SC Lawyer, May 2012, #2. When the Troops Come Marching Home to Work, Will You Be Ready?.

• Author: By Jennifer K. Dunlap and Kristen M. Baylis

South Carolina BAR Journal

2012.

SC Lawyer, May 2012, #2.

When the Troops Come Marching Home to Work, Will You Be Ready?

South Carolina LawyerMay 2012When the Troops Come Marching Home to Work, Will You Be Ready?The Top 10 Things Employers Need to Know About the Rights of Returning VeteransBy Jennifer K. Dunlap and Kristen M. BaylisOn December 20, 2011, President Obama formally marked the end of the Iraq War at Joint Base Andrews outside of Washington, D.C. As more than 40,000 troops return home and integrate back into the workforce, employers must understand their legal obligations to these returning veterans and their families under the Uniformed Services Employment and Reemployment Rights Act (USERRA) and the Family and Medical Leave Act (FMLA).

USERRA is one of the farthest-reaching employment laws in terms of employer obligations and employee protections. Applicable to all employers, regardless of size, USERRA was amended in November 2011 to offer even broader protections for veterans. Similarly, recent amendments to the FMLA have created substantial obligations for employers (with 50 or more employees) with respect to service member employees and employees who are related to service members. Recent amendments to USERRA and the FMLA emphasize the need for employers to take proactive steps in order to understand their obligations to returning veterans and their employee family members, as well as the need to train supervisors regarding compliance.

Here are the top 10 things employers should know:

1. Who has rights under USERRA?

USERRA applies to all U.S. citizens, nationals or permanent resident aliens employed in the U.S. or in a foreign country by a U.S. employer. 38 U.S.C. 4303(3) (2011). It applies regardless of how long an employee has been working with an employer, and it covers all employees who perform duty in a uniformed service on a voluntary or involuntary basis, including active duty, active duty training, inactive duty training, full-time National Guard duty and absence from employment for an examination to determine fitness for duty. 38 U.S.C. 4303(13). The Act protects covered employees on leave in the "Uniformed Services," which includes the Army, Navy, Marine Corps, Air Force and Coast Guard and their reserve components, the Army and Air National Guards, and the commissioned corps of the Public Health Service. 38 U.S.C. 4303(16).

2. USERRA requires employers to promptly reinstate service member employees upon their return from leave in most cases.

USERRA requires employers to reinstate returning service members except under very limited circumstances. An employer must reemploy a service member returning from military duty if he or she meets the following five criteria:

1. The service member has been absent from a position of civilian employment by reason of service in the uniformed services; 2. The service member gave the employer proper notice of the impending military service, unless notice was unreasonable or impossible; 3. The cumulative period of service has not exceeded five years, unless it falls within an exception set forth in the Act; 4. The service member returned to work or applied for reemployment in a timely manner after conclusion of service; and 5. The service member was not separated from service with a disqualifying discharge or under other than honorable conditions.

If a returning service member applies either in writing or orally within set time frames under the regulation and has met the criteria entitling him or her to reemployment, USERRA requires "prompt" reinstatement. According to the Department of Labor (DOL), in most cases, that means reinstatement within two weeks after the service member notifies his/her employer of intent to return, "absent unusual circumstances." Employers have the burden of explaining any delay longer than two weeks. Although employers can request documentation from employees who are on military leave, they cannot delay reinstatement while waiting for documentation. Additionally, an employer does not have the right to delay or deny reinstatement because the employer filled the service member's pre-service position and no comparable position is vacant, or because a hiring freeze is in effect.

3. USERRA provides some exceptions to mandatory reemployment.

Despite the broad duty to reemploy returning service members, USERRA excuses employers from obligatory reemployment under some circumstances. USERRA provides the three following statutory defenses that the employer bears the burden of proving. 38 U.S.C. 4312(d)(2)(A)-(C) (2011).

1.Change in circumstance. An employer has no obligation to reemploy a returning service member if the employer's circumstances have so changed as to make such reemployment unreasonable. This exception is narrowly construed, and the most practicable application is in the case of a plant shutdown. An employer cannot establish that it is unreasonable to reinstate the returning service member solely by showing no opening exists at the time of the reemployment application. 2.Undue hardship. An employer has no obligation to reemploy a returning service member if his or her reemployment would impose an undue hardship on the employer. This defense applies only 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. 3.No reasonable expectation of reemployment. An employer has no obligation to reemploy a returning service member if "the employment from which the person leaves to serve in the uniformed services is for a brief, nonrecurrent period and there is no reasonable expectation that such employment will continue indefinitely or for a significant period." 38 U.S.C. 4312(d)(1)(C),.(2)(C). USERRA does not define "significant period." A person holding a seasonal job may have reemployment rights if there was a reasonable expectation that the job would be available at the next season. See, e.g., Stephens v. Tenn. Valley Auth., 687 F.2d 158, 161-62 (6th Cir. 1982) (stating that a construction worker's position may be non-temporary).

4. Employers must not merely reinstate, but reinstate using the "escalator principle."

USERRA requires that returning service members be reinstated not simply in the job they held when they left for service but in the job that they would have attained had they not been absent for military service, with the same seniority, status and pay, as well as other rights and benefits determined by seniority. 38 U.S.C. 4313 (1996). This is called the "escalator principle." Employers are required to make reasonable efforts (such as training or retraining) to enable returning service members to qualify for reinstatement. If the service member cannot qualify for the escalator position, he or she must be reinstated, if qualified, in any other position that is the nearest approximation to the escalator position and then to the pre-service position. As with the duty of reinstatement, there are exceptions to the duty to restore to the escalator position, but they are few and narrowly interpreted.

5. The "escalator principle" applies to employee benefits as well.

Upon reinstatement, an employee is entitled to the seniority and seniority-based benefits he or she had at the beginning of the uniformed service, plus any additional seniority and benefits the service member would have attained with reasonable certainty had he or she remained continuously employed. 38 U.S.C. 4316 (2001). For benefits not based on seniority, employers must treat returning service members at least as well as employees returning from other forms of leave.

Pensions are also protected upon reinstatement; returning service members may not be treated as if they had a break in service because of military leave. 38 U.S.C. 4318 (1996). A reinstated employee's military service is to be treated as service with the employer for pension vesting and benefit accrual purposes. Employers cannot require employees to requalify to participate in their plan. The reinstated employee is entitled to any accrued benefits from employee contributions in a pension plan only to the extent that the employee repays those contributions to the plan, and the employer must allow the employee to make up missed contributions during a period over three times the length of military leave, but no longer than five years. If an employer also contributes to such plan, for example by providing 401(k) matching contributions, the employer must make up its own contributions after the employee is reinstated and only to the extent the reinstated employee timely contributes his or her own missed contributions.

USERRA requires employers with health plans to offer continuous coverage for up to 24 | months to employees who are absent because of military service. 38 U.S.C. 4317 (2006). The health plan may not require the employee to pay more than his share for medical coverage if the period of military service does not exceed 31 days. If the service goes beyond 31 days, employers may require the employee to pay up to the entire premium for him/herself and his or her dependents, plus a two-percent administrative fee. Employers subject to COBRA should review their continuation of coverage plan and insurance contract to determine if military leave terminates the coverage, which would constitute a COBRA "qualifying event." If the leave terminates coverage, then both USERRA and COBRA may apply, and employers should generally offer the more generous benefit under the two statutes.

6. A reinstated service member's employment is NOT at-will in most cases.

USERRA alters South Carolina's at-will employment doctrine for most returning service members. Once the service member is reinstated, employers cannot discharge him or her without cause within six months of reemployment if the reinstated service member was on military leave between 31 and 180 days. If the employee was on military leave for more than 180 days, the employer cannot discharge him or her without cause within one year of reemployment. 38 U.S.C. 4316(c). A reinstated service member whose duration of service lasted 30 days or less has no similar protection from discharge; however, the individual is protected by USERRA's anti- discrimination provisions. 38 U.S.C. 4311 (1996).

An employer may dismiss the service member during the protected period for "just cause." Just cause may include unacceptable or unprofessional public behavior, incompetent or inefficient performance of duties or criminal acts. An employer may also discharge the service member for cause if the application of the escalator principle results in a legitimate layoff or in the elimination of the job itself, provided the person would have faced the same consequences had he or she remained continuously employed. The reasons for any such discharge should be thoroughly documented.

7. USERRA imposes additional requirements with respect to disabled employees.

Under USERRA, a disabled service member also is entitled to the escalator position he or she would have attained but for military service. If the disability limits the service member's ability to perform the job, USERRA requires the employer to make reasonable efforts to accommodate the disability. If the disabled service member cannot become qualified for his or her escalator position, despite the employer's reasonable efforts to accommodate, the person is entitled to be reinstated "in any other position which is equivalent in seniority, status, and pay, the duties of which the person is qualified to perform or would be qualified to perform with reasonable efforts by the employer." 38 U.S.C. 4313(a)(3)(A) (1996). Reasonable accommodations may include placing the service member on "light duty" status, modifying equipment used in the job position, revising work practices or shifting job functions.

8. Individuals can bring discrimination, retaliation and hostile work environment claims under USERRA.

USERRA protects all members of the uniformed services from discriminatory employment actions regardless of whether their uniformed service was in the past, present or future and regardless of whether they are qualified for reemployment rights under the act. For example, a Vietnam Era veteran has USERRA protection against most discriminatory employment actions even though that person's uniformed service preceded their employment many years. If that person is subsequently denied a benefit of employment, motivated even in part by that service in the uniformed services, then that person may have rights under USERRA.

USERRA also prohibits retaliation against individuals who enforce their USERRA protections by: (1) testifying or otherwise making a statement in or in connection with any proceeding under USERRA; (2) assisting or participating in a USERRA investigation; or (3) exercising any right provided for by USERRA. 38 U.S.C. 4311(b). The anti-retaliation provisions of USERRA are broader than many other provisions of the Act because they protect non-uniformed service members if they testify in connection with or assist in the investigation of a USERRA complaint.

The Veterans Opportunity to Work (VOW) to Hire Heroes Act, signed by President Obama on November 21, 2011, amends USERRA to include hostile work environment claims based on military status. VOW to Hire Heroes Act, Pub. L. No. 112-56, 125 Stat. 711. Prior to the VOW Act, courts were reluctant to recognize a cause of action for hostile work environment claims under USERRA, finding that the Act's language prohibiting denial of any "benefit of employment" to a member of uniformed services based on such membership or performance of service did not create cause of action based on hostile work environment. See, e.g., Carder v. Continental Airlines, Inc., 636 F.3d 172 (5th Cir. Mar. 22, 2011).

However, by amending USERRA to prohibit discrimination based on military status with respect to the "terms, conditions, or privileges of employment," the VOW Act places the same standard governing a hostile work environment under Title VII and other employment discrimination laws onto discrimination claims brought under USERRA. 38 U.S.C. 4303(2). As a result of the VOW to Hire Heroes Act amendment to USERRA, employers may face a greater challenge defending discrimination cases brought under the Act. USERRA places a higher burden on employers in defending a discrimination claim than in discrimination cases in other contexts, such as race or gender.

9. Remember the FMLA!

Although employers may be more familiar with obligations under the FMLA than USERRA, many have not updated their policies to be consistent with seemingly constant amendments to the FMLA that provide leave for covered service members and their families. In 2008, the FMLA was amended to include two additional types of leave (qualifying exigency leave and military caregiver leave) that address needs of employees with family members in the uniformed services. National Defense Authorization Act (NDAA) for FY 2008, Pub. L. No. 110- 181, 122 Stat. 3 (2008). Military caregiver leave allows eligible employees an expanded period of FMLA leave (up to 26 work weeks-rather than the standard 12 for other types of FMLA leave-in a single 12-month period) to care for a covered family member who is a current service member with a serious injury or illness incurred in the line of duty. Qualifying exigency leave allows an eligible employee whose spouse, child or parent is called up for active duty in the National Guard or Reserves to take FMLA leave for certain exigencies related to the call-up of their family member.

In 2009, the FMLA was amended to extend the military caregiver leave entitlement to eligible family members of certain veterans and to extend the qualifying exigency leave entitlement to eligible family members of the Regular Armed Forces. NDAA for FY 2010, Pub. L. No. 111-84, 123 Stat. 2190 (2009). The FMLA was also amended by the Airline Flight Crew Technical Corrections Act, which establishes a special FMLA hours of service eligibility requirement for airline flight crew members. Airline Flight Crew Technical Corrections Act, Pub. L. No. 111-119, 123 Stat. 3476 (2009).

On January 30, 2012, the DOL announced that it was issuing proposed rules that would further expand the FMLA's military family leave provisions to include, among other things, leave to care for a veteran who is their spouse, parent, son or daughter with a serious health condition regardless of when the veteran separated from the military.

Employers covered by the FMLA must monitor their expanding legal obligations to service members and their families under the FMLA, in addition to those obligations under USERRA. It is crucial that employers regularly review their FMLA policies and revise such policies to comply with the updated military leave requirements.

10. Good news for employers: new tax credits are available for employers who hire veterans!

The VOW Act establishes tax credits for business that hire veterans who are out of work and/or who suffer from service-connected disabilities. For short-term unemployed veterans, the Act gives employers a tax credit of 40 percent of the first $6,000 of wages (up to a $2,400 credit) paid to any veteran in the first year of the veteran's employment, if during the one-year period immediately preceding the veteran's hiring date, the veteran endured aggregate periods of unemployment of four or more weeks but less than six months. VOW to Hire Heroes Act, Pub. L. No. 112-56 261(b), 125 Stat. 711 (2011). If the veteran has been unemployed for a total of six months or more during the year immediately preceding the veteran's hiring date, the Act gives employers a tax credit of 40 percent of the first $14,000 of first year wages (up to a $5,600 credit). Id. at 261(a) (b).

The largest tax credits are given to employers who hire veterans with service-connected disabilities. If the disabled veteran is hired within one year after having been discharged or released from active duty in the military, employers will receive a tax credit of 40 percent of the first $12,000 of first-year wages (up to a $4,800 credit). If the disabled veteran also endured aggregate periods of unemployment of six months or more during the year immediately preceding the veteran's hiring date, the employer is eligible for a tax credit of 40 percent of the first $24,000 of wages (up to a $9,600 credit).

While rehires do not qualify for the new federal tax credits, the tax credits provided for in the VOW Act offer a serious incentive for employers to add returning veterans to their workforce and may help to offset the initial costs of hiring a new employee.

Conclusion

With the return of veterans to the workplace, employers must understand their legal obligations to veterans and their families. In doing so, employers should update their policies to address amendments to the laws and train their supervisors and HR personnel in compliance. Employers also should exercise caution when making employment decisions or applying employment practices to service members. By taking preventative steps, employers can and will play an integral role in helping the men and women of the United States uniformed services return home.

Jennifer K. Dunlap and Kristen M. Baylis practice with Parker Poe Adams Bernstein, LLP in Charleston.