group of the Boston law firm of Nutter McClennen & Fish, LLP. Prior to joining Nutter, he served as a pilot, instructor pilot, and judge advocate in the United States Air Force. Matthew P. Ritchie is also an attorney in the Litigation Department at Nutter. He concentrates his practice on general commercial litigation and employment law.

The United States Department of Justice (DOJ) recently increased enforcement efforts against employers believed to have discriminated against armed forces members returning from active duty and seeking to reenter the civilian workforce.

These DOJ enforcement actions include lawsuits under the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA). This statute generally applies to every employer regardless of size. It prohibits discrimination against service members and entitles them to return to civilian employment at the same level of pay, benefits, and status they would have attained if continuously employed ' subject to only a few exceptions.

USERRA's Goals and Requirements

USERRA's primary goal is to facilitate non-career military service by minimizing disruption to civilian careers and prohibiting discrimination based on uniformed service. A central feature of the law is that service members released from service generally are entitled to prompt reemployment by their civilian employer. Moreover, returning service members generally must be reemployed at the position and with the benefits, pay and seniority to which they would have been entitled if never called to duty. This so-called “escalator principle” aims to achieve parity in the civilian workforce between service members and their continuously employed civilian counterparts, even if this parity requires promoting (or demoting) service members from previously held positions. The bedrock concept is that a returning service member does not step back on the seniority escalator at the point he stepped off. He instead steps back on at the precise point he would have occupied had he kept his civilian position continuously during active uniformed service.

USERRA thus entitles reemployed service members to any rights and benefits determined by seniority as if continuously employed. This applies, for example, where the number of vacation days is determined by seniority. It also applies to employee pension benefit plans, with any period of uniformed service counting as service with the employer for purposes of vesting and benefit accrual. Further, the employer must make any contributions to such benefits to which the service member would have been entitled if continuously employed.

Four Significant Limitations

There are four significant limitations on the right to reemployment. It does not apply if changed circumstances have made reemployment of the person impossible or unreasonable; if qualifying the returning service member for reemployment would impose undue hardship on the employer; if the service member's former employment was for only a brief, nonrecurrent period; or if the military service rendered by the returning service member was below certain basic standards (e.g., if the service member was dishonorably discharged).

Despite USERRA's protections, an October 2007 Department of Defense survey of more than 58,000 reservists demobilized between 9/11 and June 2006 revealed that 10% of respondents reported loss of workplace seniority and pay, 10% reported reduced pensions, 7% reported the absence of reasonable efforts by the employer to refresh their skills, 5% reported loss of health insurance, and 5% reported denial of prompt reemployment ' all of violates the USERRA.

USERRA's Procedures

USERRA provides service members with several avenues of redress when they believe their rights have been violated. They can seek informal mediation through the Department of Defense. They also can file a complaint with the Department of Labor Veterans' Employment and Training Services (VETS). This department will conduct an investigation, and if the investigation supports the claim, it will attempt to reach a settlement through negotiation or mediation.

In addition, if the VETS administrative process fails to resolve the claim, the service member can ask the DOJ to take up the case and serve as the service member's counsel in a private lawsuit in federal court. Finally, service members can choose to opt out of these administrative processes and file private suit in federal district court.

DOJ Enforcement

In the first six months of 2009, the DOJ was busy filing at least 14 lawsuits based on USERRA violations, compared with a total of 12 in all of 2008, seven in 2007, and three in 2006. These lawsuits run the gamut of USERRA causes of action, including claims based on failure to reemploy, failure to apply the “escalator” principle, failure to accommodate a disability, wrongful failure to promote, unlawful termination, and unlawful retaliation. The DOJ is demonstrating that it will pursue claims on behalf of service members for willful and unintended violations alike.

The prototypical USERRA lawsuit brought by the DOJ involves failure to reemploy promptly or failure to apply the escalator principle. In June of this year, the DOJ filed suit on behalf of a colonel in the Army Reserves who allegedly was denied reemployment as a deputy chief comptroller for the State of Nevada. According to the complaint, this reservist instead was offered a chief accountant position in which he would have reported to and been paid less than the deputy chief comptroller, provided he pass a qualifying examination and complete a one-year probationary period. Moreover, when the reservist complained to VETS, he was terminated. DOJ is seeking reinstatement in the higher position, lost wages and benefits, and multiple damages for a willful violation of the law.

Similarly, in March 2009, the DOJ sued a Pennsylvania employer based on allegations that it reemployed a reservist belatedly and at an inadequate wage. Allegations are that the employer offered the reservist his former job as a medical technician only after a year, and only after the reservist filed a claim with VETS. In addition, the reservist allegedly was offered a wage lower than that given to newly hired medical technicians and lower than that received by medical technicians of the reservist's experience (assuming continuous employment). The employer also allegedly attempted to terminate the service member at the beginning of his active duty period, but relented only after being contacted by a judge advocate. The government is seeking increased compensation, lost wages and benefits, and multiple damages for the employer's willful breach of the USERRA.

The government also has pursued USERRA claims where employers have failed to reemploy and provide accommodation for an injury sustained during active duty. In May 2009, the United States sued the State of California for allegedly failing to promptly reemploy an injured Air Force reservist. The employer allegedly forced the reservist to undergo a six-month, unpaid medical evaluation period, refused to reemploy him in the same position because of his physical limitations, and failed to retrain him for a position of like seniority and status. Also, the employer allegedly offered no reemployment at all until the reservist filed a complaint with VETS and then offered only lower paying and less senior positions. The complaint seeks lost wages and benefits.

In another lawsuit filed that same month, the DOJ alleged that an Oklahoma employer imposed unlawful re-hiring prerequisites on a reservist returning from duty. When he was called to active duty in 2005, this reservist was in the process of being reassigned to a less strenuous position to accommodate an on-the-job injury. According to the government's lawsuit, the employer violated the USERRA by requiring the reservist to undergo a medical evaluation and release his full medical records before considering him for any job openings. Moreover, even after this medical evaluation, the employer allegedly took almost a year before reemploying the reservist in a position that matched his physical capabilities. The complaint asks for lost wages and benefits.

The government has also pursued less conventional legal theories
under the USERRA. In May 2009, the DOJ sued a Utah company based on allegations that it attempted to dissuade an employee from joining the National Guard by offering a promotion, a raise, and increased benefits to withdraw his enlistment. Also, this employer allegedly terminated the employee when he refused to withdraw his enlistment. In addition to suing the company that served as the employer, which had since dissolved, the DOJ also sued the owner and operator of the company individually. The complaint seeks lost wages and benefits.

In another case filed in March 2009, the DOJ sued a Michigan employer on behalf of a reservist based on allegations that the employer tried to get him to sign a “reinstatement memorandum” forbidding future leave for voluntary military service. This reservist already had been reemployed by the employer under the USERRA previously after volunteering for a six-month tour on the U.S.-Mexico border, and he allegedly was terminated when he refused to sign the memorandum. The complaint seeks lost wages and benefits as well as multiple damages for willful conduct.

USERRA Remedies

The consequences of a USERRA lawsuit can vary. Employers can be subject to a variety of remedial measures, including being compelled to pay lost wages and benefits; being compelled to reinstate, promote, reassign, and/or provide a reasonable accommodation to an injury; being forced to pay multiple damages if the violation was willful; and being compelled to pay the litigation costs and attorneys' fees of the employee.

The magnitude of possible liability is illustrated by a March 2009 Connecticut federal district court judgment against Wachovia Securities. In that case, an Air Force reservist has been awarded what is believed to be the largest USERRA judgment ever ' at least $1.13 million for double back pay, interest, costs, and attorneys' fees. The reservist was a civilian financial adviser who was called to active duty in September 2001. He alleged that when he sought reemployment with Wachovia after his discharge two years later, his accounts had been assigned to other advisers and Wachovia refused to restore his book of business.

After the jury returned a verdict in favor of the reservist, the court undertook an extensive economic analysis to determine damages appropriate for this particular employee, whose compensation primarily was commission-based and dependent on the assets he managed and the return on those assets. The court initially found that he was entitled to back pay in the amount of $680,312, but it reduced that amount to $389,453 because the reservist had mitigated his damages by earning other income elsewhere. The court then doubled that amount to $778,906 because of Wachovia's willful misconduct. The claimed difficulty inherent in applying USERRA's provisions to a commissioned-based employee provided no defense for a sophisticated employer like Wachovia. Although, as of July 2009, the court has yet to decide on the final award amount, the employee is seeking $968,653 in litigation costs and attorneys' fees while Wachovia has argued that $349,940 is a more reasonable number.

Implications for Employers

Since 9/11, more than 1.5 million service members have been deployed to Iraq or Afghanistan and more than 630,000 military reservists and National Guard members have been mobilized as well.

With tens of thousands of these service members returning home from these wars in the context of an economy shedding thousands of jobs each month, employers need to be aware of USERRA's requirements and recognize that our legal and political institutions, and the wider public, are showing a greater willingness and purpose in enforcing this aspect of the law.

David C. Henderson is a partner in the Litigation Department and a member of the Employment, Labor, and Benefits practice group of the Boston law firm of Nutter McClennen & Fish, LLP. Prior to joining Nutter, he served as a pilot, instructor pilot, and judge advocate in the United States Air Force. Matthew P. Ritchie is also an attorney in the Litigation Department at Nutter. He concentrates his practice on general commercial litigation and employment law.