EMPLOYING RETURNING MILITARY PERSONNEL & UNEMPLOYED VETERANS
USERRA OBLIGATIONS AND NEW TAX CREDITS AVAILABLE

INSIGHTS
This past October, President Obama declared an end to the war in Iraq and with that announcement it is expected that 40,000 U.S. troops will be returning home before the end of the year.  All public and private employers in the United States regardless of size will be required to accommodate and extend reemployment, benefit, compensation and seniority rights to those employees who left their job to serve in the uniformed services of the United States.  In general, The Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) allows an individual with less than five years of cumulative military service to return to employment with his or her former employer(s). 

In addition, last month President Obama signed the Vow To Hire Heroes Act of 2011 which provides tax credits to businesses that hire unemployed veterans ranging from $2,400 to $9,600. This veteran’s employment bill is separate and apart from an employer’s obligation under USERRA to re-hire a former employee who left employment to serve in the uniformed services.

IMPLICATIONS
Employers should review and be prepared to comply with the employment and benefit rights bestowed upon returning military personnel.  Known as the “escalator provision”, USERRA (with few exceptions) requires that a returning veteran be reemployed in a position that he or she would have attained with reasonable certainty if not for the absence due to uniformed service.  The position must reflect the level of seniority, status, and rate of pay the employee would ordinarily have obtained if not for the break-in-service due to time served in the uniformed services.  An employer must make reasonable efforts to accommodate the returning employee to the workforce and be mindful of what circumstances may excuse an employer from this obligation such as when the organization has undergone changes or assisting the employee would pose an undue hardship to the employer.

More information about USERRA can be found in the Federal Register USERRA Final Rules.  The final rules contain a series of questions and answers that employers should find helpful.  Employers considering expanding their workforce may wish to take advantage of the tax credits available for hiring unemployed veterans.

What Types of Service Does USERRA Cover?
Service in the uniformed services means the performance of duty on a voluntary or involuntary basis such as active duty, active and inactive duty for training, Federal National Guard duty and for time needed to determine fitness for duty.  Uniformed services means the Armed Forces, Army and Air National Guard, the commissioned corps of the Public Health Service, certain intermittent disaster response service and other service designated by the President in time of war or national emergency.

A Returning Employee’s Responsibility
In general and with certain exceptions, an employee returning from uniformed service will be eligible for reemployment with the pre-service employer provided certain eligibility criteria are satisfied.  To qualify, the returning employee must:

• Provide advance notice (written or verbal) to the employer of the intent to return to work (the notice timeframe depends upon the length of time served in the military),
• Return to work or apply for reemployment in a timely fashion.  Employees who are hospitalized or convalescing from service-related injuries or illnesses may have up to two additional years to apply for reemployment.
• Have no more than five years of cumulative service in the uniformed services with respect to a particular employer (i.e. this measure of service does not include periods of uniformed service while employed by a different employer), and
• Not have been separated from service with a disqualifying or less than honorable discharge.

Reemployment Rights and Benefits
An employee on military leave is generally treated as being on furlough or leave of absence from the employer, and is entitled to all non-seniority rights and benefits generally provided to other “similar” employees on furlough or leave of absence.  Under USERRA, an employer is generally required to extend the following rights and benefits to those employees returning from uniformed service:

• Promptly reemploy the employee if the eligibility criteria noted above are met, generally within two weeks from the application for reemployment. 
• Under the “escalator provision”, the employee must be reinstated to a position that reflects with reasonable certainty the pay, benefits, seniority and other job perquisites that would have been attained if not for having served in the military, including promotions, merit pay and bonuses.
• The employee must be qualified for the position; the employer is obligated to make reasonable efforts to help the employee (including disabled veterans) become qualified for the position.
• Health plan coverage must be reinstated to the employee (and dependents) upon reemployment without imposing a waiting period, if a waiting period would not have applied had the employee been continuously employed.  It should be noted that employees do have the option of electing continuation coverage under the group health plan at the onset of military service for a period of up to twenty four months.
• USERRA does permit a health plan to impose an exclusion or waiting period with respect to illnesses or injuries solely determined by the Secretary of Veterans Affairs that have been incurred in, or aggravated during the performance of service in the uniformed services.
• An employee serving in the uniformed services is not treated as having a break-in-service as it relates to participation, vesting and benefit accrual under a pension plan.
• An employee enrolled in a contributory plan (such as a 401(k) plan) is allowed (but not required) to make up contributions or elective deferrals that were missed while deployed.  If an employee does not make up the missed contributions, the employer is not obligated to make any matching contributions with respect to these amounts.

When An Employer May Be Excused From The Obligation To Reemploy
There are limited circumstances when an employer is not required to reemploy a returning service member who would otherwise be eligible for reemployment.  There are limited statutory defenses available to employers under USERRA and an employer carries the burden to prove by a preponderance of the evidence that one or more of the following defenses would apply:

• Circumstances have changed making reemployment impossible or unreasonable such as a reduction in workforce that would have most likely included the returning service member.  An employer may not, however refuse to rehire the returning veteran because the position was filled during the military leave.  This scenario might result in an employer having to terminate the replacement employee to fulfill its USERRA obligation to the veteran.
• Assisting the employee in becoming qualified for reemployment would pose an undue hardship (significant difficulty or expense) on the employer.
• The position vacated by the employee was intended to be brief with no reasonable expectation that employment would have continued indefinitely or for a significant length of time.

USERRA guarantees certain rights and protections to those individuals who left employment to serve in the uniformed services.  Employers should consult with labor counsel and review the USERRA provisions as well as employment policies and benefit plan provisions to make sure every effort is extended to returning service men and women who seek reemployment.  Furthermore, an employer may be liable as a successor in interest even when a successor employer was unaware that an employee may claim reemployment rights at the time the business was acquired. 

President Obama Signs The Vow To Hire Heroes Act of 2011
On November 21, 2011 President Obama signed into law a bill that assists veterans with education and training to help improve employment opportunities.  The bill also provides a $2,400 tax credit to businesses that hire veterans who have been out of work for more than a month; $5,600 if they have been unemployed for more than six months; and $9,600 for disabled veterans out of work more than six months.  The veteran must remain employed for at least one year for an employer to be eligible for the 2012 tax credit.  This veteran’s employment bill is separate and apart from an employer’s obligation under USERRA to re-hire a former employee who left employment to serve in the uniformed services.

ADDITIONAL INFORMATION

For specific questions concerning information contained in this INSIGHTS & IMPLICATIONS, please contact your Chernoff Diamond consultant. 

Information contained in this INSIGHTS & IMPLICATIONS is not intended to render tax or legal advice. Employers should consult with qualified legal and/or tax counsel for guidance with respect to matters of law, tax and related regulation. Chernoff Diamond provides comprehensive consulting and administrative services with respect to all forms of employee benefits, risk management, qualified and non-qualified retirement plans, private client services, and compensation and human resources. For additional information about our services, please contact us at 516.683.6100 or .(JavaScript must be enabled to view this email address) .