The Uniformed Services Employment and Reemployment Rights Act (USERRA) of 1994 prohibits an employer from denying any initial employment, reemployment, retention in employment, promotion, or any benefit of employment to an individual on the basis of their membership, application for membership, performance of service, application for service, or obligation for service in the uniformed services. The law also prohibits an employer from retaliating against an individual by taking any adverse employment action against them because the individual has exercised their USERRA rights, testified in connection with a proceeding under USERRA, or assisted in a USERRA investigation. The law covers all public and private employers (38 USC 3801et seq.).

The Veterans Opportunity to Work to Hire Heroes Act of 2011 (the VOW to Hire Heroes Act) amended USERRA to recognize claims of a hostile work environment based on an individual’s military status. Before the VOW to Hire Heroes Act took effect, courts generally did not allow individuals to sue for a hostile work environment under USERRA. USERRA, as amended, prohibits discrimination based on military status with respect to the “terms, conditions, or privileges of employment,” the same standard governing a hostile work environment under Title VII and other employment discrimination laws.

USERRA requires that upon returning from service, members of the armed services and its reserve components must be reinstated to their private civil jobs without loss of seniority or benefits and without any break in service for pension purposes (38 USC 4301 et seq.). An employer may provide greater rights and benefits than USERRA requires, but no employer can refuse to provide any right or benefit guaranteed by USERRA.

The law protects military personnel, including those who perform weekend drills, summer encampment, or similar types of training duty. The employer is obliged to reschedule the worker, if possible, to avoid conflicts between work and reserve or Guard training so the employee may work a full week.

Preemption. USERRA preempts any state law that is less protective of the employment and reemployment rights of uniformed service people. That is, if the state law is less protective than USERRA, the rights given by USERRA will apply and not the less-protective state law. In addition, if a state law is more protective than USERRA, the state law will apply.

USERRA provides that an employer must not deny reemployment, retention in employment, promotion, or any benefit of employment to an individual on the basis of their membership, application for membership, performance of service, application for service, or obligation for service in the uniformed services.

Uniformed services defined. “Uniformed services” is defined (38 USC 4303) as the performance of duty on a voluntary or involuntary basis in the:

Service in the uniformed services defined. "Service in the uniformed services" means the performance of duty on a voluntary or involuntary basis in a uniformed service. Service in the uniformed services includes active duty, active and inactive duty for training, National Guard duty under federal statute, and a period for which a person is absent from a position of employment for an examination to determine the fitness of the person to perform duties in the uniformed service. The term also includes a period for which a person is absent from employment to perform funeral honors duty as authorized by law (20 CFR 1002.5(l), 10 USC 12503, or 32 USC 115).

Note: Members of the National Guard have dual status. They are members of the reserve component of the army, or, in the case of the Air National Guard, of the air force. Simultaneously, they are members of a state military force subject to call-up by the state governor for duty not subject to federal control, such as emergency duty in cases of floods or riots. National Guard members may perform service under either federal or state authority, but only federal National Guard service is covered by USERRA (20 CFR 1002.5(o)). Many states have laws protecting the civilian job rights of National Guard members who serve under state orders

Notice of leave. Employers have the right to receive advance notice of service, unless military necessity or other conditions make it impossible for the employee to provide notice. The employee, or an appropriate officer of the uniformed service in which their service is to be performed, must notify the employer that the employee is to perform military service.

An "appropriate officer" is a commissioned, warrant, or noncommissioned officer authorized to give such notice by the military service concerned. The notice to the employer may be either verbal or written. The notice may be informal and does not need to follow any particular format. Although USERRA does not specify how far in advance notice must be given to the employer, an employee should provide notice as far in advance as is reasonable under the circumstances (20 CFR 1002.85).

Employers may not insist on knowing exactly when the employee will return to work, or even if the employee intends to seek reemployment after their term of service. However, the employee can be asked to furnish the employer with the approximate beginning and concluding dates of their or her service.

Note: An employee who provides notice of military leave is not asking for the employer's permission to leave their employment. If the employee is qualified under USERRA, they are legally entitled to take such leave and to be reemployed at the end of their term of service. However, the employer is permitted to bring its concerns over the timing, frequency, or duration of an employee's service to the attention of the appropriate military authority.

Regulations issued by the Department of Defense direct military authorities to provide assistance to an employer in addressing these types of employment issues (32 CFR 104.4 ). The military authorities are required to consider requests from employers of National Guard and reserve members to adjust scheduled absences from civilian employment to perform service (20 CFR 1002.104).

Limit on length of duty. Under USERRA, an employee may take a maximum of 5 years' leave for military service. Five years is the maximum cumulative length of absence for all absences with that employer, not with previous employers (38 USC 4312(a)(2)).

There are limited exceptions to the 5-year limit, which may increase the maximum leave time allowed. These exceptions include service that is required beyond 5 years to complete an initial period of obligated service; the time consumed by trouble in obtaining release from service; the time for necessary training; and the time an employee is ordered to stay in active duty under certain federal laws (38 USC 4312(c)).

The 5-year period includes only the time the employee spends actually performing service in the uniformed services. A period of absence from employment before or after performing service in the uniformed services does not count against the 5-year limit (20 CFR 1002.100).

When leave begins. An employee need not begin military service immediately upon leaving employment. The employee must have enough time after leaving employment to travel safely to the uniformed service site and arrive fit to perform the service. Depending on the specific circumstances, including the duration of service, the amount of notice received, and the location of the service, the employee may need additional time to rest or to arrange affairs and report to duty (20 CFR 1002.74).

For example, if an employee is ordered to perform an extended period of service overseas, they will need a reasonable period of time to put personal affairs in order; or if an employee performs a full overnight shift just prior to reporting to service, they would not be considered fit to perform service.

Independent contractors. USERRA does not protect independent contractors.

The Family and Medical Leave Act (FMLA) allows qualified employees with family members actively or formerly in the military to take leave under two circumstances:

During a period of service in the uniformed services, the employee is deemed to be on furlough or leave of absence. In this status, the employee is entitled to the nonseniority rights and benefits generally provided by the employer to other employees with similar seniority, status, and pay who are on furlough or leave of absence.

The employee is entitled to nonseniority rights and benefits that the employer provides to similarly situated employees by an employment contract, agreement, policy, practice, or plan in effect at the employee's workplace. These rights and benefits include those in effect at the beginning of the employee's employment and those established after employment began. They also include those rights and benefits that become effective during the employee's period of service and that are provided to similarly situated employees on comparable periods of furlough or leave of absence.

Note: If the employee knowingly provides written notice of intent not to return to the position of employment after service in the uniformed services, they are not entitled to nonseniority rights and benefits. The employee's written notice does not waive entitlement to any other rights to which they are entitled under the Act, including the right to reemployment after service.

Wages. Employers are not required to pay employees who are on military leave. Those companies that do provide for continuing an employee's pay during short periods of military service quite often pay only the difference between the employee's regular salary and military pay. In computing military pay, food and other allowances given to officers are usually excluded. Although employers are not required to pay wage differentials to those in military service, if they promise to do so by policy, contract, or both, they are obliged to pay, or face double damages under USERRA if the pay is improperly withheld.

Tax credit for differential wage payments. The Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART Act) provides a tax credit for eligible small business employers that make eligible differential wage payments. The credit is equal to 20 percent of the sum of the eligible differential wage payment paid to each qualified employee during the taxable year (IRC Sec. 45P).

An "eligible small business employer" for a taxable year is an employer that employed an average of fewer than 50 employees on business days during the taxable year and made eligible differential wage payments under a written plan to every qualified employee of the employer. No credit is allowed if an employer violates the employment or reemployment rights of a reservist who has been called to active duty. Payments made on or after June 17, 2008, are eligible for the credit.

A "differential wage payment" is any payment made by an employer to an individual for a period while the individual is performing service in the uniformed services while on active duty for a period of more than 30 days and represents all or a portion of the wages the individual would have received from the employer if they were still performing services for the employer.

A "qualified employee" is a person who was employed by the employer claiming the credit for the 91-day period immediately preceding the period for which any differential wage payment is made.

Tax treatment of differential wage payments. The HEART Act provides that for purposes of income tax withholding, any differential wage payment is to be treated as a payment of wages by the employer to the employee. The term “differential wage payment” means any payment that is made by an employer to an individual with respect to any period during which the individual is performing service in the uniformed services while on active duty for a period of more than 30 days and represents all or a portion of the wages the individual would have received from the employer if the individual were performing service for the employer. The HEART Act specifies that differential wage payments that qualify under the Act are subject to income tax withholding.

Important: Differential wage payments made to an individual while on active duty in the United States uniformed services for more than 30 days are subject to income tax withholding, but are not subject to FICA or FUTA taxes. For more information on the tax treatment of differential wage payments during military service, see Rev. Rul. 2009-11.

Health insurance. The Veterans Benefits Improvement Act (VBIA), which amended USERRA, requires that employers offer those on military leave and their dependents the right to continue in the group health plan for up to 24 months of service.

Employees may be required to pay 102 percent of the full premium for insurance, except if the employee is on leave for 31 days or less, then the employee may not be charged more than the amount they would have paid if still employed (38 USC 4317(a)(1)(b)). Upon reemployment, an employee and their family may reenter the employer's health plan. The VBIA is effective for elections made on or after December 10, 2004.

Vacation and sick leave. An employee must be permitted, upon request, to use any accrued vacation, annual, or similar leave with pay during the period of service in order to continue their civilian pay. The employer may not require the employee to use accrued vacation, annual, or similar leave during a military service. The employee is not entitled to use sick leave that accrued with the employer during a period of service in the uniformed services, unless the employer allows employees to use sick leave for any reason, or allows other similarly situated employees on comparable furlough or leave of absence to use accrued paid sick leave. Sick leave is usually not comparable to annual or vacation leave; it is generally intended to provide income when the employee or a family member is ill and the employee is unable to work (20 CFR 1002.153(a)).

As a general matter, accrual of vacation leave is considered to be a nonseniority benefit that must be provided to an employee on a military leave of absence only if the employer provides that benefit to similarly situated employees on comparable leaves of absence (20 CFR 1002.150(c)).

Pension benefits. Under USERRA, no break in employment is considered to have occurred because of military service, no forfeiture of benefits already accrued is allowed, and there is no need for an employee to requalify for participation in the pension plan because of absence for military service (38 USC 4318). In addition, employers are required to make (on behalf of returning employees) any contribution to their pension plans that the employer would have made if the employee had not been absent for military service.

For defined contribution plans, which offer benefits only when the employee makes contributions, returning employees will have up to three times their length of service--up to a maximum of 5 years--to make contributions that may have been missed while the employee was in service. The employer must make matching contributions only to the extent that the reemployed service member makes the required employee contribution to the plan. Employers are not required to credit the employee with any interest that would have been earned.

Early distributions from retirement plans. Eligible reservists may take "qualified reservist distributions" (QRDs) from their IRAs, 401(k)s, and 403(b) tax-sheltered annuities without paying the standard 10 percent early distribution penalty (although income taxes will apply in most cases). The law is retroactive to September 11, 2001.

A QRD is a distribution that is:

A 401(k) plan does not violate the distribution restrictions if it makes a qualified reservist distribution.

An individual who receives a QRD may, during the 2 years following the end of their active duty, make one or more contributions to an IRA of the amount of such distribution.

Note: The law does not require employers to allow eligible reservists to take QRDs. Instead, it gives employers the option to add QRDs to their 401(k) plans. If the employer chooses to make this option available to its eligible reservists, it should do so by formal amendment.

Medical flexible spending accounts (FSAs). The HEART Act also amended the provisions of IRC Sec. 125 to give individuals called to active duty access to the funds in a medical FSA. A medical FSA may provide for a "qualified reservist distribution," which is a distribution of all or part of an employee's account to an employee called to active military service. Please see the national Flexible Benefits/Cafeteria Plans section.

Note on the FMLA. FMLA regulations state that active duty time counts toward eligibility to take time off from work under the FMLA. To qualify for leave under the FMLA, an individual must work for an employer with 50 or more employees for at least 12 months and for 1,250 hours in the 12 months immediately preceding the request for leave. Employees may take 12 weeks of FMLA leave per 12-month period for the birth or adoption of a child; to care for a spouse, parent, or child with a serious health condition; or for the employee's own serious health condition.

A reservist or Guard member who is taking military leave under USERRA might not have actually worked for their employer for a total of 12 months, nor have met the 1,250 hours requirement when they left for military duty. The DOL's FMLA regulations state that employers should count the months and hours that U.S. reservists or National Guard members would have worked if they had not been called to military duty toward the 1,250-hour requirement for FMLA eligibility.

The employer must promptly reemploy the employee when the employee returns from a period of service if the employee meets the law's eligibility criteria, described below. "Prompt reemployment" means as soon as practicable under the circumstances of each case. Absent unusual circumstances, reemployment must occur within 2 weeks of the employee's application for reemployment (20 CFR 1002.181).

As a general rule, the employee is entitled to reemployment in the job position that they would have attained with reasonable certainty if not for the absence due to uniformed service. This is known as the "escalator position." The principle behind the escalator position is that, if not for the period of uniformed service, the employee could have been promoted (or, alternatively, demoted, transferred, or laid off) due to intervening events. The escalator principle requires that the employee be reemployed in a position that reflects with reasonable certainty the pay, benefits, seniority, and other job perquisites, that they would have attained if not for the period of service (20 CFR 1002.193).

Timing for returning or reapplying. The amount of time a returning employee has to return to their position or reapply for work depends on their period of service (38 USC 4312(e)(1)).

These time limits may be extended for up to 2 years if an individual is hospitalized or convalescing from an injury caused by active duty. This period for recuperation and recovery extends the time period for reporting to or submitting an application for reemployment to the employer and is not applicable following reemployment (20 CFR 116).

Required documentation on application for reemployment. The employee may be required to submit documentation to the employer in connection with an application for reemployment if the period of service exceeded 30 days. If the employee submits an application for reemployment after a period of service of more than 30 days, the employer may require the employee to provide documentation to establish that:

Reemployment position (less than 91 days of service). Following a period of service of less than 91 days, the employee must be reemployed in the escalator position. The employee must be qualified to perform the duties of this position. If the employee is not qualified to perform the duties of the escalator position after reasonable efforts by the employer, the employee must be reemployed in the position in which they were employed on the date that the period of service began.

If the employee is not qualified to perform the duties of the escalator position or the pre-service position, after reasonable efforts by the employer, the employee must be reemployed in any other position that is the nearest approximation first to the escalator position and then to the pre-service position. The employee must be qualified to perform the duties of this position.

Reemployment position (more than 90 days of service). Following a period of service of more than 90 days, the employee must be reemployed in the escalator position or a position of like seniority, status, and pay. The employee must be qualified to perform the duties of this position.

If the employee is not qualified to perform the duties of the escalator position or a like position after reasonable efforts by the employer, the employee must be reemployed in the position in which they were employed on the date that the period of service began or in a position of like seniority, status, and pay. The employee must be qualified to perform the duties of this position.

If the employee is not qualified to perform the duties of the escalator position, the pre-service position, or a like position, after reasonable efforts by the employer, they must be reemployed in any other position that is the nearest approximation first to the escalator position and then to the pre-service position. The employee must be qualified to perform the duties of this position. The employer must make reasonable efforts to help the employee become qualified to perform the duties of each of the positions described above.

Missed skills tests or examinations. If an opportunity for promotion or eligibility for promotion that the employee missed during service is based on a skills test or examination, the employer should give the employee a reasonable amount of time to adjust to the employment position and then give a skills test or examination. If the employee is successful on the makeup exam and, based on the results of that exam, there is a reasonable certainty that the employee would have been promoted or made eligible for promotion during the time that the employee served in the uniformed service, the promotion or eligibility for promotion must be made effective as of the date it would have occurred had employment not been interrupted by uniformed service.

Termination. Individuals who serve more than 180 days cannot be discharged without cause for 12 months after reemployment (38 USC 4316(c)). Those who serve for 31 to 180 days cannot be discharged without cause for 6 months after reemployment. Individuals who serve for 30 days or less have no protected period.

Rate of pay. When the employee returns from service, their rate of pay is determined by the same escalator principles that are used to determine the reemployment position. If the employee is reemployed in the escalator position, the employer must compensate them at the rate of pay associated with the escalator position. The rate of pay must be determined by taking into account any pay increases, differentials, step increases, merit increases, or periodic increases that the employee would have attained with reasonable certainty had they remained continuously employed during the period of service.

When considering whether merit or performance increases would have been attained with reasonable certainty, an employer may examine the returning employee's own work history, their history of merit increases, and the work and pay history of employees in the same or similar position. The escalator principle also applies in the event a pay reduction occurred in the reemployment position during the period of service. Any pay adjustment must be made effective as of the date it would have occurred had the employee's employment not been interrupted by uniformed service (20 CFR Part 2001.236).

Seniority. Returning service personnel are to be regarded as having been on a leave of absence or furlough during their period of military service. Upon return, they are eligible for like seniority, status, and pay. Specifically, this means that returning service personnel will count their period of military service as part of their total seniority within the company for such benefits as pension eligibility and long-service vacation. Similarly, across-the-board increases, improvements in insurance or other benefits, and all the other rights or benefits that would probably have been derived from continued employment must be given to them on the same terms as if they had been working for the company during the military service period (38 USC 4316(a)).

Disability. USERRA provides that an individual with service-connected disabilities who is not qualified for employment in the position they would have attained if continuously employed (even after reasonable accommodation as required by the Americans with Disabilities Act of 1990 (ADA)) must be reemployed promptly in any other position of similar seniority, status, and pay for which they qualified or would become qualified with reasonable efforts by the employer or otherwise in a position that is the nearest approximation to the equivalent position, consistent with the circumstances of the employee's case in terms of seniority, status, and pay.

A position that is the nearest approximation to the equivalent position may be a higher or lower position, depending on the circumstances (38 USC 4313(a)(3); (20 CFR 1002.225). As with the ADA, the employer is not required to reemploy the disabled individual if doing so would be of such difficulty or expense as to constitute an undue hardship (38 USC 4312(d)(1)(B)).

Notice of intent to return. When the employee leaves their job to begin a period of service, the employee is not required to tell the civilian employer whether they intend to seek reemployment. Even if the employee tells the employer before entering or completing uniformed service that they do not intend to seek reemployment, the employee does not forfeit the right to reemployment after completing service. The employee is not required to decide in advance of leaving the civilian employment position whether they will seek reemployment after completing uniformed service (20 CFR 1002.88).

Failure to reapply for or return to work. If the employee fails to report for work or apply for reemployment on time, they do not automatically forfeit entitlement to USERRA's reemployment and other rights and benefits. Rather, the employee becomes subject to the conduct rules, established policy, and general practices of the employer pertaining to an absence from scheduled work (20 CFR 1002.117).

If reporting or submitting an employment application to the employer is impossible or unreasonable through no fault of the employee, they may report to the employer as soon as possible (in the case of a period of service less than 31 days) or submit an application for reemployment to the employer by the next full calendar day after it becomes possible to do so (in the case of a period of service from 31 to 180 days), and the employee will be considered to have timely reported or applied for reemployment.

Under the VOW to Hire Heroes Act, employers that hire veterans who have been unemployed for more than 4 weeks (but less than 6 months) are eligible for a $2,400 tax credit. For veterans who have been unemployed for more than 6 months, employers are eligible for a tax credit of up to $5,600. Tax credits of up to $9,600 are available for hiring veterans with service-connected disabilities who have been looking for a job for more than 6 months.

Employers may apply for VOW to Hire Heroes Act credits within 28 days of hiring a veteran. Employers (including both for‐profit and not‐for-profit organizations) must submit IRS Form 8850 and either ETA Form 9061 or 9062 to their local state Work Opportunity Tax Credit coordinator for certification. ETA is working to revise and issue ETA Form 9061, and update all other program‐related materials, to reflect these new tax credits. During this transition period, until revised forms are issued, employers are instructed to continue to use the current ETA Form 9061.

Once an employer receives a certification letter from the state workforce agency, the employer may then claim the tax credit for certified workers on the employer's annual income tax returns. For tax purposes, this tax credit is considered a general business credit. To the extent that general business credits claimed exceed taxable liability for a given year, the excess general business credits can be carried back to prior years or carried forward to future years.

USERRA provides that an employer may not be required to reemploy a person after military service under the following circumstances (38 USC 4312(d)):

Note: Although USERRA's reemployment provisions do not apply to a person whose employment is for a brief, nonrecurrent period when there is no reasonable expectation that such employment will continue indefinitely or for a significant period, USERRA's provisions regarding discrimination and retaliation still apply to that person.

Employers are prohibited from retaliating against anyone who files a complaint of discrimination under USERRA, or testifies, assists, or otherwise participates in an investigation or proceeding under the law--regardless of whether that person has performed military service (38 USC 4311(b)).

Employers should also note that a state's statute of limitations (which bars lawsuits after a certain period of time) is not applicable to violations of USERRA, so employers should not presume that because time has passed, they are immune to lawsuits. Also, state employers are not immune to suits under USERRA.

Employers should be able to prove that adverse employment selection decisions were not based on an applicant's membership in the uniformed services, including membership in the National Guard or reserves. Personnel policies and employment forms should be amended to include reservists as a protected class under equal employment opportunity provisions. Written policies granting time off for reserve obligations demonstrate good faith and the employer's awareness of legal responsibilities toward military personnel.

Employers must provide USERRA-eligible employees with a notice of their rights and benefits under USERRA. The notice may be provided by a posting in the same place where other required notices are customarily posted. A poster containing the required notice for private sector and state government employers may be obtained on the U.S. Department of Labor website at www.dol.gov/vets.

The USERRA is enforced by DOL. The Veterans' Employment and Training Service (VETS) of DOL provides reemployment assistance and investigates complaints of discrimination under USERRA and attempts to resolve them. Filing of complaints with VETS is optional (38 USC 4322). Individuals may also file private court actions to enforce USERRA under certain circumstances. A court may order an employer who fails to comply with the law to pay back wages, lost benefits, and attorney's fees. If a court determines that the violation was “willful,” it may order double damages of back pay or lost benefits.

DOL has set up a link to frequently asked questions (FAQs) at www.dol.gov/ebsa to answer reservist questions about pension and health benefits. Questions about USERRA and the FMLA should be referred to the Wage and Hour Division of DOL. To find your local Wage and Hour Division office, call 866-487-9243. For more information on USERRA, VETS has established a helpful advisor system on its Internet home page at www.dol.gov/vets that will answer specific questions regarding USERRA. VETS may also be reached at: