Military Leave: An Employer's Basic Obligations

Recent U.S. military activity reminds us of an employer's obligations when its employees are required to leave their jobs for active military service. In most cases, the Uniformed Services Employment and Re-employment Rights Act ("USERRA") will guarantee these employees up to five years of military leave, followed by re-employment in the jobs they would have held if employment had not been interrupted for military duty. Some employees also will be entitled to certain benefits during military leave. In addition, USERRA prohibits employment discrimination against any person due to actual or prospective military service. This Update restates and supplements a prior Update, addressing several frequently asked questions about USERRA. Please remember that state law may impose additional requirements.

When does USERRA require an employer to grant military leave?

USERRA applies to service in the "uniformed services." This includes the Armed Forces (including the Coast Guard), the National Guard, the Reserves and the Public Health Service's commissioned corps and intermittent disaster-response appointees. In general, if an employee's absence is necessitated by uniformed service, the employer must give the employee time off for that military service. The employer is entitled to advance written or verbal notice of the military service from either the employee or an appropriate military officer, unless advance notice is precluded by military necessity or is otherwise impossible or unreasonable. The employer may not impose additional conditions on time off for military service.

Must an employer pay the employee for any part of the military leave?

No, this is not required by USERRA. However, state laws sometimes require paid military leave (e.g., RCW 38.40.060 requires Washington public employers to provide 15 working days of paid military leave per year). Moreover, many employers voluntarily provide at least some paid time for military service.

If the employee asks to use previously accrued paid vacation or similar paid leave benefits during military leave, then the employer must permit this. However, the employer may not require the employee to use any paid vacation or similar paid leave that he or she accrued before the military leave began.

Must an employer provide group health plan coverage during military leave?

An employer is not required to provide an employee and eligible dependents with health and welfare benefits during military leave, except to the extent the employer provides such benefits to similarly situated employees and eligible dependents during other forms of leave. However, an employee who qualifies for group health plan coverage under the circumstances of his or her military leave may elect to remain covered by the plan for up to 18 months. If the military leave is less than 31 days, the employee may not be required to pay more for this coverage than an active employee's share of premiums, if any. After the first 30 days of military leave, the employee and eligible dependents have the right to elect COBRA-like continuation coverage if coverage under the group health plan would otherwise terminate. (A later COBRA-qualifying event may trigger a further period of true COBRA continuation coverage.)

Under USERRA, employees who return from military leave are entitled to resume health coverage without exclusions or waiting periods. The group health plan's summary plan description and COBRA qualifying events notice should include a description of this resumption right and other applicable USERRA requirements.

In what cases must the employer re-employ an employee who wants to return after military leave?

Generally, an employee must be re-employed after military service if four conditions are met: (1) the employer was given advance notice of the military service; (2) the employee was released from service under honorable or non-punitive conditions, (3) the cumulative length of the employee's absence for this service was less than five years; and (4) the employee reports back to work or applies for re-employment in a timely manner. If these conditions are met, the timing, frequency, duration and nature of the military service do not affect re-employment rights.

Re-employment is not required where the employee left a temporary job for military service. The employer also does not need to provide re-employment if it can prove that this would be impossible or unreasonable, or create an undue hardship.

What must an employee do to return from military leave in a timely manner?

The method and timing of an employee's return from military leave depends on the length of the absence. If the military leave was 30 days or less, the employee generally must report back to work on the next regular workday. If the military leave lasted from 31 to 180 days, the employee normally must apply for re-employment within 14 days after completing the military service. For military leaves of more than 180 days, the employee has 90 days after completing the military service to apply for re-employment.

What job must the returning employee be given, and what job protections apply?

An "escalator" principle determines USERRA re-employment rights. The employer must offer re-employment in the job that the returning employee would have held if continuous employment had not been interrupted, as long as the employee either qualifies or can become qualified for that job with reasonable employer efforts (e.g., training). If the military leave exceeded 90 days, the employer may place the employee in a job that has seniority, status and pay like the "escalator" job. Alternatively, if reasonable efforts will not qualify the returning employee for the "escalator" job and the military leave did not exceed 90 days, then the employer generally must restore the employee to the job actually held when the leave began. Where the military leave was longer than 90 days and the employee cannot qualify for the "escalator" job or a job like it, the employer generally has the option of restoring the employee either to the job actually held when leave began or to another job with like seniority, status and pay.

If the military service was more than 30 days, the employee may not be discharged except for "cause" during the first six months after re-employment. For military leaves that exceeded 180 days, this "for cause" protection extends for the first year after the employee's return to work.

What benefits and rights does an employee have under USERRA upon returning from military leave?

The types of benefits covered under USERRA are broadly defined. They include benefits such as 401(k) plans, stock plans, bonuses, severance pay and vacations. Upon re-employment, an employee is entitled to all seniority-based benefits and rights that were accrued when the military leave began, plus all additional seniority-based benefits and rights that would have accrued had the individual been continuously employed. A benefit or right is seniority-based if it accrues with, or is determined by, longevity in employment. A employee returning from military leave also is entitled to any non-seniority-based benefits or rights that the employer generally provides to other employees of similar seniority, status and pay when those employees are on a furlough or leave of absence.

What are a returning employee's rights to pension benefits?

Under USERRA, a military leave must not cause a break in service for an employee with re-employment rights. Accordingly, the employer's pension plan must credit such employees with continuous service during military leave for eligibility, vesting and benefit accrual purposes.

In a 401(k) plan, a returning employee has the right to "make up" any elective and after-tax contributions that would have been made, but for the leave. Special rules apply to the timing and amount of these contributions. In turn, the employer must make up any matching contributions relating to these contributions, and any profit-sharing contributions that were made during the military leave and that would have been allocated to the returning employee but for the leave. The employer must also make up benefit accruals under a defined benefit plan.

If a pension plan provides for suspending a participant loan repayment obligation due to military leave, the employee has the option of suspending the loan for any portion of the military leave. The loan repayments must resume after the employee completes the military leave, and the loan's term will be extended accordingly. Unlike other leaves, a military leave potentially allows for a loan suspension longer than one year and for exceeding the IRS maximum loan term (for example, five years for non-residential loans). The pension plan should consider whether the Soldiers' and Sailors' Civil Relief Act of 1940 requires an adjustment to the loan's interest rate (not to exceed 6 percent).

A pension plan must currently comply in operation with USERRA. The plan sponsor must adopt a formal USERRA plan amendment by the applicable deadline (for some types of plans, the deadline has passed) or correct the non-amendment in accordance with the IRS's correction procedures. The summary plan description should describe USERRA's requirements, as appropriate, in compliance with applicable Department of Labor regulations.