Department of Labor Issues New USERRA Regulations
The Department of Labor has finally issued its long-awaited regulations (“the Regulations”) implementing the Uniform Services Employment and Reemployment Rights Act (“USERRA”). The Regulations, codified at 20 C.F.R. § 1002 , are structured in a question and answer format similar to the regulations accompanying the Family and Medical Leave Act. The Regulations are easy to understand, particularly since they provide examples to explain some of the more difficult concepts. This document provides an overview of the new Regulations.
The Regulations expand on the USERRA definition of “employer” to specifically include foreign employers doing business in the United States and to make clear that supervisors and managers can be individually liable for USERRA violations.
The Regulations state that USERRA’s re-employment rights and benefits do not apply to employment positions that are for a brief, non-recurrent period and for which the employee has no reasonable expectation that the employment position will continue indefinitely or for a significant period. However, USERRA’s prohibitions against discrimination in hiring and retaliation do apply to such positions. This eliminates the confusion regarding the applicability of USERRA to these special positions.
Employers often wonder if asking about an applicant’s military service is prohibited. The DOL, in the comments preceding the Regulations, states that it is not unlawful “for a prospective employer to ask an applicant about military service or obligations.” Only if the information elicited from such inquiry is used by the employer to discriminate against the applicant in hiring or to take other adverse action against the applicant once hired is such an inquiry evidence of unlawful discrimination.
USERRA has always applied to employers who are successors in interest of a servicemember’s previous employer. The Regulations state that this is the case even if the successor employer was unaware when it acquired the business that an employee may claim re-employment rights. Employers who are successors in interest should factor in the possibility that employees they have never seen or heard of may show up demanding jobs and the employer is obligated to comply with USERRA with respect to these employees. Employers involved in acquisitions may want to consider requiring the businesses they are acquiring to disclose the existence and identities of any USERRA-protected employees with re-employment rights.
USERRA has never been deemed to apply to an independent contractor, and this does not change with the publication of the Regulations. However, the Regulations provide guidance for distinguishing between employees and independent contractors. The Regulations set forth six factors, such as “the extent of the employer’s right to control the manner in which the individual’s work is to be performed,” “any investment in equipment or materials required for the individual’s tasks,” and “the degree of permanence of the individual’s working relationship,” to be considered in making the determination. This six-factor test generally mirrors the “economic reality” test used to determine whether a person is an employee or independent contractor for purposes of the Fair Labor Standards Act.
One of the most confusing aspects of USERRA is its application to individuals serving in the National Guard. The Regulations explain when USERRA protects National Guard soldiers and when it does not. Briefly, National Guardsmen are protected by USERRA when engaged in Federal National Guard service (such as a deployment to Iraq or Afghanistan in support of Operation Iraqi Freedom or Operation Enduring Freedom). National Guard service under the authority of the state (typically, riot control and responses to natural disasters is service under the authority of state control) is not protected by USERRA, but may be protected by individual state laws that are similar to USERRA. Because characterization of National Guard service as federal or state can be difficult, we strongly recommend you contact counsel to assist you in determining your obligations with respect to soldiers serving in the National Guard.
Questions frequently have arisen under USERRA as to how employers should treat the time between a soldier’s notification that he or she is being called up to active duty and the time the soldier actually enters military service. The Regulations answer this question: the employer is to give the employee “a reasonable period of time” to put his or her affairs in order before commencing military service. What is “reasonable” will vary from situation to situation and according to the length of the deployment. Employers are not required to pay the employee during this time, nor may the employer force the employee to use accumulated vacation during this period or count this period against the employee for attendance purposes. Essentially, employers should view this time as part of the military service itself unless the employee takes an unreasonable amount of time – questions about reasonableness should be discussed with counsel.
Another interesting clarification in the USERRA Regulations involves an employer’s obligation to re-employ an employee who has specifically stated that he or she will not return to that employer after the employee’s military service. The Regulations state that the employee does not forfeit the right to reemployment after completing service even if he or she makes such a pronouncement, and even if it is in writing. Note, however, that if an employee gives a knowing, written notice of intent not to return to the position after his service, the employee may lose entitlement to any non-seniority rights and benefits, such as life insurance coverage, holiday pay, or bonuses.
Additionally, even if the employee begins working for another employer after returning from uniformed service but before he is required to apply for reemployment with his previous employer, the previous employer cannot assume the employee has waived his right to reemployment (although the employee’s “alternative employment during the application period must not violate the pre-service employer’s employment policy to such a degree that it constitutes just cause for discipline or termination by the pre-service employer.”).
The employee need only give notice to his employer that he wishes to return to work within the period prescribed by USERRA (e.g., for a deployment of 181 days or more, the employee has 90 days within which to make oral or written request for reemployment). Thus, until the expiration of the period in which the employee is required to give the employer notice of return to work, employers should always assume that their employee will be returning to work. After that period, the employer may not automatically deem the employee terminated, but must subject the employee to the workplace rules or policies that ordinarily apply to unexcused absences from work.
USERRA generated some confusion as to what documentation employers were allowed to request of the employee regarding the employee’s application for reemployment. The Regulations state that the employer is entitled to request documentation that would prove that the employee’s request for reemployment was timely made, that the employee has not exceeded the five-year service limit, and that the employee’s separation or dismissal from service was not disqualifying. The employer may not delay the employee’s return to work while waiting for the employee to furnish this document since the employee may have difficulty obtaining this documentation from the military. Rather, the employer should allow the employee to return to work and if the later-received documentation indicates that the employee is not entitled to reemployment under USERRA (e.g., if the employee’s DD-214 reveals that he received a dishonorable discharge), the employer may then terminate the employee.
The Regulations do not provide any guidance as to how long employers should have to wait to receive this documentation, but they do say that the employer can refuse to treat the employee as not having had a break in service for pension purposes until such documentation is received. The Regulations also specify which documents satisfy the requirements of USERRA and what employers should ask employees to provide. Note also that if an employee with a previously disqualifying discharge (such as a dishonorable discharge or a general discharge under other than honorable conditions) is able to get his discharge upgraded, as often happens, the employee will, at that time, be eligible for reemployment rights. The employee is not entitled to back pay or benefits between the time of the disqualifying discharge and the upgraded discharge, however.
USERRA was already clear on the point that the employee who seeks reemployment after a period of service in the uniformed services must be rehired, even if the employer has hired someone to replace the employee during his absence. The Regulations further emphasize this point: “The employer may not. . . refuse to reemploy the employee on the basis that another employee was hired to fill the position during the employee’s absence, even if reemployment might require the termination of that replacement employee.”
Employers who offer employee health plans have certain obligations with respect to employees who are performing service in the uniformed services. The employer must allow the employee to elect COBRA-like continuation coverage during military service for himself or herself and dependents, if the plan offers dependent coverage and the employee has such dependent coverage. The Regulations clarify that this includes pretax premium payments and flexible spending accounts under a “cafeteria plan.” Health care continuation coverage must be for the period of the employee’s military service not to exceed a period of 24 months beginning on the date the employee’s absence for the purpose of service in the uniformed services begins. Employers are not required to allow an employee who did not previously have coverage to initiate such coverage at the beginning of a period of military service.
The Regulations permit administrators of health care continuation coverage under USERRA to use COBRA-compliant election procedures in most cases and provide procedures for the plan to establish rules regarding the period within which employees may elect continuation coverage. The Regulations provide special rules for late reinstatement of health coverage in cases in which the employee is excused from giving notice of service under USERRA and where plan administrators have not adopted rules regarding the period during which an employee may elect continuation coverage. The employee must pay 102% of the full cost of the plan for such coverage (no more than the regular employee share of the cost if the employee performs fewer than 31 days of service with the uniformed services) and the Regulations allow a plan to adopt reasonable rules (which may generally be COBRA-compliant rules) for cancellation of continuation coverage if the employee does not make timely premium payments.
If the employee is reemployed, the employer is required, upon the employee’s request, to reinstate health coverage under the employer’s plan without a waiting period or exclusion (except in the event of illnesses or injuries incurred or aggravated during service in the uniformed services) if an exclusion or waiting period would not have been imposed had coverage not been terminated by reason of military service. Under the Regulations, upon the employee’s request, the employer is permitted (but not required) to delay reinstatement of health plan coverage to a date sometime after the employee’s reemployment. An employee might request such a delay because his or her veteran’s health benefits may extend for several months after his or her period of military service, and the employee may want to take advantage of these benefits as long as possible.
The Regulations provide that, upon reemployment, an employee’s service in the uniformed services (including certain periods prior to and following such service that is “necessitated” by such service) may not be treated as a break in service for purposes of participation, vesting and accrual of pension benefits. The Regulations make clear that USERRA applies to certain governmental and church plans not covered by ERISA. Depending on the length of absence, an employee may take a period of up to ninety days following military service before reporting back to employment. This period (and up to two years -- or a longer period in circumstances beyond the employee’s control -- of hospitalization or convalescence from an illness or injury incurred in or aggravated during such service) must be treated as continuous service with the employer under the plan.
Except for multi-employer plans (for which the Regulations provide separate rules), an employer must fund any obligation of a plan to provide benefits attributable to a reemployed employee’s period of military service. Upon reemployment, the sponsor of a defined contribution plan must make and allocate make-up contributions in the same manner as for contributions for active employees or within 90 days of the employee’s reemployment, if later. A reemployed employee may, within a period following reemployment equal to three times the period of military service (but not more than five years) make employee contributions and elective deferrals missed during military service (but may not make up missed earnings or interest). The Regulations provide that an employee is not required to make up the full amount of missed contributions or deferrals but employer matching contributions (and benefit accruals that are dependent on employee contributions) are required only to the extent that the employee does make up such contributions or deferrals. The Regulations also permit a reemployed employee to repay amounts distributed in connection with a period of military service from a defined benefit plan (but not from a defined contribution plan) plus interest. Such repayment is required in order to have the employee’s accrued benefit increased for the period of military service. The Regulations also provide rules for determining employee compensation to be used for purposes of arriving at plan contributions or benefit accruals during periods of military service.
Finally, the Regulations include a provision requiring employers to post a slightly revised notice of the rights, benefits and obligations of employee and employers under USERRA by January 18, 2006. This notice requirement was first effective on March 10, 2005; the new Regulations simply expand on the information that must be contained in the posting and provide a new form of notice to be used for this purpose.