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Longtime American Airlines pilot Mark Woodall thought nothing of it when he took 16 days of military leave for a routine training with the U.S. Naval Reserve in June 2001. But eight months later, he learned the airline had reduced his 21 annual paid vacation days to 19. The company had counted his military leave as a "leave of absence," which meant he couldn't accrue vacation time during that period.

Cutting two vacation days may seem innocuous, but a recent DOJ lawsuit suggests otherwise. The Jan. 12 complaint, which could affect more than 100 former and present American Airlines pilots, suggests the company violated their rights under the Uniformed Services Employment and Reemployment Act (USERRA) when it allegedly targeted their employment benefits. This is the first class action lawsuit the government has filed under USERRA, the law protecting employees who take military leave. It's not likely to be its last.

This stepped-up enforcement, coupled with a new set of USERRA regulations, is leaving companies bewildered and vulnerable just as those serving in Iraq and Afghanistan are returning home in droves.

"Employers are much more likely to have to deal with USERRA issues now than at any time in recent memory," says James B. Thelen, a principal at Miller, Canfield, Paddock and Stone in Lansing, Mich.

DOL Responds

Passed by Congress in 1994, USERRA protects the rights and benefits of service members in the workplace. Under the law, employees who enlist or are called up for duty are shielded from discrimination on the basis of their military service or status. In addition, they are entitled to up to five years of leave and timely reinstatement to their jobs upon their return with pay, benefits and promotions comparable to what they would have received had they never left.

"USERRA is probably one of the broadest leave statutes that exists on the federal level," says George Wood, a shareholder at Littler Mendelson. Employees who feel their USERRA rights have been violated can either file a complaint with the Department of Labor (DOL) or pursue a private lawsuit. DOL complaints that don't get resolved in administrative proceedings can be passed on to the DOJ for prosecution.

Like most USERRA plaintiffs, Woodall chose to file his complaint with the Department of Labor. Filed in the Northern District of Texas, the resulting class action seeks a judgment that would award plaintiffs and class members "all employment benefits denied them as a result of unlawful practices under USERRA." In other words, this is not your typical high-stakes litigation.

"Unlike some other kinds of employment litigation, USERRA cases pick up a lot of adverse publicity," says Shawn Kee, a partner with Jackson Lewis in Connecticut.

In large part, employers have tried to comply with USERRA, but the statute isn't entirely clear. Ambiguities in certain provisions led the DOL to issue its first-ever set of USERRA regulations earlier this year. In a press conference announcing the new regulations, Secretary of Labor Elaine Chao noted that "for the first time, all of America's employers and employees will have clear and consistent guidance on how USERRA applies to them."

In some cases, this is true. The regulations make clear, for example, that employers must provide notice to employees of their rights under USERRA. They describe the timetables and procedures that service members must follow when reporting back to work. They explain employers' obligations with regard to pension plans and health care coverage for returning employees. They even clear up some of the confusion over the types of benefits at issue in the American Airlines case. But the regulations leave other aspects of the law dangerously ambiguous.

Continuing Troubles

In-house counsel were hoping the regulations would clarify the issues that have led to the most litigation, but the new regs failed to do so. It seems determining how and whether an employee should be reinstated will remain a precarious process.

For instance, USERRA's "escalator" principle requires companies to return employees to the position and status they would have had if they had been employed continuously. The DOL suggests determining an employee's rate of pay by looking at work history and the pay history of employees in similar positions. But the escalator provision is a highly subjective notion, especially in nonseniority, nonunion settings, where the progression of salary and promotions is not always spelled out.

The regulations are even murkier for an employer that has reason to deny reinstatement to or fire a returning service member. Under USERRA, reservists cannot be fired without "cause" for a period of six months to a year following their return to work. But the regulations do little to define "cause," leaving legal departments to ponder whether that can include performance issues or only misconduct.

"The definition of cause is vague in the statute and vague in the regulations," says Carrie Hoffman, a partner at Gardere Wynne Sewell. This vagueness sometimes drives companies that don't want to be stuck with uncooperative or unproductive employees to claim they cannot, for economic reasons, reinstate an individual. And this is where employers get into trouble.

USERRA does exempt from reinstatement obligations those employers that can show a layoff has eliminated a service member's position. And the new regulations acknowledge that such an intervening event would be a legitimate defense to a USERRA claim.

"The regulations recognize that the escalator can go up and down," Kee says. "In today's economy, two years can be a long time for a person to be gone. In some cases, an employee comes back and their position or department has been downsized."

If not carefully executed, however, decisions not to reinstate and decisions on when and how to lay off employees can be perceived as discriminatory.

"I would expect courts to see through after-the-fact rationalizations to justify laying off a deployed employee if the employer's reasons don't add up, or similarly situated employees who were not on military leave were not subjected to the reduction," Thelen says.

Proceed With Caution

Despite these uncertain times, there are things in-house counsel can do to protect themselves from future USERRA litigation. Bottom-line? Proceed with caution.

"USERRA practically requires courts to give any benefit of the doubt to the employee," Thelen says.

With that in mind, any employer planning to use a "reduction in force" defense should be able to show that the layoff was purely economic and unrelated to an employee's military service.

"It's easier to [justify] if you eliminated 50 percent of jobs or a whole office," Hoffman says. "You should be able to say, 'This guy was just a victim of a large-scale companywide reduction.'"

Thelen offers that the safest route is to reinstate employees and delay any drastic decisions until the USERRA protection window has passed.

"I would counsel an employer to avoid transfers, demotions, discipline, or terminations of returning service members near in time to military service except in cases that are clear-cut, with well-established precedent and evidence," he says.

Staff Writer

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