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The USERRA Minefield

Thursday, October 2, 2008
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When it comes to dealing with employees who return from serving in the military, most employers want to do the right thing. They are familiar with their obligations under the Uniformed Services Employment and Reemployment Act and support its laudable goal of ensuring that those who serve this country are able take a leave of absence for military service and return to work with minimal disruption to their careers.

Most employers know that USERRA requires them to re-employ a returning service member in the position and at the rate of pay that he or she would have attained had his or her career not been interrupted by military service.

This concept, known as the "escalator principle," dates back to a 1946 Supreme Court decision, Fishgold vs. Sullivan Drydock and Repair Corp., which interpreted one of USERRA's predecessor statutes, the Selective Training and Service Act of 1940. It cannot be denied that the composition of the workforce has changed greatly since 1946.

The escalator principle was, and still is, easy to apply in a workplace where compensation rates are based on length of service. Simply move the returning employee "along the scale" and you have complied with the statute. Such compensation structures were commonplace in 1946, but have become less so since the Supreme Court's decision.

Determining the level of compensation for a returning service member in today's workplace, where compensation structures are often not based on length of service alone, can create confusion for employers -- and sometimes liability. Increasingly, returning service members are suing their employers, alleging that they have not been offered reinstatement to the proper position or on the proper terms.

For example, if a returning service member was a commission-based employee, ensuring that the reinstatement position "reflects with reasonable certainty the pay, benefits, seniority and other job perquisites that he would have attained if not for the period of service" can be complicated. Employers have argued that it is impossible to gauge what level of compensation is due a returning service member who had been compensated entirely on a commission system. This argument has been unsuccessful in court.

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Courts have held that USERRA requires that an employee be reinstated to a position with at least an "equivalent earning opportunity" upon his or her return. So, upon an employee's return, should an employer offer a higher draw against commission than before the employee left? What if his commissions do not pick up? Courts have not answered these questions and the Department of Labor has provided little guidance on this issue.

Both employers and returning service members would be better served, and litigation avoided, if the Department of Labor provided further guidance on how to determine the appropriate compensation for returning service members subject to non-seniority-based pay structures.

Thomas A. McKinney, an attorney in New York-based Proskauer Rose's labor and employment law department, can be e-mailed at tmckinney@proskauer.com.

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