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VETS Final Rule

Uniformed Services Employment and Reemployment Rights Act of 1994, As Amended [12/19/2005]

[PDF Version]

Volume 70, Number 242, Page 75245-75313


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Part II





Department of Labor





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Veterans' Employment and Training Service



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20 CFR Part 1002



Uniformed Services Employment and Reemployment Rights Act of 1994; 
Final Rules


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DEPARTMENT OF LABOR

Veterans' Employment and Training Service

20 CFR Part 1002

[Docket No. VETS-U-04]
RIN 1293-AA09


Uniformed Services Employment and Reemployment Rights Act of 
1994, As Amended

AGENCY: Veterans' Employment and Training Service, Department of Labor.

ACTION: Final rules.

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SUMMARY: The Veterans' Employment and Training Service (``VETS'' or 
``the Agency'') issued proposed rules implementing the Uniformed 
Services Employment and Reemployment Rights Act of 1994, as amended 
(USERRA). This document sets forth the Agency's review of and response 
to comments on the proposal and any changes made in response to those 
comments.
    Congress enacted USERRA to protect the rights of persons who 
voluntarily or involuntarily leave employment positions to undertake 
military service. USERRA authorizes the Secretary of Labor (in 
consultation with the Secretary of Defense) to prescribe rules 
implementing the law as it applies to States, local governments, and 
private employers. VETS proposed rules under that authority in order to 
provide guidance to employers and employees concerning their rights and 
obligations under USERRA. The Agency invited written comments on these 
proposed rules, and any specific issues related to the proposal, from 
members of the public.

DATES: Effective Date: This rule will be effective on January 18, 2006.

FOR FURTHER INFORMATION CONTACT: Robert Wilson, Chief, Investigations 
and Compliance Division, Veterans' Employment and Training Service, 
U.S. Department of Labor, 200 Constitution Avenue, NW., Room S-1312, 
Washington, DC 20210, Wilson.Robert@dol.gov, (202) 693-4719 (this is 
not a toll-free number).
    For press inquiries, contact Michael Biddle, Office of Public 
Affairs, U.S. Department of Labor, 200 Constitution Avenue, NW., Room 
S-1032, Washington, DC 20210, Biddle.Michael@dol.gov, (202) 693-5051 
(this is not a toll-free number).

SUPPLEMENTARY INFORMATION:

I. Background

    On September 20, 2004, the Department of Labor (``the Department'') 
issued proposed regulations to implement the Uniformed Services 
Employment and Reemployment Rights Act of 1994, as amended (USERRA), 38 
U.S.C. 4301-4334. The Department invited written comments on the 
proposed regulations from interested parties. The Department also 
invited public comment on specific issues. The written comment period 
closed on November 19, 2004, and the Department has considered all 
timely comments received in response to the proposed regulations.
    The Department received 80 timely comments from a wide variety of 
sources. Commenters included: a member of Congress; service members and 
veterans; organizations representing human resource professionals and 
employee benefits providers; law firms; individual employers and 
employer associations; individual employees and employee 
representatives; and members of the interested public. The comments 
were composed of well over 300 individual queries or concerns addressed 
to approximately 200 specific topics set out in the Department's notice 
of proposed rulemaking. While a few of the comments were generalized 
plaudits or individualized complaints, the great majority of comments 
specifically addressed issues contained in the Department's proposed 
rule. The Department recognizes and appreciates the value of comments, 
ideas, and suggestions from members of the uniformed services, 
employers, industry associations, labor organizations and other parties 
who have an interest in uniformed service members' and veterans' 
employment and reemployment rights and benefits.
    Following the publication of the NPRM, the Department issued an 
interim final rule, Notice of Rights and Duties Under the Uniformed 
Services Employment and Reemployment Act, 70 FR 12106 (March 10, 2005), 
to comply with an amendment made to USERRA by the Veterans Benefits 
Improvement Act of 2004 (VBIA), Public Law 108-454 (Dec. 10, 2004). In 
part, the VBIA imposed a new requirement that ``Each employer shall 
provide to persons entitled to rights and benefits under [USERRA] a 
notice of the rights, benefits, and obligations of such persons and 
such employers under [USERRA].'' 38 U.S.C. 4334(a). The VBIA required 
the Secretary of Labor to make available to employers the text of the 
required notice, 38 U.S.C. 4334(b), and the Department's publication of 
the interim final rule set forth such text as an appendix to these 
USERRA regulations.

II. Statutory Authority

    Section 4331 of USERRA authorizes the Secretary of Labor (in 
consultation with the Secretary of Defense) to prescribe regulations 
implementing the law as it applies to States, local governments, and 
private employers. 38 U.S.C. 4331(a). The Department has consulted with 
the Department of Defense, and issues these regulations under that 
authority in order to provide guidance to employers and employees 
concerning the rights and obligations of both under USERRA.

III. Prior Laws and Interpretation

    USERRA was enacted in part to clarify prior laws relating to the 
reemployment rights of service members, rights that were first 
contained in the Selective Training and Service Act of 1940, 54 Stat. 
885, 50 U.S.C. 301, et seq. USERRA's immediate predecessor was the 
Vietnam Era Veterans' Readjustment Assistance Act of 1974, 38 U.S.C. 
2021-2027 (later recodified at 38 U.S.C. 4301-4307 and commonly 
referred to as the Veterans' Reemployment Rights Act ``VRRA''), which 
was amended and recodified as USERRA.
    In construing USERRA and these prior laws, courts have followed the 
Supreme Court's admonition that:

    This legislation is to be liberally construed for the benefit of 
those who left private life to serve their country in its hour of 
great need. * * * And no practice of employers or agreements between 
employers and unions can cut down the service adjustment benefits 
which Congress has secured the veteran under the Act.

See Fishgold v. Sullivan Drydock and Repair Corp., 328 U.S. 275, 285 
(1946), cited in Alabama Power Co. v. Davis, 431 U.S. 581, 584-85 
(1977); King v. St. Vincent's Hosp., 502 U.S. 215, 221 n.9 (1991). The 
Department intends that this interpretive maxim apply with full force 
and effect in construing USERRA and these regulations.
    This preamble also selectively refers to many other cases decided 
under USERRA and its predecessor statutes, to explain and illustrate 
the rights and benefits established under the Act. The failure to cite 
or refer to a particular court decision in this preamble is not 
intended to indicate the Department's approval or disapproval of the 
reasoning or holding of that case.

IV. Plain Language

    The Department wrote the proposed rule in the more personal style 
advocated by the Presidential Memorandum on Plain Language. ``Plain 
language'' encourages the use of:

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     Personal pronouns (we and you);
     Sentences in the active voice; and,
     A greater use of headings, lists, and questions.
    The Department received three comments regarding its use of 
``you,'' ``I,'' and ``my'' to refer to employees, whom the Department 
viewed as the primary beneficiaries of USERRA rights and benefits. 
These commenters appreciated the use of plain language and the use of 
question and answer format, but expressed a preference for the use of 
third person pronouns so that both employers and employees are included 
as the audience of the rule. In response, the Department has revised 
the pronoun usage in the final rule, and has employed third person 
pronouns to refer to the rights and obligations of both employers and 
employees.
    In addition, one of these commenters recommended the Department use 
a more formal style when addressing complex topics such as health and 
pension plan rights and obligations. In response, the Department has 
adopted the use of more technical guidance on these matters without 
unduly sacrificing clarity.

V. Section-by-Section Summary of the Final Rule and Discussion of 
Comments

    This preamble sets out the Department's interpretation of USERRA, 
section by section. The preamble generally follows the outline of the 
rule, which in turn follows the outline of USERRA. Within each section 
of the preamble, the Department has noted and responded to those 
comments that are addressed to that particular section of the rule. 
Before setting out the section-by-section analysis, however, the 
Department will first acknowledge and respond to comments that did not 
easily fit into this organizational scheme.

A. General Comments

    The Department received a number of general comments from members 
of the public expressing gratitude to the Department for the long-
awaited USERRA regulations. In particular, Rep. John Boehner, Chairman 
of the U.S. House of Representatives Committee on Education and the 
Workforce, commended the Department for ``undertaking this most 
important endeavor.''
    Conversely, the Department received a few comments from individuals 
complaining about their specific USERRA claims. The Department also 
received several comments offering assistance with grammar and 
punctuation. In all cases--the plaudits, the complaints, and the offers 
of assistance-- the Department acknowledges and appreciates the 
thorough and thoughtful comments.
    The Department also received several comments requesting that 
particular text cross-reference other text or make reference to related 
text elsewhere in the rule. As a general matter of style, the 
Department views such cross-references as cumbersome and ultimately 
detrimental to the clarity of the text and, with few exceptions, has 
declined to make such revisions.
    Finally, the Department received several comments asking about the 
application of these regulations to the Federal Government when it is 
acting as an employer. The Federal Office of Personnel Management has 
issued a separate body of regulations that govern the USERRA rights of 
Federal employees. See 5 CFR part 353.

B. Compliance With USERRA and Compliance With the Internal Revenue Code

    The Department received a number of comments from individuals and 
employers seeking guidance on compliance with USERRA in those cases in 
which the commenters perceived a conflict between USERRA's mandates and 
the mandates of the Internal Revenue Code (IRC). These comments arose 
primarily with regard to the health and pension plan provisions of the 
rule, and suggested that in some cases compliance with USERRA may cause 
the plan to be out of compliance with the IRC. See Subparts D and E. 
The Department can provide guidance only with regard to the 
requirements of USERRA. However, the Internal Revenue Service (IRS) and 
the Department of the Treasury have indicated that a health or pension 
plan will be deemed not to be in conflict with the applicable IRC 
requirements merely because of compliance with USERRA or its 
regulations.

C. Comments Addressing the National Disaster Medical System

    The Department received several comments from an attorney employed 
by the Federal Emergency Management Agency (FEMA) regarding the rule's 
treatment of the National Disaster Medical System (NDMS). The NDMS is a 
section within the U.S. Department of Homeland Security, and supports 
Federal agencies in the management and coordination of the Federal 
medical response to major emergencies and Federally declared disasters. 
The NDMS is composed primarily of teams of professional and para-
professional volunteers, who may be activated for training or in 
response to public health emergencies. NDMS volunteers who are 
activated are considered to be serving in the uniformed services for 
the purposes of USERRA. 42 U.S.C. 300hh-11(e)(3).
    The FEMA commenter suggests several instances in which the 
Department should clarify the coverage of members of the NDMS under 
USERRA. The Department agrees with a number of these suggestions, and 
rejects others, as follows:
    1. The commenter recommends that section 1002.2, which provides 
background and historical information on USERRA, include the statutory 
reference, 42 U.S.C. 300hh-11(e)(3), that provides USERRA coverage to 
members of the NDMS. The Department declines this suggestion, because 
this section of the rule is intended as a general discussion, and 
contains no mention of any statutory provisions that have directly or 
indirectly amended USERRA. However, the Department will take the 
opportunity to highlight the NDMS coverage issues elsewhere in this 
final rule.
    2. The commenter recommends that the Department include a 
description of the NDMS in section 1002.5, which contains a number of 
definitions that are considered helpful in understanding USERRA. The 
Department has adopted this proposal. See 1002.5(f).
    3. The commenter recommends a style change in NPRM section 
1002.5(k), which has been incorporated. See 1002.5(l).
    4. The commenter suggests that the Department include in NPRM 
section 1002.5 that NDMS appointees are considered members of the 
uniformed services when Federally activated or attending authorized 
training. The Department has revised section 1002.5(o) to reflect that, 
pursuant to the statute creating the NDMS, service in the NDMS is 
considered to be service in the uniformed services for the purposes of 
USERRA, although the appointee is not considered to be a member of the 
uniformed services. See 42 U.S.C. 300hh-11(e)(3).
    5. The commenter suggests that the Department clarify in section 
1002.6 that service in the NDMS is a type of service covered by USERRA. 
The Department agrees. See 1002.6.
    6. The commenter requests that the Department modify 1002.41 to 
include a reference to the intermittent nature of the service of the 
NDMS. The Department rejects this suggestion because the section in 
question refers to the brief or intermittent nature of civilian 
employment, not the service in the uniformed services.
    7. The commenter suggests that the Department clarify that, with 
regard to section 1002.56, not all NDMS service is

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protected by USERRA, and that the Department remove the phrase ``even 
if you are not a member of the uniformed services'' from this section. 
While the Department did not adopt these suggestions, the Department 
reexamined the question set out in section 1002.56 and concluded it 
needed revision to accurately reflect the scope of the coverage of NDMS 
service.
    8. The commenter properly suggests that the Department modify 
section 1002.86 to indicate that the Secretary of Homeland Security 
may, in consultation with the Secretary of Defense, make a 
determination that giving of notice by intermittent disaster-response 
appointees of the National Disaster Medical System is precluded by 
``military necessity.'' The revision has been made. See 1002.86.
    9. The commenter requests that the Department correct a reference 
in section 1002.103(a)(5) and (a)(7), which addresses the types of 
service that do not count toward the general five-year limit on service 
after which a person is not entitled to reemployment rights. The 
correction has been made to follow precisely the corresponding sections 
of the statute. See 38 U.S.C. 4312(c)(4)(B) and 4312(c)(4)(D).
    10. The commenter requests that the Department include within 
section 1002.123 an additional type of document that establishes an 
employee's eligibility for reemployment following covered NDMS service. 
The Department agrees. See section 1002.123(a)(7).
    11. The commenter suggests that the Department modify section 
1002.35, which specifies the types of discharge following service that 
will cause a person to lose reemployment rights under USERRA. The 
commenter sought inclusion on this list the termination of an 
intermittent NDMS appointee for misconduct or cause. Because no 
statutory or regulatory guidance was provided as a basis for this 
suggestion, and the Department is aware of none, the suggestion is not 
adopted.

Subpart A--Introduction to the Regulations Under the Uniformed Services 
Employment and Reemployment Rights Act of 1994

General Provisions

    Sections 1002.1 through 1002.7 describe the regulation's purpose, 
scope, and background, as well as the sense of the Congress in enacting 
USERRA. Section 1002.1 sets out the purpose of these regulations. See 
38 U.S.C. 4301. Sections 1002.2 through 1002.4 provide additional 
background on USERRA, its effective date, and its purposes. Section 
1002.5 defines the important terms used in the regulation. See 38 
U.S.C. 4303. Sections 1002.6 and 1002.7 describe the general coverage 
of the rule, its applicability and its relationship to other laws, 
contracts, agreements, and workplace policies and practices. See 38 
U.S.C. 4302.
    The Department received one comment from the Equal Employment 
Advisory Council regarding the breadth of USERRA's definition of 
``employer.'' The proposed rule adopted, in Section 1002.5(d), USERRA's 
definition of ``employer,'' which includes ``any person, institution, 
organization or other entity that pays salary of wages for work 
performed or that has control over employment opportunities, including 
* * * a person, institution, organization, or entity to whom the 
employer has delegated the performance of employment-related 
responsibilities.'' 38 U.S.C. 4303(4). The EEAC proposed that the 
regulatory definition of employer explicitly exclude from liability for 
statutory violations individuals, such as managers or supervisors, who 
are not directly responsible for paying wages to employees. In support 
of this proposal, the EEAC cited case law under various civil rights 
statutes holding that individuals cannot be held personally liable for 
statutory violations if the individual does not independently meet the 
statute's definition of a covered ``employer.'' See, e.g., EEOC v. AIC 
Security Investigations, LTD, 55 F.3d 1276, 1281 (7th Cir. 1995), and 
cases cited therein. Under the statutory definitions of ``employer'' in 
the Americans with Disabilities Act (ADA), 42 U.S.C 12111(5), the Age 
Discrimination in Employment Act (ADEA), 29 U.S.C. 630(b), and Title 
VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e(b), which are 
essentially the same, the weight of authority is that Congress intended 
the doctrine of respondeat superior to apply, and to impose liability 
upon employers for acts of their agents. Id.
    The Department has considered this comment and disagrees with the 
conclusion reached by the commenter. In comparison to the ADA, the 
ADEA, and Title VII of the Civil Rights Act, USERRA's definition of 
``employer'' is quite different and much broader. USERRA imposes 
liability for violations upon ``any person * * * [who] * * * has 
control over employment opportunities'' including ``a person * * * to 
whom the employer has delegated the performance of employment-related 
responsibilities.'' 38 U.S.C. 4303(4)(A)(i). At least two courts have 
held that, based on this definition, individual supervisors may be 
liable under the Act. See Brandasse v. City of Suffolk, 72 F.Supp.2d 
608, 617-18 (E.D.Va. 1999) (both a city, as a police officer's direct 
employer, and its director of personnel, who had authority over hiring 
and firing for the city, were subject to liability as ``employers'' 
under USERRA); Jones v. Wolf Camera, Inc., 1997 WL 22678 (N.D.Tex. 
1997) (at Fed.R.Civ.P. 12(b)(6) stage, individual supervisors may be 
liable under USERRA as ``persons'' with control over hiring and firing 
and to whom the employer has delegated the performance of employment-
related responsibilities). But see Satterfield v. Borough of Schuykill 
Haven, 12 F.Supp.2d 423 (E.D.Pa. 1998) (plaintiff could not bring an 
action under USERRA against individual members of a borough council, 
alleging that the council terminated him because of his military 
status, because such members did not have any individual power over the 
plaintiff and the plaintiff was not required to report to them 
individually); Brooks v. Fiore, 2001 WL 1218448 (D. Del. 2001) 
(supervisor was not covered by USERRA because he did not have the power 
to hire and fire the plaintiff).
    Thus, courts have construed USERRA's definition of ``employer'' as 
including supervisors and managers in appropriate cases. Those courts 
that have found no individual liability have done so not because the 
language of the statute precludes it, but rather because the facts and 
circumstances of the case do not warrant the imposition of individual 
liability. Based on these considerations, the Department declines to 
adopt the position that individual supervisors and managers should be 
excluded from the regulatory definition of ``employer'' under USERRA.
    The Department received two additional comments, one from an 
association of third-party employee benefit administrators and one from 
a trade association of firms providing health insurance products to 
employers, regarding the statute's broad definition of ``employer'' and 
its implications in the employee benefits area. Each commenter was 
concerned that USERRA's definition of ``employer'' was so broad as to 
impute liability to third parties to whom employers had delegated only 
ministerial responsibilities for employee benefits plans.
    Congress intended that the definition of employer be broad enough 
to ``apply to insurance companies that administer employers' life, 
long-term disability, or health plans, so that such entities cannot 
refuse to modify their policies in order for employers to comply with

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requirements under [USERRA].'' S. Rep. No. 158, 103d Cong., 2d Sess. 42 
(1993). However, the Department agrees with the commenters that 
entities to whom employers or plan sponsors have delegated purely 
ministerial functions regarding the administration of employee benefits 
plans are not intended to be covered by USERRA's definition of 
``employer.'' For instance, firms whose activities are strictly limited 
to the preparation and maintenance of plan benefit forms, without 
engaging in substantive decisions regarding plan benefits, would not be 
considered employers for the purposes of USERRA.
    The Department received comments on the rule's definitions 
regarding an employer's obligation to make reasonable efforts, without 
imposing an undue hardship on the employer, to qualify an employee 
returning from military service for reemployment. One commenter 
suggested that the definition of ``reasonable efforts'' in section 
1002.5(i) should explicitly include an employer's obligation to provide 
evaluative testing, assistance with obtaining licensing, and other 
similar employer efforts. The Department views the definition of 
``reasonable efforts,'' which requires actions by employers ``including 
training * * * that do not place undue hardship on the employer,'' as 
sufficiently broad so as to include other actions not specified in the 
definition. The same commenter requested that the Department delete 
from the definition of ``undue hardship'' in section 1002.5(n) any 
consideration based on ``the nature and cost of the action needed.'' 
The ``nature and the cost of the action'' is one of the factors 
expressly included in USERRA's definition of ``undue hardship,'' and 
the Department views consideration of all factors essential to 
evaluation of what constitutes ``undue hardship.'' 38 U.S.C. 
4303(15)(A)-(D).
    Additionally, another commenter requested that the Department 
exclude ``former employees'' from the definition of ``employee'' in 
section 1002.5(c). Congress intended ``that the term `employee' would 
include former employees of an employer.'' H.R. Rep. No. 65, 103d 
Cong., 2d Sess. 21 (1993); S. Rep. No. 103-158, at 41 (1993). 
Therefore, the Department will retain ``former employees'' within this 
definition.
    One comment suggests a revision to section 1002.6, which describes 
the various types of service that are covered under USERRA. USERRA's 
predecessor, the VRRA, provided reemployment protections that varied 
(in many instances) based on the type of service performed. One of the 
ways in which USERRA modified the old law was to base many of the 
reemployment rights on the length of the service performed rather than 
its type. The commenter requests the deletion of the sentence from 
section 1002.6 that erroneously indicates that the statute's 
reemployment provisions vary only according to the length of service. 
The Department agrees, and has made the deletion. See 1002.6.
    Finally, the Department received one comment regarding USERRA's 
relationship to the Internal Revenue Code. The commenter has requested 
the Department clarify how ``differential pay'' should be reported for 
tax purposes. The term ``differential pay'' refers to payments by 
employers to their employees absent to perform military service, and 
this pay is neither required by nor addressed in USERRA. In some cases, 
employers provide employees their full civilian pay, but more often 
they provide payments that represent the difference between the 
employee's military pay and civilian pay. Differential pay is a 
generous show of support by employers for their employees who are in 
service to the nation.
    The commenter correctly points out that USERRA requires that a 
person absent from a position of employment on account of service in 
the uniformed services is to be considered on a furlough or leave of 
absence, a provision that has been incorporated in the reemployment 
rights statute since its first enactment in 1940. 38 U.S.C. 
4316(b)(1)(A). On the other hand, the commenter notes that the Internal 
Revenue Service (IRS) has issued guidance that such person is 
considered to be ``terminated'' for certain tax purposes.
    The Department reiterates that for the purposes of determining the 
rights and obligations set out in USERRA, an employee absent to perform 
service in the uniformed services is to be considered as on furlough or 
leave of absence. 38 U.S.C. 4316(b). Therefore, for the purposes of 
compliance with USERRA, an employee should be treated as on furlough or 
leave of absence, and for the purposes of compliance with the Internal 
Revenue Code (IRC), the IRS guidance should be followed. See IRS 
Revenue Ruling 69-136 (1969).

Subpart B--Anti-Discrimination and Anti-Retaliation

Protection From Employer Discrimination and Retaliation

    USERRA prohibits an employer from engaging in acts of 
discrimination against past and present members of the uniformed 
services, as well as applicants to the uniformed services. 38 U.S.C. 
4311(a). The anti-discrimination prohibition applies to both employers 
and potential employers. No employer may deny a person initial 
employment, reemployment, retention in employment, promotion, or any 
benefit of employment based on the person's membership, application for 
membership, performance of service, application to perform service, or 
obligation for service in the uniformed services. USERRA also protects 
any person who participates in an action to protect past, present or 
future members of the uniformed services in the exercise of their 
rights under the Act. The Act prohibits any employer from 
discriminating or taking reprisals against any person who acts to 
enforce rights under the Act; testifies in any proceeding or assists a 
statutory investigation; or exercises any right under the statute 
pertaining to any person. 38 U.S.C. 4311(b). A person is protected 
against discrimination and reprisal regardless whether he or she has 
served in the military.
    Proposed sections 1002.18, 1002.19 and 1002.20 implement the 
protections of section 4311(a) and (b). Proposed section 1002.21 makes 
clear that the prohibition on discrimination applies to any employment 
position, regardless of its duration, including a position of 
employment that is for a brief, non-recurrent period, and for which 
there is no reasonable expectation that the employment position will 
continue indefinitely or for a significant period.
    The Department received two comments on proposed section 1002.21. 
The first commenter suggests that the application of USERRA's anti-
discrimination and anti-retaliation provisions to brief, non-recurrent 
positions is ``unduly burdensome for employers and contains unnecessary 
verbiage.'' Because the statute explicitly requires the application of 
the anti-discrimination and anti-retaliation provisions to such 
employment positions, see 38 U.S.C. 4311(d), the Department will retain 
the provision unchanged. A second commenter requests that 1002.21 
include a cross-reference to section 1002.41 to reflect that persons 
employed in brief, non-recurrent employment positions enjoy the 
protections of USERRA's anti-

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discrimination and anti-retaliation provisions, while persons employed 
in temporary and seasonal employment positions are not protected by 
USERRA's reemployment provisions. The commenter mistakenly equates the 
terms ``brief, non-recurrent'' with ``temporary'' and ``seasonal'' when 
referring to employment positions. Some employment positions, such as a 
life guard at a swimming pool or a football coach, are temporary, 
seasonal positions, and such positions enjoy both the anti-
discrimination/anti-retaliation and the reemployment protections 
afforded under USERRA. See 38 U.S.C. 4311(d) and 4312(d)(1)(C); S. Rep. 
No. 103-158, at 46 (1993). By contrast, some, but not all, temporary, 
seasonal employment positions are brief and non-recurrent, and provide 
the employee no reasonable expectation of continued employment, such as 
an employment contract that covers a one-time-only, three-month-long 
position. Such brief, non-recurrent positions enjoy the protections 
afforded by USERRA's anti-discrimination/anti-retaliation provisions, 
but are not protected by the statute's reemployment provisions. See 38 
U.S.C. 4312(d)(1)(C); S. Rep. No. 103-158, at 46 (1993).
    Proposed section 1002.22 explains who has the burden of proving 
that a certain action violates the statute. Proposed section 1002.23 
sets out the evidentiary elements of a claimant's and an employer's 
case under USERRA. The Department received several comments regarding 
these two provisions. Two commenters, including the National Employment 
Lawyers Association (NELA), criticized the provisions for failing to 
state explicitly in the text of the rule that once an employee has met 
his or her burden to prove that the employee's USERRA-protected status 
or activity was a reason for an employer's adverse action against the 
employee, that the employer's rebuttal case is an affirmative defense, 
which places the burden of proof on the employer to show by a 
preponderance of evidence that it would have taken the adverse action 
in the absence of the protected status or activity. In addition, two 
commenters, including NELA, criticized the provisions for erroneously 
stating that the burden of proof shifts back to the employee if the 
employer successfully prevails on its affirmative defense.
    The Department agrees that the structures of proof set forth in 
proposed sections 1002.22 and 1002.23 are susceptible to confusion and 
should be clarified. Congress intended that the evidentiary scheme set 
forth by the United States Supreme Court in NLRB v. Transportation 
Management Corp., 462 U.S. 393, 401 (1983), apply to the analysis of 
violations under USERRA. See S. Rep. No. 103-158, at 45 (1993), and 
H.R. Rep. No. 103-65, Pt. I, at 18, 24 (1993). See also  Gummo v. 
Village of Depew, NY, 75 F.3d 98, 106 (2d Cir. 1996) (citing USERRA's 
legislative history); Sheehan v. Dept. of the Navy, 240 F.3d 1009, 
1013-1014 (Fed. Cir. 2001) (same).
    Under this structure, in order to establish a case of employer 
discrimination, the person's membership, application for membership, 
performance of service, application for service, or obligation for 
service in the uniformed services must be a ``motivating factor'' in 
the employer's actions or conduct. 38 U.S.C. 4311(c)(1). The initial 
burden of proving discrimination or retaliation rests with the person 
alleging discrimination (the claimant). A person alleging 
discrimination under USERRA must first establish that his or her 
protected activities or status as a past, present or future service 
member was a motivating factor in the adverse employment action. See 
Robinson v. Morris Moore Chevrolet-Buick, Inc., 974 F.Supp. 571 (E.D. 
Tex. 1997). The claimant alleging discrimination must prove the 
elements of a violation--i.e., membership in a protected class (such as 
past, present or future affiliation with the uniformed services); an 
adverse employment action by the employer or prospective employer; and 
a causal relationship between the claimant's protected status and the 
adverse employment action (the ``motivating factor''). To meet this 
burden, a claimant need not show that his or her protected activities 
or status was the sole cause of the employment action; the person's 
activities or status need be only one of the factors that ``a truthful 
employer would list if asked for the reasons for its decision.'' Kelley 
v. Maine Eye Care Associates, P.A, 37 F. Supp.2d 47, 54 (D. Me. 1999); 
see Robinson, 974 F. Supp. at 575 (citing Price Waterhouse v. Hopkins, 
490 U.S. 228, 250 (1989) (addressing Title VII gender discrimination 
claim and related defense)). ``Military status is a motivating factor 
if the defendant relied on, took into account, considered, or 
conditioned its decision on that consideration.'' Fink v. City of New 
York, 129 F.Supp.2d 511, 520 (E.D.N.Y. 2001), citing Robinson, 974 
F.Supp. at 576. The employee is not required to provide direct proof of 
employer animus at this stage of the proceeding; intent to discriminate 
or retaliate may be established through circumstantial evidence. See 
Desert Palace, Inc. v. Costa, 539 U.S. 90 (2003); United States Postal 
Service Bd. of Governors v. Aikens, 460 U.S. 711, 714 (1983); Sheehan, 
240 F.3d at 1014.
    After the employee establishes the elements of an alleged 
violation, the employer may avoid liability by proving by a 
preponderance of the evidence that the claimant's military activities 
or status was not a motivating factor in the adverse employment action. 
See Gummo, 75 F.3d at 106. At this stage, the employer carries the 
burden to prove as an affirmative defense that it would have taken the 
action anyway, without regard to the employee's protected status or 
activity. Sheehan, 240 F.3d at 1014. Because the employer's defenses 
are affirmative under USERRA, if the employer fails to counter the 
employee's evidence, the claimant's proof establishes that the adverse 
employment action was more likely than not motivated by unlawful 
reasons. This framework is set forth in sections 1002.22 and 1002.23, 
which have been revised in response to the comments noted above and to 
accurately reflect the nature of the evidentiary structure intended by 
Congress.
    Section 4311(c)(2) provides the same evidentiary framework for 
adjudicating allegations of reprisal against any person (including 
individuals unaffiliated with the military) for engaging in activities 
to enforce a protected right; providing testimony or statements in a 
USERRA proceeding; assisting or participating in a USERRA 
investigation; or exercising a right provided by the statute. 38 U.S.C. 
4311(c)(2). Section 1002.19 addresses the elements of a case of 
retaliation. One commenter highlighted an ambiguity in the question 
posed in section 1002.19, and the Department has narrowed the question 
to clarify that the section applies only to employer retaliation.
    The Department received responses to its request for comment on the 
application of the anti-discrimination provisions of the Act to 
potential employers. Because this issue is also addressed in section 
1002.40, which explains in some detail the obligations of potential 
employers, the Department will respond to those comments in its summary 
of Subpart C, below.
    The Department received one comment requesting clarification in the 
text of the final rule that USERRA protects not just a service member's 
activities, but also protects a service member's status in the 
uniformed services. For example, an employer may not discriminate 
against a person because of his or her status as a military veteran or 
member of a uniformed

[[Page 75251]]

service, regardless of whether that status results in the performance 
of military activities. The Department agrees with the comment, and has 
revised sections 1002.18, 1002.22 and 1002.23 to reflect that USERRA 
protects both military status and activities.
    The Department received numerous additional comments regarding this 
part of the rule. One comment criticized the rule for failing to state 
that the evidentiary scheme set forth in sections 1002.22 and 1002.23 
applies only to court proceedings and does not apply to the earlier 
administrative stage during which VETS investigates an employee's 
USERRA claim. While the evidentiary structure in the rule certainly 
pertains to the litigation of USERRA claims in court, the Department 
regards the analysis as one that should be taken into account during 
the investigative stage, so that adequate assessments can be made 
regarding the claims of any party to a USERRA dispute. An additional 
comment criticized the proposed rule for failing to explicitly state 
that an employee need only show that his or her protected status or 
activity was one of the factors motivating the adverse employment 
action. Section 1002.22 states that the employee's burden is to prove 
that the protected activity or status was ``one of the factors for the 
employer's adverse action,'' and therefore no revision is necessary. 
Another commenter faulted the proposed rule for failing to state that 
the employee's initial burden of proof includes showing by a 
preponderance of evidence that the protected activity or status was a 
``substantial and motivating'' factor. The Department has concluded 
that under Transportation Management, an employee must show that the 
protected status or activity was a ``substantial or motivating'' 
factor. 462 U.S. at 401. One commenter suggested the addition of the 
phrase ``or more'' to the first sentence of Section 1002.23(b) so that 
it states, ``If you prove that the employer's action against you was 
based on one or more of the prohibited motives listed in paragraph (a) 
of this Section * * *.'' The Department regards this suggestion as 
unnecessary to clarify the meaning of the provision. Finally, the 
Department received one comment suggesting that in a reinstatement case 
in which the employer has failed to reemploy a service member in a 
position of like pay, status and seniority, the burden of proof should 
be on the employer to show that its failure was not a result of 
protected activity or service, and that the burden should be on the 
employee only after reinstatement. Because the comment is ambiguous and 
does not offer clarification of any provision of the regulation, no 
revision has been made to respond to the comment.

Subpart C--Eligibility for Reemployment

General Eligibility Requirements for Reemployment

    USERRA requires that the service member meet five general criteria 
in order to establish eligibility for reemployment:
    (1) That the service member be absent from a position of civilian 
employment by reason of service in the uniformed services;
    (2) That the service member's employer be given advance notice of 
the service;
    (3) That the service member have five years or less of cumulative 
service in the uniformed services with respect to a position of 
employment with a particular employer;
    (4) That the service member return to work or apply for 
reemployment in a timely manner after conclusion of service; and
    (5) That the service member not have been separated from service 
with a disqualifying discharge or under other than honorable 
conditions.
    Section 1002.32 sets out these general eligibility requirements. 
Sections 1002.34-.74 explain the ``absent from a position of civilian 
service'' requirement, sections 1002.85-.88 explain the ``advance 
notice'' requirement, sections 1002.99-.104 explain the ``five years or 
less of cumulative service'' requirement, sections 1002.115-.123 
explain the ``return to work or apply for reemployment'' requirement, 
and sections 1002.134-.138 explain the ``no disqualifying discharge'' 
requirement.
    A person who meets these eligibility criteria, which are contained 
in 38 U.S.C. 4312(a)-(c) and 4304, is entitled to be reemployed in the 
position described in 38 U.S.C. 4313, unless the employer can establish 
one of the three affirmative defenses contained in 38 U.S.C. 4312(d).
    The Department received two comments on the general eligibility 
criteria set out in proposed section 1002.32. The first commenter 
recommended that the phrase ``in the uniformed services'' be inserted 
after the word ``service'' in section 1002.32(a)(2) so that the 
sentence more accurately states, ``You have five years or less of 
cumulative service in the uniformed services with respect to your 
position of employment.'' The Department agrees that this amendment 
improves the clarity of the text, and has made the revision. See 
1002.32(a)(2). The second commenter also requested a clarification to 
the same sentence. In order to reflect that the five-year service limit 
applies to an employee's entire employment relationship with a 
particular employer, including any changes in employment position with 
that particular employer, the Department has revised this sentence 
accordingly. See 1002.32(a)(2).
    There has been some disagreement in the courts over the appropriate 
burden of proof in cases brought under 38 U.S.C. 4312, the provision in 
USERRA establishing the reemployment rights of persons who serve in the 
uniformed services. One court has interpreted that provision to be ``a 
subsection of section 4311 [the anti-discrimination and anti-
retaliation provision].'' Curby v. Archon, 216 F.3d 549, 556 (6th Cir. 
2000). Other courts have interpreted section 4312 to establish a 
statutory protection distinct from section 4311, creating an 
entitlement to re-employment for qualifying service members rather than 
a protection against discrimination. Wrigglesworth v. Brumbaugh, 121 F. 
Supp.2d 1126, 1134 (W.D. Mich. 2000) (stating that requirements of 
section 4311 do not apply to section 4312). Brumbaugh relies in part on 
legislative history and the Department's interpretation of USERRA. Id. 
at 1137. Another district court supports the Brumbaugh decision and 
characterizes the contrary view in Curby as dicta. Jordan v. Air 
Products and Chem., 225 F. Supp.2d 1206, 1209 (C.D. Ca. 2002).
    In the proposed rule, the Department agreed with the district court 
decisions in Brumbaugh and Jordan that sections 4311 and 4312 of USERRA 
are separate and distinct. Accordingly, proposed section 1002.33 
provided that a person seeking relief under section 4312 need not meet 
the additional burden of proof requirements for discrimination cases 
brought under section 4311. The Department disagreed with the decision 
in Curby v. Archon discussed above, insofar as it interprets USERRA to 
the contrary, and the Department invited comment regarding the proper 
interpretation of the statute regarding the burden of proof for relief 
under section 4312.
    The Department received four comments regarding this issue, and all 
four agreed with the Department's interpretation that a person alleging 
a violation of section 4312 of USERRA need not prove the elements of an 
alleged violation of section 4311. In the absence of any negative 
comment to consider, the Department will incorporate this provision of 
the

[[Page 75252]]

proposed rule in the final rule. In addition, one of the four 
commenters on this topic requested that section 1002.33 contain much 
more detail about VETS' administrative procedures that follow the 
filing of a complaint stating a claim under section 4312. The 
Department declines this request, as it suggests the insertion of 
material that is covered below in Subpart F of this rule, Compliance 
Assistance, Enforcement and Remedies.

Coverage of Employers and Positions

    Sections 1002.34 through 1002.44 of the final rule list the 
employers and employment positions that are covered by USERRA. Section 
1002.34 provides that the Act's coverage extends to virtually all 
employers in the United States; the statute contains no threshold or 
minimum size to limit its reach. The Department received two comments 
regarding this coverage provision. First, the Department was asked 
whether USERRA applies to Native American tribes when they act as 
employers. Section 1002.34(a) reiterates USERRA's broad applicability 
to all employers, explicitly including the Federal government and the 
States. 38 U.S.C. 4303(4). While the face of the statute does not 
explicitly cover Native American tribal employers, USERRA's legislative 
history reflects the Act was intended to apply to ``Native American 
tribes and their business enterprises.'' S. Rep. No. 103-158, at 42 
(1993). Thus, although the Department concludes that USERRA likely 
applies to Native American tribal employers, the Department recognizes 
that there is a difference between the right to demand compliance with 
the law and the means to enforce it. Kiowa Tribe of Oklahoma v. 
Manufacturing Techs., Inc., 523 U.S. 751, 754 (1998). Native American 
tribes, like the States, possess sovereign immunity from suit except 
where ``Congress has authorized the suit or the tribe has waived its 
immunity.'' Kiowa Tribe of Oklahoma, 523 U.S. at 754. As a result, 
judicial enforcement of the Act against an Indian tribe depends on 
whether the tribe has waived its immunity, and such a waiver ``cannot 
be implied but must be unequivocally expressed.'' Santa Clara Pueblo v. 
Martinez, 436 U.S. 49, 58 (1978). Accordingly, the Department 
recognizes that the application of USERRA's provisions to Native 
American tribal employers is a complicated and heavily fact-dependent 
issue that, if raised in a USERRA proceeding, will ultimately be 
resolved by the courts on a case-by-case basis. See, e.g., C & L 
Enterprises, Inc. v. Citizen Band Potawatomi Tribe of Oklahoma, 532 
U.S. 411 (2001) (arbitration provisions in contract amounted to clear 
waiver of tribal immunity).
    An additional commenter suggests the elimination of section 
1002.34(c), which states that USERRA applies to American firms 
operating in a foreign country, because it ``attempts to create an 
extraterritorial application that is not established under the 
statute.'' To the contrary, the text set out in section 1002.34(c) is 
based on an unambiguous statutory provision establishing such 
applicability. See 38 U.S.C. 4319. Accordingly, the Department has 
retained this provision in the final rule. See 1002.34.
    Other provisions in this section address various aspects of the 
employment relationship subject to the Act. Section 1002.35 defines the 
term ``successor in interest,'' and section 1002.36 further addresses 
the issue. Section 1002.37 addresses the situation in which more than 
one employer may be responsible for one employee. The Department 
received two comments on this provision regarding multiple employers. 
The first commenter suggested that, as with regulations promulgated 
under the Family and Medical Leave Act, see, e.g. 29 CFR 825.106, the 
provision should allocate statutory responsibilities and liability 
between ``primary'' and ``secondary'' employers. Similarly, an 
additional commenter submitted that the statute's reemployment 
provisions should apply only to the ``primary'' employer and not the 
``secondary'' employer.
    In response to these two comments, the Department again notes 
USERRA's broad definition of ``employer'' as an entity ``that has 
control over employment opportunities.'' 38 U.S.C. 4303(4). In 
addition, USERRA's legislative history instructs that the term 
``employer'' is intended to be broadly construed to cover situations 
where more than one entity exercises control over different aspects of 
the employment relationship. S. Rep. No. 103-158, at 41 (1993); H.R. 
Rep. 103-65, Pt. I, at 21(1993), citing, e.g., Magnuson v. Peak 
Technical Services, Inc., 808 F.Supp. 500, 507-511 (E.D. Va. 1992) (the 
legal issue is whether one or more of the entities exercise requisite 
control over significant aspects of employment relationship so as to be 
deemed an ``employer'' under the statute). Thus, in cases in which more 
than one entity employs an individual, the entity's status, 
responsibility and liability as an employer under USERRA is assessed by 
determining whether the entity controls the employee's employment 
opportunities, not by reference to shorthand labels such as ``primary 
employer'' and ``secondary employer.'' Indeed, under this analytical 
framework, employers may share or co-determine certain aspects of the 
employment relationship, and in those cases there will not be a 
``primary'' and ``secondary'' employer. Accordingly, the Department 
will retain the provision unmodified. See 1002.37.
    The Department received a comment from the Building and 
Construction Trades Department of the AFL-CIO (``BCTD'') regarding the 
Department of Labor's treatment of hiring halls in proposed section 
1002.38, which provides that a hiring hall is an ``employer'' if ``the 
hiring and job assignment functions have been delegated by an employer 
to the hiring hall.'' The BCTD recommends that this provision be 
eliminated, arguing that hiring halls in the unionized construction 
industry represent an ``arrangement'' between the union and local 
employers to facilitate referral of available union members for work. 
According to the BCTD, hiring halls do not perform any hiring or 
assignment functions beyond referring the number and types of workers 
requested by the employer. The BCTD suggests that the multi-employer 
group using the hiring hall to obtain workers should be the 
``employer'' rather than the hiring hall. In order to effectuate this 
suggestion, the BCTD proposes, in addition to eliminating section 
1002.38, that the Department modify the regulatory definition of 
``employer'' (section 1002.5(d)) to state, ``In industries in which 
exclusive hiring halls are utilized, all employers who are required to 
obtain applicants through a given hiring hall arrangement, may 
constitute a single employer under the Act.''
    The Department's response to the BCTD's proposal lies again in the 
breadth of the statutory definition of ``employer,'' and in Congress's 
unambiguous intent that this definition be read broadly to include 
entities, such as hiring halls, to whom job referral responsibilities 
have been delegated. See S. Rep. No. 103-158, at 42 (1993); H.R. Rep. 
103-65, Pt. I, at 21(1993). In addition, the BCTD's proposed amendment 
to the definition of employer in section 1002.5, which seeks the 
permanent application of a ``single employer'' framework to multiple 
hiring hall employers, is misplaced. The term ``single employer'' 
applies to firms that operate as an integrated enterprise and ``exert [ 
] significant control over'' the employees in question. G. Heileman 
Brewing Co. v. NLRB, 879 F.2d 1526, 1530 (7th Cir. 1989). To determine 
whether firms are sufficiently integrated to constitute a single 
employer, courts

[[Page 75253]]

look to (1) common management; (2) centralized control of labor 
relations; (3) interrelation of operations; and (4) common ownership or 
financial control. See Radio and Television Broadcast Technicians Local 
Union 1264 v. Broadcast Service of Mobile, Inc., 380 U.S. 255, 256, 85 
S. Ct. 876, 13 L. Ed. 2d 789 (1965); see also Naperville Ready Mix, 
Inc. v. NLRB, 242 F.3d 744, 752 (7th Cir. 2001), cert. denied, 534 U.S. 
1040 (2001). While one or more employers utilizing the same hiring hall 
may or may not operate as an integrated enterprise so that they meet 
the criteria of the ``single employer'' test, such criteria are not 
essential to determine whether the entity is an employer for the 
purposes of USERRA. Accordingly, the Department rejects the BCTD's 
suggestions, and will retain the provision regarding hiring halls in 
unchanged form. See 1002.38.
    Proposed section 1002.39 covers States and other political 
subdivisions of the United States as employers, and the Department 
received one comment regarding this provision. The commenter noted 
USERRA's specific treatment for reemployment of employees of the 
Federal legislative and judicial branches and, seeing no similar 
provision for employees of State legislative and judicial branches, 
asked whether USERRA's protections applied to the latter group. In 
response, the Department again notes USERRA's broad applicability to 
all employers, explicitly including the States, 38 U.S.C. 4303(4), 
without regard to whether the State employer is the State's judicial or 
legislative branch.
    The Department received three favorable comments in response to 
proposed section 1002.40, which confirms that USERRA makes it unlawful 
for any employer to deny employment to a prospective employee on the 
basis of his or her membership, application for membership, performance 
of service, application to perform service, or obligation for service 
in the uniformed services, or on the basis of his or her exercise of 
any right guaranteed under the Act. In addition to these favorable 
comments, the Department received two comments regarding the 
application of this principle in specific circumstances. The first 
commenter submits a hypothetical in which a person is on extended 
active duty and cannot interview for a job or be present for the job's 
start date because of service in the uniformed services. In the 
scenario presented, the job advertisement states clearly that the 
``most qualified'' applicants must be interviewed and the selectee is 
desired to start work immediately upon selection. The person on active 
duty can do neither, but does apply for the job by mail and is among 
the most qualified based on the application. The employer eliminates 
all applicants who cannot for whatever reason appear for an interview 
or start work immediately upon selection. The commenter requests that 
the Department determine that such conduct on the part of an employer 
would not constitute a violation of USERRA. The second commenter 
suggests a scenario in which a prospective employer withdraws an offer 
of employment because of a person's military service or obligations, 
and urges the Department to state in the final rule that while such a 
withdrawal may constitute discrimination under USERRA, the prospective 
employee is not entitled to reemployment rights under section 4312 of 
the statute.
    The Department declines to include either of these hypothetical 
scenarios or their suggested outcomes in the final rule. Each 
individual case involving an issue under USERRA must be decided based 
on the specific facts of that case, with all the attendant and 
potentially influential details, together with the appropriate and 
applicable legal standards.
    In addition, the Department received three comments regarding 
whether employer inquiries about military service or obligations during 
the hiring process are permissible under USERRA. The Department 
concludes that it is not unlawful in itself for a prospective employer 
to ask an applicant about military service or obligations. Indeed, in 
many instances a prospective employee's military experience may enhance 
his or her potential value to the employer. However, if information 
elicited in response to such questions forms the basis of the 
employer's decision not to hire the applicant, or to take other adverse 
action against the person once hired, the inquiries may constitute 
evidence of unlawful discrimination.
    As stated earlier, temporary, part-time, probationary, and seasonal 
employment positions are also covered by USERRA. The Department 
received one comment on proposed section 1002.41, which establishes 
that an employer does not have reemployment obligations under USERRA if 
the temporary or seasonal position is for a brief, non-recurrent period 
and the employee has no reasonable expectation of continued employment 
indefinitely or for a significant period. The commenter submits that 
the Department should state in the final rule that in such cases, an 
employer need not provide employment benefits during the absence from 
employment due to military service.
    Section 4312(d)(1)(C) of USERRA clearly provides that an employer 
does not possess any reemployment obligations if an employee departing 
for military service is in a brief, non-recurrent position and has no 
reasonable expectation that such employment will continue indefinitely 
or for a significant period. However, an employee in a brief, non-
recurrent position may be entitled to non-seniority benefits under 
certain situations. Because section 4316(b)(1)(B) requiring employers 
to provide non-seniority benefits to employees is not limited by an 
exception regarding employees occupying brief, nonrecurrent employment 
positions, the Department interprets the mandate of section 
4316(b)(1)(B) to apply to all employees, including those in brief, 
nonrecurrent positions of employment. However, as discussed below in 
Subpart D and in section 1002.150 of this rule, the employer is 
obligated to provide non-seniority benefits to employees on military 
leave only to the extent that the employer provides such benefits to 
similarly situated employees on comparable non-military furlough or 
leave of absence. As a result, if an employer provides non-seniority 
benefits to similarly situated employees in brief, nonrecurrent 
employment positions on comparable, non-military leave, those benefits 
must also be provided to employees in brief, nonrecurrent employment 
positions on military leave.
    Section 1002.42 explains that USERRA covers employees on strike, 
layoff, or leave of absence, and section 1002.43 makes clear that 
persons occupying professional, executive and managerial positions also 
are entitled to USERRA rights and benefits. The Department received two 
comments on proposed section 1002.44, which addresses the distinction 
between an independent contractor and an employee under USERRA. This 
section provides that USERRA does not apply to individuals who act as 
independent contractors rather than as employees of an employer, and 
outlines six factors that must be considered in deciding whether a 
person is an independent contractor. One commenter suggested the 
Department eliminate as too limiting the word ``managerial'' from one 
of the six factors that addresses a ``person's opportunity for profit 
or loss that depends on his or her managerial skill.''
    The second commenter disputed the six-factor test entirely, and 
stated the appropriate legal standard for determining whether a person 
is an

[[Page 75254]]

employee or an independent contractor is found in Nationwide Mutual 
Insurance Co. v. Darden, 503 U.S. 318 (1992), a case decided under the 
Employee Retirement Income Security Act (ERISA). In Darden, the Supreme 
Court set forth a common-law-based ``degree of control'' test that 
focuses primarily on ``the hiring party's right to control the manner 
and means by which the product is accomplished.'' Id. The commenter 
sought the elimination of three of the six factors set out in 1002.44 
as inconsistent with the common law test and because ``they do not help 
to inform the decision.''
    The independent contractor provision in this rule is based on 
Congress's intent that USERRA's definition of ``employee'' be 
interpreted in the same expansive manner as the term is defined under 
the Fair Labor Standards Act (FLSA). H.R. Rep. No. 103-65, Pt. I, at 29 
(1993) (citing Brock v. Mr. W. Fireworks, Inc., 814 F.2d 1042 (5th 
Cir.), cert. denied, 484 U.S. 924 (1987)); S. Rep. No. 103-58, at 40 
(1993). In determining whether a person is a statutory employee or an 
independent contractor under the FLSA, the ``economic reality'' test is 
employed. See, e.g., Mr. W. Fireworks, 814 F.2d at 1043; see also Debra 
T. Landis, Determination of ``Independent Contractor'' and ``Employee'' 
Status for Purposes of the FLSA, 51 A.L.R. Fed. 702 (2005). The focal 
point of the test is whether the individual is economically dependent 
on the business to which he or she renders service or is, as a matter 
of economic fact, in business for him- or herself. Bartels v. 
Birmingham, 332 U.S. 126, 130 (1947). In applying the test, courts 
generally examine five or six factors. Landis, supra, section 2. No one 
of the factors is determinative. Rutherford Food Corp. v. McComb, 331 
U.S. 722 (1947). Moreover, the factors are ``simply analytical tools,'' 
thus, ``their weight, number and composition are variable.'' Dole v. 
Snell, 875 F.2d 802, 805 n. 2 (10th Cir. 1989). In Mr. W. Fireworks, 
the court examined five factors to use in determining independent 
contractor status: ``(1) The degree of control exercised by the alleged 
employer; (2) the extent of the relative investments of the putative 
employee and employer; (3) the degree to which the `employee's' 
opportunity for profit and loss is determined by the employer; (4) the 
skill and initiative required in performing the job; and (5) the 
permanency of the relationship.'' Id. (citing United States v. Silk, 
331 U.S. 704 (1947)). Many courts also examine a sixth factor: Whether 
the service rendered is an integral part of the employer's business. 
See, e.g., Henderson v. Interchem Coal Co., 41 F.3d 567, 570 (10th Cir. 
1994); Real v. Driscoll Strawberry Associates, Inc., 603 F.2d 748 (9th 
Cir. 1979).
    Consistent with USERRA's legislative history, the proposed section 
essentially restates the test used under the FLSA to determine 
independent contractor status. In addition, in FLSA cases, ``the courts 
have generally indicated that the common law degree of control test is 
not controlling.'' See Landis, supra, section 2. Indeed, even in 
Darden, the Supreme Court indicated that the common law test is 
inappropriate in FLSA cases. 503 U.S. at 326 (``While the FLSA, like 
ERISA, defines an `employee' to include `any individual employed by an 
employer,' it defines the verb `employ' expansively to mean `suffer or 
permit to work.' This latter definition [* * *] stretches the meaning 
of `employee' to cover some parties who might not qualify as such under 
a strict application of traditional agency law principles.'' (internal 
citations omitted)). USERRA's legislative history shows that Congress 
made a clear choice between the test employed under the FLSA and the 
degree-of-control test, and explicitly chose the former. In addition, 
with respect to the proposal to delete the word managerial from the 
second factor of the test set out in section 1002.44(b), the Department 
notes that most courts use that term when applying the test. See, e.g., 
Imars v. Contractors Manufacturing Services, Inc., 165 F.3d 27 (6th 
Cir. 1998). As a result, the Department will retain the test for 
independent contractor as set forth in section 1002.44.

Coverage of Service in the Uniformed Service

    Sections 1002.54 through 1002.62 explain the term ``service in the 
uniformed services,'' list the various types of uniformed services, and 
clarify that both voluntary and involuntary duty are covered under 
USERRA. Section 1002.54 provides that ``service in the uniformed 
services'' includes a period for which a person is absent from a 
position of employment for the purpose of an examination to determine 
his or her fitness to perform duty in the uniformed services. Sections 
1002.55 and 1002.56 provide that service under certain authorities for 
funeral honors duty or as a disaster-response appointee also constitute 
service in the uniformed services. Section 1002.57 clarifies when 
service in the National Guard is covered by USERRA, and section 1002.58 
addresses service in the commissioned corps of the Public Health 
Service, a division of the Department of Health and Human Services. 
Section 1002.59 recognizes coverage for persons designated by the 
President in time of war or national emergency.
    Sections 1002.60, 1002.61, and 1002.62 address the coverage of a 
cadet or midshipman attending a service academy, and members of the 
Reserve Officers Training Corps, Commissioned Corps of the National 
Oceanic and Atmospheric Administration, Civil Air Patrol, and Coast 
Guard Auxiliary. The Department received one comment regarding the 
provision in section 1002.61, which states that training performed by 
members of ROTC is not considered ``service in the uniformed services'' 
under USERRA's definition of that term, except in very limited 
circumstances. In particular, section 1002.61 explains that, on 
occasion, Reserve and National Guard units will enroll enlisted unit 
members in a local college's ROTC program in order to train them to 
become officers. In such cases, the ROTC member may perform ROTC 
training while in a duty status with the National Guard or Reserve 
unit, either active duty training or inactive duty training. Under 
these circumstances, the ROTC duty would be considered ``service in the 
uniformed services'' for USERRA purposes, and the ROTC member would be 
entitled to reemployment rights following such service. 38 U.S.C. 
4303(13).
    The commenter has requested that the Department modify section 
1002.61 to establish broader USERRA protection for ROTC members. 
Specifically, the commenter points out that where an ROTC member has a 
contractual obligation to complete the ROTC course of training, he or 
she should have USERRA protection against discrimination. An ROTC 
member generally signs an agreement that specifies he or she will 
complete the ROTC program and accept a commission upon graduation, or 
serve as an enlisted member of the service if he or she fails to 
successfully complete ROTC training. The Department agrees with the 
commenter and, following consultation with the Department of Defense, 
has made the necessary revision by adding subsection (b) to 1002.61. 
The Department's consultation with the Department of Defense also 
resulted in technical modifications to section 1002.61(a). See section 
1002.61.

Absence From a Position of Employment Necessitated by Reason of Service 
in the Uniformed Services

    The Department received four comments regarding proposed section 
1002.73, which addresses the issue of

[[Page 75255]]

the employee's reason for leaving employment as it bears on his or her 
reemployment rights. Section 4312(a) of the Act states that ``any 
person whose absence from a position of employment is necessitated by 
reason of service in the uniformed services'' is entitled to the 
reemployment rights and benefits of USERRA, assuming the Act's 
eligibility requirements are met. Military service need not be the only 
reason the employee leaves, provided such service is at least one of 
the reasons. See H.R. Rep. No. 103-65, Pt. I, at 25 (1993).
    All four commenters expressed unease about the apparent latitude 
given employees in this section. The first commenter, concerned about 
an employee's opportunity to seek other employment during absence for 
military leave, suggested that the Department permit employers to 
evaluate whether it was reasonable that an employee's absence included 
a particular purpose other than the actual time engaged in service 
itself. Similarly, a second commenter suggested that the Department 
indicate in this provision that a neutral observer must be able to 
conclude that the absence is related to performing military service. 
Although the commenters did not say so explicitly, the presumed result 
of imposing such requirements on an employee's non-military activities 
would be to permit employers to deny reemployment if the employer 
concludes that the employee's absence included a purpose that was 
unreasonable or inappropriate. The effect of these suggestions would be 
to impose an additional requirement for reemployment eligibility based 
on an employee's conduct during absence from employment for military 
service beyond the requirements contained in the statute. Consequently, 
the Department will not include the proposed addition.
    The third commenter requests that the Department state in section 
1002.73 that an employee cannot extend the USERRA-protected period of 
absence for non-military purposes. Because section 1002.73 clearly 
provides that the period of absence from employment must be 
necessitated by military service, there is no need for modification on 
this point. The final commenter on this provision requests that the 
Department require an employee to return to work within a prescribed 
period of time if the employee's mobilization orders are cancelled. The 
Department will not prescribe a set period of time within which an 
employee must report back to work following the cancellation of 
mobilization orders, because the facts and circumstances of each case 
will differ. However, in the event that a mobilization is cancelled, an 
employee on military leave of absence should report back to his or her 
employer as soon as practicable.
    USERRA does not impose a limit on the amount of time that may 
elapse between the date the employee leaves his or her position and the 
date he or she actually enters the service. Proposed section 1002.74 
recognized that no such limit is warranted. A person entering military 
service generally needs a period of time to organize his or her 
personal affairs, travel safely to the site where the service is to be 
performed, and arrive fit to perform service. The amount of time needed 
for these preparations will vary from case to case. Moreover, the 
actual commencement of the period of service may be delayed for reasons 
beyond the employee's control. If an unusual delay occurs between the 
time the person leaves civilian employment and the commencement of the 
uniformed service, the circumstances causing the delay may be relevant 
to establish that the person's absence from civilian employment was 
``necessitated by reason of service in the uniformed services.'' See 
Lapine v. Town of Wellesley, 304 F.3d 90, 100 (1st Cir. 2002).
    The Department received two comments suggesting this provision 
could be subject to abuse. One commenter suggested that the Department 
should restrict the time off to prepare for military service solely to 
travel or to a prescribed time period. The second commenter requested 
that the Department state that USERRA permits time off from employment 
to put one's affairs in order only immediately and seamlessly before 
the military service itself and not on an intermittent or periodic 
basis during the weeks prior to military service. The final commenter 
was more concerned that employees facing an extended period of military 
service are ensured an adequate period of time to prepare for service, 
so requested that the rule provide that an employee is entitled to a 
minimum of one week off from employment prior to service.
    The Department is averse to placing in this provision the 
limitations or specific time frames suggested by these commenters. The 
amount of time that an employee may need to prepare for military 
service will vary, and will depend on the facts of each case. In 
addition, employees may need intermittent time off from work prior to 
military service for brief but repeated periods to put their affairs in 
order, and such periods may be necessary to, for example, interview 
child care providers, go to meetings with bank officers regarding 
financial matters, or seek assistance for elderly parents. Although the 
Department is disinclined to include the commenter's limitations in 
section 1002.74, the Department has revised the text of the provision 
to reflect that the duration of the military service, the amount of 
notice supplied to an employee called to military service, and the 
location of the service are all factors that influence the amount of 
time an employee may need in order to rest and/or put his or her 
affairs in order.

Requirement of Advance Notice

    Section 1002.85 explains one of the basic obligations imposed on 
the service member by USERRA as a prerequisite to reemployment rights: 
the requirement to notify the employer in advance about impending 
military service. 38 U.S.C. 4312(a)(1). Section 4312(a)(1) of USERRA 
contains three general components of adequate notice: (i) The sender of 
the notice; (ii) the type of notice; and (iii) the timing of notice. 
First, the employee must notify his or her employer that the employee 
will be absent from the employment position due to service in the 
uniformed services. An ``appropriate officer'' from the employee's 
service branch, rather than the employee, may also provide the notice 
to the employer on behalf of the employee. Second, the notice may be 
either verbal or in writing. See 38 U.S.C. 4303(8) (defining ``notice'' 
to include both written and verbal notification) and 38 U.S.C. 
4312(a)(1). Although written notice by the employee provides evidence 
that can help establish the fact that notice was given, the sufficiency 
of verbal notice recognizes the ``informality and current practice of 
many employment relationships[.]'' S. Rep. No. 103-158, at 47 (1993). 
The act of notification is therefore more important than its particular 
form. Third, the notice should be given in advance of the employee's 
departure. USERRA does not establish any bright-line rule for the 
timeliness of advance notice, i.e., a minimum amount of time before 
departure by which the employee must inform the employer of his or her 
forthcoming service. Instead, timeliness of notice must be determined 
by the facts in any particular case, although the employee should make 
every effort to give notice of impending military service as far in 
advance as is reasonable under the circumstances. See H.R. Rep. No. 
103-65, Pt. 1, at 26 (1993).
    The Department received several comments concerning the general 
requirement of notice. One commenter suggested the regulations address 
situations in which an employee is

[[Page 75256]]

employed by more than one employer, for instance, in cases in which an 
employee is referred by a hiring hall to various employers in a common 
industry, or cases in which an employment agency assigns an employee to 
a particular job site. The commenter suggests that the rule provide 
that where an employee is employed by one or more employers, the 
employee must provide the required notice to each employer. The 
Department agrees with the submission, and has modified section 1002.85 
accordingly. See section 1002.85(a).
    Four commenters requested the regulations adopt a general 
requirement that notice be given 30 days in advance of impending 
service. Another commenter requested the Department employ stronger 
language with respect to an employee's obligation to give timely 
notice, suggesting the final rule state the employee should ``make 
every effort'' to give advance notice ``as promptly as possible.'' The 
Department does not intend that these regulations impose any new 
requirements, either explicit or implied, upon the exercise of the 
rights granted to protected persons by the statute. Therefore, the 
Department did not adopt these suggestions concerning the timeliness of 
notice. However, the Department has revised Section 1002.85 to note 
that the Department of Defense, in their USERRA regulations, ``strongly 
recommends that advance notice to civilian employers be provided at 
least 30 days prior to departure for uniformed service when it is 
feasible to do so.'' See 32 CFR 104.6(a)(2)(i)(B). While this provision 
does not establish an inflexible 30-day requirement for the provision 
of advance notice, it does serve to demonstrate that the Department of 
Defense expects that service members exercise care when providing 
notice to their employers of impending service in the uniformed 
services.
    The Department received seven comments related to the provision in 
section 1002.85 that advance notice may be either written or verbal. 
One commenter requested the final rule contain a ``recommendation'' 
that notice be in writing. Another commenter requested the regulation 
provide that an employee use the employer's established procedure for 
requesting other types of leave (i.e., written), except in cases where 
written notice is precluded pursuant to USERRA. Five commenters 
requested the final rule require the employee to provide, either before 
or shortly after the commencement of the uniformed service, some form 
of documentation, either a written notice or a copy of military orders 
or similar documentation of the service. As noted above, both the 
statutory language and the legislative history make clear Congress's 
intent that advance notice may be either verbal or written. However, 
the Department again notes that the Department of Defense regulations 
under USERRA provide guidance to service members that ``strongly 
recommends'' that advance notice be given in writing, while 
acknowledging that verbal notice is sufficient. See 32 CFR 
104.6(a)(2)(i)(B). The Department of Defense regulations also make 
clear that the military services must consider and, where military 
requirements permit, accommodate legitimate concerns of civilian 
employers concerning the military service or obligations of their 
employees. See 32 CFR 104.4(c) and (d); 104.5(b)(6); and 104.6(n), (o).
    Section 1002.86 implements the statutory exceptions to the 
requirement of advance notice of entry into the uniformed services. The 
statute recognizes that in rare cases it may be very difficult or 
impossible for an employee to give advance notice to his or her 
employer. To accommodate these cases, the advance notice requirement 
may be excused by reason of ``military necessity'' or circumstances 
that make notice to the employer ``otherwise impossible or 
unreasonable.'' 38 U.S.C. 4312(b). Section 4312(b) also provides that 
the uniformed services make the determination whether military 
necessity excuses an individual from notifying his or her employer 
about forthcoming military service. Any such determination is to be 
made according to regulations issued by the Secretary of Defense. See 
32 CFR part 104. Finally, section 4312(b) states that the ``military 
necessity'' determination is not subject to judicial review. The same 
finality and exemption from review, however, do not apply if the 
employee fails to provide notice to his or her employer because the 
particular circumstances allegedly make notification ``impossible or 
unreasonable.'' Whether the circumstances of the case support the 
employee's failure to provide advance notice of service are questions 
to be decided by the appropriate fact-finder. See S. Rep. No. 103-158, 
at 47 (1993).
    One commenter requested the Department note in section 1002.86 that 
situations in which the provision of advance notice is precluded 
because it is ``impossible or unreasonable'' will be rare, especially 
in light of the access to telephones, e-mail and other readily 
available sources by which contact with an employer may be made. The 
commenter also requested the section provide that in such rare cases, 
the employee must give the employer notice at the employee's earliest 
opportunity. The Department views the current language in subsection 
1002.86(b) as sufficient to address the notice requirement in 
``impossible or unreasonable'' circumstances, and therefore has not 
adopted the commenter's suggested revision.
    Proposed section 1002.87 makes explicit that the employee is not 
required to obtain the employer's permission before departing for 
uniformed service in order to protect his or her reemployment rights. 
Imposing a prior consent requirement would improperly grant the 
employer veto authority over the employee's ability to perform service 
in the uniformed services by forcing the employee to choose between 
service and potential loss of his or her employment position, if 
consent were withheld.
    Section 1002.88 implements the long-standing legal principle that 
an employee departing for service is not required to decide at that 
time whether he or she intends to return to the pre-service employer 
upon completion of the tour of duty. Rather, the employee may defer the 
decision until after he or she concludes the period of service, and the 
employer may not press the employee for any assurances about his or her 
plans. See H.R. Rep. No. 103-65, Pt. I, at 26 (1993) (``One of the 
basic purposes of the reemployment statute is to maintain the service 
member's civilian job as an `unburned' bridge.'') and S. Rep. No. 103-
158, at 47 (1993), both of which cite Fishgold v. Sullivan Drydock and 
Repair Corp., 328 U.S. 275, 284 (1946).
    Section 1002.88 also provides that an employee cannot waive the 
right to reemployment by informing the employer that he or she does not 
intend to seek reemployment following the service. This general 
principle that an employee cannot waive USERRA's right to reemployment 
until it has matured, i.e., until the period of service is completed, 
is reiterated in the discussion of USERRA's ``Furlough and Leave of 
Absence'' provisions. See section 1002.152.
    The Department received three comments regarding section 1002.88, 
all of which contested the Department's conclusion that a person cannot 
waive the right to reemployment by notifying the employer prior to or 
during the period of military service that he or she does not intend to 
seek reemployment upon completion of the service. Commenters included 
the Equal Employment Advisory Council, the U.S.

[[Page 75257]]

Chamber of Commerce, and a law firm. The Department's conclusion is 
based on both the USERRA's broad prohibition against waivers of 
statutory rights, and the statute's legislative history on this point. 
Section 4302(b) of USERRA states that the statute supersedes ``any * * 
* contract, agreement, policy, plan, practice, or other matter that 
reduces, limits, or eliminates in any manner any right or benefit 
provided by [the Act].'' 38 U.S.C. 4302(b). This provision against 
waivers has been interpreted expansively; for instance, it includes a 
prohibition against the waiver in an arbitration agreement of an 
employee's right to bring a USERRA suit in Federal court. See, e.g., 
Garrett v. Circuit City Stores, Inc., 338 F.Supp.2d 717, 721-22 
(N.D.Tex. 2004). USERRA's legislative history underscores that this 
provision is intended to prohibit ``employer practices and agreements, 
which provide fewer rights or otherwise limit rights provided under 
amended chapter 43 or put additional conditions on those rights * * 
*.'' H. Rep. No. 103-65, Pt. I, at 20 (1993). This provision, coupled 
with the mandate to courts to liberally construe USERRA to the benefit 
of the service member, supports the Department's determination 
regarding waivers of reemployment rights made before or during service. 
However, in light of the comments received on this point, the 
Department has revised section 1002.88 to clarify that a person cannot 
waive his or her reemployment rights prior to or during a period of 
service in the uniformed services. See section 1002.88.

Period of Service

    USERRA provides that an individual may serve up to five years in 
the uniformed services, in a single period of service or in cumulative 
periods totaling five years, and retain the right to reemployment by 
his or her pre-service employer. 38 U.S.C. 4312(c). Sections 1002.99 
through 1002.104 implement this statutory provision. The Department 
received one comment on Section 1002.99, which implements the basic 
five-year period established by the statute, requesting that the five-
year period be reduced to two years. Because the time period is 
established by statute, the Department has rejected the suggestion. See 
section 1002.99.
    Section 1002.100 provides that the five-year period includes only 
actual uniformed service time. Periods of time preceding or following 
actual service are not included even if those periods may involve 
absences from the employment position for reasons that are service-
related, for example, travel time to and from the duty station, time to 
prepare personal affairs before entering the service, delays in 
activation, etc. The Department received one comment regarding this 
provision, indicating that employers may have difficulty in 
ascertaining which part of the absence from employment is attributable 
to actual time in the uniformed service, and which part of the absence 
was service-related. As a result, the commenter suggests that employers 
either be allowed to assess an employee's entire absence from 
employment for the purposes of the five-year limit or, alternatively, 
be permitted to request documentation from an employee that will 
demonstrate the precise length of the actual military service. Because 
the text of the provision comports with the statute and its legislative 
history, the Department declines the suggestion to amend the text of 
the rule. However, in response to the stated concerns, the Department 
advises employers that the Secretaries of the Military Departments and 
the Commandant of the Coast Guard are expected to provide assistance to 
civilian employers of employees covered by USERRA, 32 CFR 104.5(b)(6). 
Such assistance may include support to employers to ascertain which 
part of the absence from employment constituted service in the 
uniformed services.
    Section 1002.101 clarifies that the five-year period pertains only 
to the cumulative period of uniformed service by the employee with 
respect to one particular employer, and does not include periods of 
service during which the individual was employed by a different 
employer. Therefore, the employee is entitled to be absent from 
employment with a particular employer because of service in the 
uniformed services for up to five years and still retain reemployment 
rights with respect to that employer; this period starts anew with each 
new employer. The regulation derives from section 4312(c)'s language 
tying the five-year period ``to the employer relationship for which a 
person seeks reemployment[.]'' 38 U.S.C. 4312(c).
    One commenter requested guidance on applying the five-year limit to 
cases in which an employee is employed by more than one employer. The 
Department has revised section 1002.101 to reflect that if an employee 
is employed by more than one employer, a separate five-year period runs 
as to each employer independently, even if those employers share or co-
determine the employee's terms and conditions of employment. See 
section 1002.101.
    Section 1002.102 addresses periods of service undertaken prior to 
the enactment of USERRA, when the Veterans' Reemployment Rights Act 
(VRRA) was in effect. If an individual's service time counted towards 
the VRRA's four or five-year periods for reemployment rights, then that 
service also counts towards USERRA's five-year period. The regulation 
implements section (a)(3) of the rules governing the transition from 
the VRRA to USERRA, which appear in a note following 38 U.S.C. 4301.
    The Department invited comments as to whether its interpretation in 
proposed section 1002.102 best effectuates the purpose of the Act, and 
received one comment in response. The commenter indicated that in reply 
to the question posed in section 1002.102 regarding whether the five-
year service limit includes periods of service that the employee 
performed before USERRA was enacted, the Department should not provide 
an unqualified ``yes,'' but instead should indicate that ``it depends'' 
on whether the individual's service time counted towards the VRRA's 
four or five-year periods for reemployment rights. The Department 
agrees, and has made the change to the text of this provision. See 
1002.102.
    Section 4312(c) enumerates eight specific exceptions to the five-
year limit on uniformed service that allow an individual to serve 
longer than five years while working for a single employer and retain 
reemployment rights under USERRA. 38 U.S.C. 4312(c)(1)-(4)(A)-(E). The 
exceptions involve unusual service requirements, circumstances beyond 
the individual's control, or service (voluntary or involuntary) under 
orders issued pursuant to specific statutory authority or the authority 
of the President, Congress or a Service Secretary. Section 1002.103 
implements this provision by describing each exception set out in the 
statute.
    The regulation also recognizes a ninth exception based on equitable 
considerations. A service member is expected to mitigate economic 
damages suffered as a consequence of an employer's violation of the 
Act. See Graham v. Hall-McMillen Co., Inc., 925 F. Supp. 437, 446 (N.D. 
Miss. 1996). If an individual remains in (or returns to) the service in 
order to mitigate economic losses caused by an employer's unlawful 
refusal to reemploy that person, the additional service is not counted 
against the five-year limit. The Department sought comment on whether 
an exception to the five-year limit based on the service member's 
mitigation of economic loss furthers the

[[Page 75258]]

purposes of the statute, and received four comments in support of the 
provision.
    Section 1002.104 implements section 4312(h), which prohibits the 
denial of reemployment rights based on the ``timing, frequency, and 
duration'' of the individual's training or service, as well as the 
nature of that service or training. 38 U.S.C. 4312(h). A service 
member's reemployment rights must be recognized as long as the 
individual has complied with the eligibility requirements specified in 
the Act. Id. The legislative history of section 4312(h) makes clear the 
Congress' intent to codify the holding of the United States Supreme 
Court in King v. St. Vincent's Hospital, 502 U.S. 215 (1991). See H.R. 
Rep. No. 103-65, Pt. I, at 30 (1993); S. Rep. No. 103-158, at 52 
(1993). In King, the court held that no service limit based on a 
standard of reasonableness could be implied from the predecessor 
version of USERRA. Section 4312(h). Section 1002.104 therefore 
prohibits applying a ``reasonableness'' standard in determining whether 
the timing, frequency, or duration of the employee's service should 
prejudice his or her reemployment rights.
    Consistent with views expressed in the House report, Section 
1002.104 counsels an employer to contact the appropriate military 
authority to discuss its concerns over the timing, frequency, and 
duration of an employee's military service. The Department received two 
comments regarding this provision. One commenter suggests that section 
1002.104 state that employer contacts with a military authority to 
discuss concerns regarding timing, frequency, and duration of an 
employee's military service should not be considered as evidence of 
discrimination in violation of section 4311 of USERRA. The Department 
declines the opportunity to make such a categorical statement in the 
final rule that would apply in all circumstances. However, the 
Department notes that good faith contacts with the military to express 
legitimate concerns about timing, frequency, and duration of an 
employee's military service do not evidence a discriminatory motive. 
The second comment regarding section 1002.104 involves the provision 
stating that ``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.'' The 
commenter asks whether this statement subjects the military authority 
to suit under the Administrative Procedures Act (APA) in cases in which 
it may be alleged that the military authority's response to such 
requests is arbitrary and capricious. The Department views this inquiry 
as raising an issue beyond the scope of these regulations. However, the 
Department notes that this requirement is established by Department of 
Defense regulations. See 32 CFR 104.6(o).

Application for Reemployment

    In order to protect reemployment rights under USERRA, the returning 
service member must make a timely return to, or application for 
reinstatement in, his or her employment position after completing the 
tour of duty. 38 U.S.C. 4312(a)(3). Sections 4312(e) and (f) establish 
the required steps of the reinstatement process. 38 U.S.C. 4312(e), 
(f). Section 4312(e) of USERRA establishes varying time periods for 
requesting reinstatement, and section 1002.115 explains that the three 
statutory time periods for making a request for reinstatement are 
dependent on the length of the period of military service, except in 
the case of an employee's absence for an examination to determine 
fitness to perform service.
    The Department received three general comments with regard to the 
time periods set out in section 1002.115. Two commenters suggest that 
the Department indicate that employees and employers may lawfully agree 
to extend the time periods for making a request for reinstatement. 
Section 4302(a) of USERRA states that ``[n]othing in this chapter shall 
supersede, nullify or diminish any * * * contract, agreement, policy, 
plan, practice, or other matter that establishes a right or benefit 
that is more beneficial to, or is in addition to, a right or benefit 
provided'' under USERRA. The Department concludes that this statutory 
provision permits the types of agreements to which the commenters 
refer, and finds it unnecessary to add such a provision to the final 
rule. A final general comment suggests that the Department indicate 
that an employee's separate but proximate periods of service be 
accumulated into one period for the purposes of determining the time 
period within which to apply for reemployment. The Department disagrees 
with the approach offered by the commenter. Under USERRA, an employee 
may not add together service days from separate but proximate periods 
of military service to create a longer period within which to apply for 
reemployment with the employer. Similarly, if an additional period of 
military service intervenes in the statutory period within which to 
apply for reemployment with the employer, an employee may not bank any 
remaining days from that period and add them on to the subsequent 
period within which to report back to or apply for reemployment with 
the employer.
    Section 1002.115 also specifies the actions that must be taken by 
the employee. Section 4312(e)(1)(A)(i) of USERRA provides that the 
employee reporting back to the employer following a period of service 
of less than 31 days must report:

    (i) Not later than the beginning of the first full regularly 
scheduled work period on the first full calendar day following the 
completion of the period of service and the expiration of eight 
hours after a period allowing for the safe transportation of the 
person from the place of that service to the person's residence * * 
*

38 U.S.C. 4312(e)(1)(A)(i).
    The Department interprets this provision as requiring the employee 
to report at the beginning of the first full shift on the first full 
day following the completion of service, provided the employee has a 
period of eight hours to rest following safe transportation to the 
person's residence. See H.R. Rep. No. 103-65, Pt. I, at 29 (1993). If 
it is impossible or unreasonable for the employee to report within this 
time period, he or she must report to the employer as soon as possible 
after the expiration of the eight-hour period.
    The Department invited comment as to whether the interpretations in 
section 1002.115(a) best effectuate the statute, and received four 
comments in response. Two commenters asserted that the statute requires 
that an employee report back to the employer ``by the beginning of the 
first full shift on the first calendar day that falls after the eight 
hour rest period ends.'' One commenter requested that this provision be 
re-drafted to improve its clarity, and one commenter requested that the 
Department extend the 8-hour period of rest because it is too brief.
    After reviewing these comments, and the arguments in support of a 
modification to this provision, the Department views section 
1002.115(a), which requires an employee to report back to the employer 
no later than the beginning of the first full regularly-scheduled work 
period on the first full calendar day following the completion of the 
period of service, provided the employee has an 8-hour rest period, as 
a proper and accurate interpretation of section 4312(e)(1)(A)(i). 
Neither the statute nor the legislative history suggests that an 
employee must report back on the first full shift on the day following 
the day that includes the period of rest. Nor can the Department

[[Page 75259]]

extend that period of rest beyond eight hours, as is called for in the 
statute.
    An additional commenter sought guidance on the application of 
section 1002.115(a) to a case in which an employee is subject to 
rotating shifts. This rule is not intended as an opportunity to resolve 
issues arising under individual facts and circumstances. However, the 
Department views the text of section 1002.115(a), which requires an 
employee to report back ``at the beginning of the first full regularly-
scheduled work period on the first full calendar day following the 
completion of the period of service,'' as capable of resolving the 
inquiry. Under this provision, an employee need not report back until 
the beginning of the first full regularly scheduled work period, 
whether the shift is conventional or rotating.
    Two final commenters on this provision asked the Department to 
clarify the application of USERRA's rules covering reporting back to 
work following periods of service for less than 31 days in light of a 
recent case from a Federal appeals court, Gordon v. WAWA, Inc., 388 
F.3d 78 (3rd Cir. 2004). In Gordon, an employee returning from weekend 
duty with the Army Reserve stopped by his workplace to collect his 
paycheck and was allegedly ordered by the employer to return to work 
before he had an opportunity to return home and rest. The employer 
allegedly threatened Gordon with termination if he did not work the 
upcoming shift. The employee apparently did not insist on his rest 
period, and worked the upcoming (midnight) shift. He was not denied 
reemployment. After working his shift, the employee suffered a fatal 
automobile accident while driving home.
    The court reviewed USERRA's legislative history, which demonstrates 
Congressional intent that service members reporting back to their 
civilian employment ``be allowed sufficient time to return to their 
residence and be rested before they are to perform their work.'' 388 
F.3d at 83, citing S. Rep. No. 103-158, at 50 (1993). However, the 
court held that the time periods provided by USERRA in which a 
returning service member must notify the pre-service employer of his or 
her intent to return to work are obligations the service member must 
meet to reclaim the pre-service job, not rights that can be enforced 
under USERRA in cases where, as here, the person was in fact 
reemployed. As a result, the court held that the statute's reporting-
back requirement, 38 U.S.C. 4312(e)(1), ``does not confer a right to 
rest'' to a returning service member.
    Although Gordon did not interpret USERRA to provide relief to an 
employee allegedly injured by the employer's denial of the eight-hour 
rest period, the Department's view is that the case does not interfere 
with the eight-hour, 14-day, and 90-day rest/notification periods 
allowed under USERRA. The facts in Gordon were unusual; the employer 
reportedly threatened the employee with termination if he did not work 
the upcoming shift, but the employee apparently did not insist on his 
rest period, and was not denied reemployment. Consequently, the 
employee was not denied his USERRA right to be reemployed.
    Gordon also does not change the procedure that a service member 
must follow to be entitled to reemployment rights. An employee must 
report to the employer or apply for reemployment within the specified 
time periods to be eligible for reemployment. If the employee is 
required by the employer to report to work, or apply for reemployment, 
earlier than is provided by USERRA, the employee should seek assistance 
from VETS or seek relief in the courts to prevent the employer from 
enforcing such a policy. A service member may not be required by an 
employer to forego any portion of the applicable eight-hour, 14-day, or 
90-day rest/notification period as a condition of reemployment.
    Section 1002.115(b) and (c) set out the other time periods in which 
an employee must report back to an employer. If the individual served 
between 31 and 180 days, he or she must make an oral or written request 
for reemployment no more than 14 days after completing service. If it 
is impossible or unreasonable for the employee to apply within 14 days 
through no fault of the employee, he or she must submit the application 
not later than the ``next full calendar day after it becomes possible 
to do so.'' The Department indicated in the proposed rule that it 
understands the term ``next'' in the clause ``next first full calendar 
day'' in section 4312(e)(1)(C) to be superfluous, and received one 
comment agreeing with the position. Finally, if the individual served 
more than 180 days, he or she must make an oral or written request for 
reemployment no more than 90 days after completing service.
    Section 1002.116 addresses the situation in which a service member 
is unable to meet the foregoing timeframes due to the individual's 
hospitalization for or convalescence from a service-related illness or 
injury. Such a person must comply with the notification procedures 
determined by the length of service, after the time period required for 
the person's recovery. The recovery period may not exceed two years 
unless circumstances beyond the individual's control make notification 
within the required two-year period impossible or unreasonable.
    The Department received two requests for guidance on section 
1002.116 from one commenter. The commenter would like to know whether 
the two-year period begins on the date of military discharge, on the 
date the recovery period ends, or on the date the employee returns to 
work, and how to apply the rule in a situation in which the returning 
service member has already reported to the employer and a service-
related medical condition arises requiring absence from work. As to the 
first issue, section 4312(e)(2)(A) of the statute states that a 
``person who is hospitalized for, or convalescing from, an illness or 
injury incurred in, or aggravated during, the performance of service in 
the uniformed services shall, at the end of the period that is 
necessary for the person to recover from such illness or injury, report 
to the person's employer * * * or submit an application for 
reemployment with such employer * * * [and] such period of recovery may 
not exceed two years.'' The Department concludes, based on this 
provision of USERRA, that the two-year recuperation period begins on 
the date of completion of the service.
    This represents a change from USERRA's predecessor law, under which 
an employee with a service-related injury or illness could seek 
reemployment within 90 days of the conclusion of a period of 
hospitalization of not more than one year (a maximum of one year plus 
90 days). USERRA's enactment extended the period for recuperation and 
recovery from one year to two years, but did not allow any additional 
time for application or reporting back after the end of the 
recuperation period. USERRA's legislative history supports this reading 
by indicating that if time were needed for recuperation and recovery, 
the time for application or reporting back would be extended ``by up to 
two years.'' See, e.g., S. Rep. No. 103-158, at 51 (1993) (USERRA 
``provides for extending reemployment reporting or application dates 
for up to two years.''); H.R. Rep. No. 103-65, Pt. I, at 29 (1993) 
(USERRA extends the reporting deadlines ``by up to two years.'').
    As a result, unless extended to accommodate circumstances beyond 
the control of the employee that make

[[Page 75260]]

reporting within such period impossible or unreasonable, the entire 
period between the date of completion of service and the date of 
reporting to work or applying for reemployment can be no greater than 
two years, and there is no longer an additional extension of 14 or 90 
days for applying for reemployment at the end of the recuperation 
period. However, because the recuperation period is coextensive with 
the 14- or 90-day application period under USERRA, the service member 
is entitled to whichever period is longer, but not both.
    The second request for guidance on section 1002.116 asks whether 
the provision of section 1002.116 applies in a situation in which the 
returning service member has already reported to the employer and a 
service-related medical condition arises, necessitating absence from 
work. The Department concludes that the extension of time for 
recuperation and recovery applies only to the period in which the 
employee has to report back or apply for reemployment, and does not 
apply after the person is reemployed. Although this conclusion does not 
provide for cases in which service-related injuries or illnesses, such 
as post-traumatic stress disorder or exposure to battlefield toxins, 
become apparent only following reemployment, it is nevertheless 
consistent with the unambiguous statutory language on this issue. The 
Department has revised section 1002.116 to reflect this position.
    Section 1002.117 covers the situation where the employee fails to 
report or to submit a timely application for reemployment. Such failure 
does not automatically divest the individual of his or her statutory 
reemployment rights. See 38 U.S.C. 4312(e)(3). However, the employer 
may subject the employee to the workplace rules, policies and practices 
that ordinarily apply to an employee's unexcused absence from work.
    Sections 1002.118 through 1002.123 establish procedures for 
notifying the employer that the service member intends to return to 
work. These sections also address the requirement that the returning 
service member provide documentation to the employer in certain 
instances. The documentation provides evidence that the service member 
meets three of the basic requirements for reemployment: Timely 
application for reinstatement, permissible duration of service, and 
appropriate type of service discharge. USERRA expressly provides that 
the Secretary may prescribe, by regulation, the documentation necessary 
to demonstrate that a service member applying for employment or 
reemployment meets these requirements.
    The Department received two comments on section 1002.119 of the 
proposed rule, which indicates to whom an employee must submit an 
application for reemployment. The first commenter suggests that the 
Department incorporate in this provision a statement that an employee 
is ``encouraged, but not required, to notify [the employee's] human 
resources officer and * * * supervisors as soon as practicable.'' The 
second commenter suggests that the provision include a statement that 
if a pre-service employer ``has an established channel for receiving 
employment or reemployment applications, [an employee] should follow 
that channel.'' The Department views both suggestions as ones that can 
be construed as imposing on service members obligations not set forth 
in the statute and, as a result, declines the proposals.
    The Department received two comments on proposed section 1002.120, 
which, as originally drafted, provided unconditionally that the service 
member does not forfeit reemployment rights with one employer by 
working for another employer after completing his or her military 
service, as long as the service member complies with USERRA's 
reinstatement procedures. The commenters suggested either deletion of 
the provision entirely, or the placement of some limitations on the 
right to seek alternative employment during the application period. One 
commenter suggests that such limitations are required in cases in which 
such alternative employment may violate the pre-service employer's 
workplace policies, such as employment with a competitor of the pre-
service employer that violates an employer's policy against non-
competition, or employment that presents a conflict of interest for the 
employee. The Department agrees with the comments, and has modified 
this provision accordingly. Section 1002.120 now reflects that a 
service member's alternative employment during the application period 
must not violate the pre-service employer's employment policy to such a 
degree that it constitutes just cause for discipline or termination by 
the pre-service employer. The Department views this new language as 
striking an appropriate balance between protecting the proprietary 
interests of pre-service employers and providing flexibility for 
employees to explore other post-service employment opportunities. In 
addition, the modification comports with USERRA's provision protecting 
reemployed service members from discharge for a certain period 
following reemployment, except for ``cause.'' 38 U.S.C. 4316(c).
    Section 4312(f) of USERRA describes the documentary evidence that 
the service member must submit to the employer in order to establish 
that the service member meets the statutory requirements for 
reinstatement, and the rule implements these documentation requirements 
at 1002.121 to .123. Section 1002.121 establishes that an individual 
applying for reemployment who served more than 30 days in military 
service must provide certain documentation upon the employer's request. 
The documentation must establish that the individual's application is 
timely; he or she has not exceeded the five-year service limitation; 
and the type of separation from service does not disqualify the 
individual from reemployment. Section 1002.122 provides that an 
employer is required to reemploy a service member even if documentation 
establishing the service member's reemployment eligibility does not 
exist or is not readily available.
    The Department received five comments on sections 1002.121 and 
1002.122, each of which addresses a different aspect of the provisions. 
One comment urged the Department to include language in section 
1002.122 imposing an affirmative obligation on the employee to make a 
``reasonable effort'' to secure the documentation, and assist the 
employer in obtaining such documentation. Section 4312(f)(1) of USERRA 
states that an employee applying for reinstatement ``shall provide to 
the person's employer'' the requested documentation (emphasis 
supplied). Section 1002.121 follows the directive of the statute and 
similarly states that the employee ``must'' provide the documentation. 
The Department concludes that adding the ``reasonable effort'' language 
to the rule is redundant, and arguably diminishes the mandatory 
directive of the statute. Furthermore, Department of Defense 
regulations under USERRA obligate the military services to provide 
documentation upon request by the service member ``that may be used to 
satisfy the Service member's entitlement to statutory reemployment 
rights and benefits.'' 32 CFR 104.6(l). The service branch is therefore 
ultimately obligated to provide the documentation that the employee 
requires in order to satisfy his or her own obligation to the employer. 
The Department concludes that a service member seeking reemployment 
will realistically make every effort to

[[Page 75261]]

obtain the documentation or assist the employer in doing so. However, 
in difficult cases, the military services can assist employers.
    Two comments regarding these provisions were very similar in their 
suggested solutions to the situation in which documentation is 
unavailable in a timely fashion. One comment suggested specific time 
frames for the employee to provide the documentation, and both 
suggested sanctions for failing to do so in a timely manner. The 
suggestions included a three-step proposal that should apply to an 
employee who is unable to produce documentation at the time he or she 
applies for reemployment: First, the employer may require the employee 
to execute an affidavit confirming the dates of service, and the 
employer may terminate the employee if the information is later proven 
incorrect; second, if the employee does not provide requested 
documentation within a specific period (28 business days is suggested), 
the employer may place him or her on unpaid leave; and third, if the 
employee does not provide the documentation after a specific period of 
unpaid leave (28 days is again suggested), the employer may terminate 
him or her.
    The Department concludes that the proposed change is inconsistent 
with the statute and USERRA's general policy of eliminating obstacles 
to prompt reemployment. Both section 1002.122 and the legislative 
history of USERRA's section 4312(f) clearly establish that the employer 
may not deny or delay reemployment if the requested documentation is 
nonexistent or not ``readily available.'' H.R. Rep. No. 103-65, Pt. I, 
at 29-30 (1993); S. Rep. No. 103-158, at 51 (1993). Requiring an 
affidavit in lieu of documentation at the time of reemployment places 
an additional condition on reemployment beyond the general obligation 
to obtain the documentation. Furthermore, both sections 4312(f)(3)(A) 
and 1002.122 permit an employer to terminate an employee only if the 
documentation ultimately proves the employee was not eligible for 
reemployment. Terminating the employee for failure to provide the 
documentation after a prescribed period is inconsistent with the 
statute.
    The fourth comment suggests that 1002.122 be modified to state that 
an employer may terminate an employee following reemployment if 
documentation received after reemployment indicates that the employee 
was not entitled to reemployment, ``unless the employer's policy, plan, 
or practice provides otherwise under the circumstances.'' The 
Department views the provision permitting an employer to terminate an 
employee if documentation fails to support the employee's entitlement 
to reemployment as permissive and not a mandatory directive. The 
proposed addition neither enhances nor circumscribes the employer's 
discretion on this subject, and is therefore unnecessary.
    The final comment with respect to these provisions urged the 
Department to require the employee to provide the documentation within 
a reasonable time. The Department concludes that adoption of this 
option imposes an additional obligation on the employee not 
contemplated by the statute, particularly in those cases in which 
delays in obtaining documentation following return from service may be 
caused by the military unit and not by the employee. After considering 
all the comments on these provisions, the Department has concluded that 
it will retain them in unchanged form. See sections 1002.121 and 
1002.122.

Character of Service

    USERRA makes entitlement to reemployment benefits dependent on the 
characterization of an individual's separation from the uniformed 
service, or ``character of service.'' 38 U.S.C. 4304. The general 
requirement is that the individual's service separation be under other 
than dishonorable conditions. Section 1002.135 lists four grounds for 
terminating the individual's reemployment rights based on character of 
service: (i) Dishonorable or bad conduct discharge; (ii) ``other than 
honorable'' discharge as characterized by the regulations of the 
appropriate service Secretary; (iii) dismissal of a commissioned 
officer by general court-martial or Presidential order during a war (10 
U.S.C. 1161(a)); and, (iv) removal of a commissioned officer from the 
rolls because of unauthorized absence from duty or imprisonment by a 
civil authority (10 U.S.C. 1161(b)). 38 U.S.C. 4304(1)-(4). The 
uniformed services determine the individual's character of service, 
which is referenced on Defense Department Form 214. See section 
1002.136. For USERRA purposes, Reservists who do not receive character 
of service certificates are considered honorably separated; many short-
term tours of duty do not result in an official separation or the 
issuance of a Form 214.
    Sections 1002.137 and 1002.138 address the consequences of a 
subsequent upgrading of an individual's disqualifying discharge. 
Upgrades may be either retroactive or prospective in effect. An upgrade 
with retroactive effect may reinstate the individual's reemployment 
rights provided he or she otherwise meets the Act's eligibility 
criteria, including having made timely application for reinstatement. 
However, a retroactive upgrade does not restore entitlement to the back 
pay and benefits attributable to the time period between the 
individual's discharge and the upgrade.
    The Department received two comments regarding the character-of-
service provisions. The meaning of the first comment was difficult to 
discern, but appeared to be related to an obligation an employer might 
have to pay back-wages to an employee who receives a retroactive 
upgrade in the characterization of his or her service. Section 1002.137 
expressly provides that in such a case an employer is not required to 
pay back-wages for the period from the date of completion of service to 
the date of the retroactive upgrade. The final commenter requests that 
in the event a service member otherwise eligible for reemployment 
receives an upgrade to the characterization of his or her service 
months or even years later, the employer should enjoy some flexibility 
in its obligation to reemploy. Because a person who receives a 
retroactive upgrade and meets all other eligibility requirements is 
eligible for reemployment, there is no basis for providing flexibility 
regarding an employer's obligation to reemploy. However, such employers 
may rely on the undue hardship or changed circumstances defenses, if 
applicable. After considering all the comments on the character-of-
service provisions, the Department will retain them as originally 
proposed. See sections 1002.137 and 1002.138.

Employer Statutory Defenses

    USERRA provides three statutory defenses that an employer may 
assert against a claim for USERRA benefits. The employer bears the 
burden of proving any of these defenses. 38 U.S.C. 4312(d)(2)(A)-(C).
    An employer is not required to reemploy a returning service member 
if the employer's circumstances have so changed as to make such 
reemployment impossible or unreasonable. 38 U.S.C. 4312(d)(1)(A). In 
view of USERRA's remedial purposes, this exception must be narrowly 
construed. The employer bears the burden of proving that changed 
circumstances make it impossible or unreasonable to reemploy the 
returning veteran. 38 U.S.C. 4312(d)(2)(A); proposed section 1002.139. 
The change must be in the pre-service employer's circumstances,

[[Page 75262]]

as distinguished from the circumstances of its employees. For example, 
the defense of changed circumstances is available where reemployment 
would require the creation of a ``useless job or mandate reinstatement 
where there has been a reduction in the workforce that reasonably would 
have included the veteran.'' H.R. Rep. No. 103-65, Pt. I, at 25 (1993), 
citing Watkins Motor Lines v. De Galliford, 167 F.2d 274, 275 (5th Cir. 
1948); Davis v. Halifax County School System, 508 F. Supp. 966, 969 
(E.D. N.C. 1981). However, an employer cannot establish that it is 
unreasonable or impossible to reinstate the returning service member 
solely by showing that no opening exists at the time of the 
reemployment application or that another person was hired to fill the 
position vacated by the veteran, even if reemploying the service member 
would require terminating the employment of the replacement employee. 
See Davis at 968; see also Cole v. Swint, 961 F.2d 58, 60 (5th Cir. 
1992); Fitz v. Bd. of Education of Port Huron Area Schools, 662 F. 
Supp. 1011, 1015 (E.D. Mich. 1985), aff'd, 802 F.2d 457 (6th Cir. 
1986); Anthony v. Basic American Foods, Inc., 600 F. Supp. 352, 357 
(N.D. Cal. 1984); Goggin v. Lincoln St. Louis, 702 F.2d 698, 704 (8th 
Cir. 1983). Id.
    An employer is also not required to reemploy a returning service 
member if such reemployment would impose an undue hardship on the 
employer. 38 U.S.C. 4312(d)(1)(B). As explained in USERRA's legislative 
history, this defense only applies 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. H.R. Rep. No. 103-65, Pt. I, at 25 (1993). USERRA 
defines ``undue hardship'' as actions taken by the employer requiring 
significant difficulty or expense when considered in light of the 
factors set out in 38 U.S.C. 4303(15). USERRA defines ``reasonable 
efforts'' as ``actions, including training provided by an employer, 
that do not place an undue hardship on the employer.'' 38 U.S.C. 
4303(10). USERRA defines ``qualified'' in this context to mean having 
the ability to perform the essential tasks of the position. 38 U.S.C. 
4303(9). These definitions are set forth in sections 1002.5(n) (``undue 
hardship''), 1002.5(i) (``reasonable efforts''), and 1002.5(h) 
(``qualified'').
    The third statutory defense against reemployment requires the 
employer to establish that ``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.'' 
Under both USERRA and its predecessor, the VRRA, 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., Stevens v. Tennessee Valley Authority, 687 F.2d 158, 161-62 (6th 
Cir. 1982), and cases cited therein; S. Rep. No. 103-158, at 46-47 
(1993).
    The Department received three comments on section 1002.139, which 
sets forth the employer's statutory defenses. Two of the comments 
request the deletion of one or more of the statutory defenses from the 
rule. Because these defenses are expressly provided in the statute, the 
Department will retain them in the rule. The final comment requested 
that this provision of the rule should express that the statutory 
defenses are affirmative ones and that the employer carries the burden 
to prove them by a preponderance of the evidence. Section 4312(d)(2) 
expressly provides that the employer has the burden to prove its 
statutory defenses, and it is appropriate for the rule to include this 
statutory provision. Therefore, the rule has been modified accordingly. 
See section 1002.139.

Subpart D--Rights, Benefits, and Obligations of Persons Absent From 
Employment Due to Service in the Uniformed Services

Furlough or Leave of Absence

    Sections 1002.149 and 1002.150 implement section 4316(b) of the 
Act, which establishes the employee's general non-seniority based 
rights and benefits while he or she is absent from the employment 
position due to military service. 38 U.S.C. 4316(b). The employer is 
required to treat the employee as if he or she is on furlough or leave 
of absence. 38 U.S.C. 4316(b)(1)(A). The employee is entitled to non-
seniority employment rights and benefits that are available to any 
other employee ``having similar seniority, status, and pay who [is] on 
furlough or leave of absence. * * *'' 38 U.S.C. 4316(b)(1)(B). These 
non-seniority rights and benefits may be provided ``under a contract, 
agreement, policy, practice, or plan in effect at the commencement of 
such service or established while such person performs such service.'' 
Id. For example, if the employer offers continued life insurance 
coverage, holiday pay, bonuses, or other non-seniority benefits to its 
employees on furlough or leave of absence, the employer must also offer 
the service member similar benefits during the time he or she is absent 
from work due to military service. If the employer has more than one 
kind of non-military leave and varies the level and type of benefits 
provided according to the type of leave used, the comparison should be 
made with the employer's most generous form of comparable leave. See 
Waltermyer v. Aluminum Company of America, 804 F.2d 821 (3d Cir. 1986); 
H.R. Rep. No. 103-65, Pt. I, at 33-34 (1993); Schmauch v. Honda of 
America Manufacturing, Inc., 295 F. Supp. 2d 823 at 836-839 (S.D. Ohio 
2003) (employer improperly treated jury duty more favorably than 
military leave). The employee is entitled not only to the non-seniority 
rights and benefits of workplace agreements, policies, and practices in 
effect at the time he or she began the period of military service, but 
also to those that came into effect during the period of service.
    The Department also interprets section 4316(b) of the Act to mean 
that an employee who is absent from a position of employment by reason 
of service is not entitled to greater benefits than would be generally 
provided to a similarly situated employee on non-military furlough or 
leave of absence. See Sen. Rep. No. 103-158, at 58 (1993).
    The Department invited comments as to whether its interpretation in 
sections 1002.149 and 1002.150 best effectuates the purpose of section 
4316(b). In response, the Department received six comments generally 
addressing the provisions, and fifteen comments addressing specific 
issues contained in the provisions. Of the general comments, three 
expressed general support for the Department's interpretation in this 
provision. A fourth general comment suggested that employers that are 
contractors with the Federal government be required to provide to 
employees on military leave any non-seniority rights and benefits 
provided to Federal employees. The same commenter suggested that an 
employer be required to provide to employees on military leave any non-
seniority rights and benefits provided to other employees under a 
collective bargaining agreement. In response to each scenario, the 
Department underscores that the statute requires that an employer 
provide to employees on military leave those non-seniority employment 
rights and benefits that are available to any other employee ``having 
similar seniority, status, and pay who [is] on furlough or leave of 
absence. * * *'' 38 U.S.C. 4316(b)(1)(B). The statement in the preamble 
to the proposed rule that the ``Department also

[[Page 75263]]

does not interpret the second use of the term `seniority' in section 
4316(b)(1)(B) as a limiting factor'' is inaccurate: for the purposes of 
section 4316(b)(1)(B), the comparator must be employees of the employer 
with similar seniority, status, and pay. Although a determination of 
whether an employee is ``similarly situated'' under section 1002.150 
includes consideration of seniority as well as status and pay, it is 
not necessary for the seniority to be determined by a collective 
bargaining agreement, nor does consideration of seniority in 
determining whether an employee is ``similarly situated'' make the 
benefit a seniority benefit for purposes of USERRA. The final general 
comment suggested that the rule state that an employer does not violate 
USERRA if it characterizes an employee on military leave as 
``terminated'' for the purposes of its administrative systems. The 
Department agrees that an employer's characterization, or mis-
characterization, of a service member's absence from employment is 
unimportant so long as the employer is in full compliance with USERRA's 
substantive requirements on this issue, but because the rule is 
sufficiently clear on this point, the suggested modification is 
unnecessary.
    Of the specific comments received regarding these provisions, two 
comments expressed agreement with the terms in section 1002.150 and the 
remaining comments primarily addressed the mechanics of implementing 
the provisions of section 1002.150. Four commenters requested that the 
Department indicate whether vacation accrual is a seniority-or non-
seniority-based benefit. Three of the four comments take the position 
that vacation accrual is not a seniority-based benefit; the fourth 
simply seeks clarification of the issue. The regulations provide that a 
particular right or benefit is seniority-based if it accrues with or is 
determined by seniority, and depends primarily on whether the benefit 
is a reward for length of service. See section 1002.212. Under this 
construct, the Supreme Court has held that vacation accrual, rather 
than being a perquisite of seniority, is a form of short-term 
compensation for work performed. Foster v. Dravo, 420 U.S. 92 (1975). 
Accordingly, the Department has long viewed the accrual of vacation 
leave as a non-seniority based benefit and, because a significant 
number of comments were received on this subject, has amended the text 
of the rule to reflect this determination. See section 1002.150(c).
    USERRA requires, and section 1002.150 reiterates, that an employee 
on military leave must be accorded the non-seniority rights and 
benefits generally provided by the employer to other employees with 
similar seniority, pay, and status that are on furlough or leave of 
absence based on ``employment contract, agreement, policy, practice, or 
plan'' in effect at the workplace. 38 U.S.C. 4316(b)(1)(B); section 
1002.150. The Department received one question asking whether non-
seniority benefits that are required by law, rather than by 
``employment contract, agreement, policy, practice, or plan,'' to be 
provided to employees on other types of leaves of absence must be 
provided to employees on military leave. For instance, regulations 
promulgated by the Department pursuant to the Family and Medical Leave 
Act, 29 U.S.C. 2601 et seq. (FMLA), require that covered employers 
extend to employees who have taken leave under the FMLA bonuses that do 
not require performance by the employee but rather contemplate the 
``absence of occurrences'' of some particular event. See 29 CFR 
825.215(c)(2). For instance, under this provision, bonuses for perfect 
attendance and for safety do not require performance by the employee 
but rather contemplate the absence of occurrences, and an employee 
absent from employment due to FMLA leave may not be disqualified from 
the award of such bonuses because of taking FMLA leave. 29 CFR 
825.215(c)(2). The commenter argues that if such bonuses are 
contemplated by section 4316(b)(1)(B) of the statute, they may become 
the ``most favorable treatment'' to which employees on military leave 
are entitled.
    USERRA's legislative history gives no unambiguous indication 
whether Congress intended that non-seniority benefits required to be 
provided by law to employees on other types of leaves of absence must 
also be provided to employees on military leave. S. Rep. 103-158, at 58 
(1993) (reemployed service member entitled to the ``agreements and 
practices in force'' at the time of departure and the ``agreements and 
practices which became effective'' during military service); H.R. Rep. 
103-65, Pt. I, at 33 (1993) (service member entitled to ``whatever non-
seniority related benefits are accorded other employees on non-military 
leaves of absence''). As a result, the Department is averse to 
responding to the inquiry in a manner that establishes a rigid rule 
regarding the application of non-seniority benefits established by law. 
Rather, the Department views the issue as one that must be decided on a 
case-by-case basis, and depends on the nature of the leave to which the 
benefits apply, whether that leave is comparable, the nature of the 
benefit mandated by other law, and the nature of the ``employment 
contract, agreement, policy, practice, or plan'' that implements the 
non-seniority benefit provisions of the other law.
    The Department received seven comments regarding section 
1002.150(b), which states that if non-seniority benefits to which 
employees on other types of furlough or leave of absence vary according 
to the type of leave, the employee on military leave must be given the 
most favorable treatment accorded to employees on any comparable leave. 
One commenter was in complete agreement with the provision, and a 
second commenter requests that the Department designate what factors to 
consider when assessing whether two types of leave are comparable. The 
third commenter submitted that employees on military leave should be 
afforded only those non-seniority-based benefits that are provided to 
other employees on unpaid, long-term leaves of absence. Similarly, the 
fourth commenter queried whether the voluntary provision of salary to 
an employee during military leave altered the treatment of non-
seniority benefits, so that the employer must provide an employee on 
military leave those non-seniority benefits provided to employees on 
other types of paid leave. Three final commenters stated that section 
the requirement in 1002.150(b) that employers provide to employees on 
military leave the ``most favorable treatment'' accorded to employees 
on comparable leave is confusing, exceeds the scope of the statutory 
mandate, or both.
    The plain language of the statute mandates that an employee on 
military leave be granted non-seniority benefits afforded to 
``employees having similar seniority, status, and pay who are on 
furlough or leave of absence. * * *'' The requirement that an employee 
on military leave must be given the ``most favorable treatment'' 
accorded to other employees on leave is based on legislative history 
requiring that ``to the extent that employer policy or practice varies 
among various types of non-military leaves of absence, the most 
favorable treatment accorded any particular leave would also be 
accorded the military leave. * * *'' H.R. Rep. 103-65, Pt. I, at 33 
(1993), citing Waltermyer, 804 F.2d at 825, in which the court held 
that the service member's leave for Reserve training was comparable to 
other forms of leave to which benefits attached under the collective 
bargaining agreement and,

[[Page 75264]]

therefore, the service member could not be afforded less favorable 
treatment.
    The Waltermyer court held that in providing non-seniority benefits 
to employees on military leave, an employer cannot treat those 
employees less favorably than other employees on comparable forms of 
leave. In comparing types of employee leave, the court first assessed 
the purpose of the collective bargaining agreement's provision 
rewarding holiday pay to those employees that either worked during the 
week of the holiday or were away from work for specified, non-military 
reasons. The court found that the purpose of the benefit was to protect 
against excessive absenteeism during the holiday week, and that the 
collective bargaining agreement's exemption from the policy of certain 
types of absence from work served to protect those employees who were 
absent involuntarily. Therefore, the court found that because military 
leave was similarly involuntary, it was comparable to other types of 
involuntary absences from work and should be afforded the holiday pay. 
Waltermyer, 804 F.2d at 825.
    The Department recognizes that under the proposed rule, employers 
may have had some difficulty in assessing whether one or more types of 
leave are comparable for the purposes of this provision, and has 
accordingly amended section 1002.150(b) to provide further guidance. 
The additional text indicates that in determining whether any two types 
of leave are comparable, the duration of the leave may be the most 
significant factor to compare. For instance, a two-day funeral leave 
will not be comparable to an extended military leave. The new language 
also states that in addition to comparing the duration of the absences, 
other factors such as the purpose of the leave and the ability of the 
employee to choose when to take the leave should also be considered. 
See section 1002.150(b). Finally, USERRA's legislative history 
indicates that Congress intended that for the purposes of implementing 
this provision, it is irrelevant whether the non-military leave is paid 
or unpaid. See H.R. Rep. 103-65, Pt. I, at 33-34 (1993). Therefore, 
contrary to the request of one commenter, the Department has declined 
to include as a factor in determining the comparability of leave 
whether the non-military leave is paid or unpaid.
    The final comment regarding these provisions sought further 
guidance on the provision of bonuses, for example, attendance bonuses 
or performance bonuses, to employees on military leave. The provision 
of employment benefits during military leave depends first on whether 
the benefit is a seniority-based or non-seniority based benefit. As 
noted above, a particular right or benefit is seniority-based if it 
accrues with or is determined by seniority, and depends primarily on 
whether the benefit is a reward for length of service. If a bonus is 
based on seniority, it must be included in the escalator position and 
provided upon reemployment. See sections 1002.191-1002.193. If a bonus 
is non-seniority-based and is provided to similarly situated employees 
on comparable non-military leave, it must be provided to employees on 
military leave. Therefore, after considering all the comments 
applicable to sections 1002.149 and 1002.150, the Department has made 
revisions only with regard to the issues of leave comparability factors 
and accrual of vacation leave. See section 1002.149 and 150.
    Section 1002.152 addresses the circumstances under which an 
employee waives entitlement to non-seniority based rights and benefits. 
Section 4316(b)(2) of the Act provides that an employee who 
``knowingly'' states in writing that he or she will not return to the 
employment position after a tour of duty will lose certain rights and 
benefits that are not determined by seniority. 38 U.S.C. 4316(b)(2). 
The Department intends for principles of Federal common law pertaining 
to a waiver of interest to apply in determining whether such notice is 
effective in any given case. See Melton v. Melton, 324 F.3d 941, 945 
(7th Cir. 2003); Smith v. Amedisys, Inc., 298 F.3d 434, 443 (5th Cir. 
2002). By contrast, a notice given under 38 U.S.C. 4316(b)(2) does not 
waive the employee's reemployment rights or seniority-based rights and 
benefits upon reemployment.
    The Department invited comments as to whether this interpretation 
best effectuates the purpose of this provision, and received four 
comments in response. Of these, three commenters requested that the 
Department clarify what USERRA rights may be waived by an employee and 
what USERRA rights are not susceptible to waiver. The final commenter 
requested that the Department include in the text of the rule the legal 
elements that must be met in order for a waiver to be effective.
    Pursuant to section 4316(b)(2)(A) of USERRA, if an employee 
provides to his or her employer a written notice that he or she intends 
not to return to employment with the pre-service employer, the employee 
has effectively waived any non-seniority based benefits to which he or 
she is entitled under section 4316(b)(1) of the statute. Such waiver is 
effective only with regard to the employee's non-seniority-based 
rights, and will not pertain to the employee's right to reemployment. 
For example, if prior to departure for military service, or during 
military service, an employee sends his or her employer a letter that 
states that the employee will not be returning to his or her pre-
service employment after military service, the employee may have waived 
his or her entitlement to non-seniority based benefits, depending on 
whether the elements of waiver have been met. However, if the same 
employee changes his or her mind after sending the letter, and decides 
that he or she will seek reemployment, the employee may do so, despite 
having sent the letter. The right to reemployment, with all its 
attendant rights, cannot be waived prior to or during military service. 
See section 1002.88.
    The fourth commenter addressing section 1002.152 requested the 
Department include in the text of the rule the legal elements of waiver 
of statutory rights. As noted above, whether an employee has 
effectively waived a right protected by USERRA is to be determined by 
application of Federal common law. The common law test is fact 
intensive, and seeks to determine whether the employee's waiver is 
explicit, knowing, voluntary, and uncoerced. Melton, 324 F.3d at 945; 
Smith, 298 F.3d at 443. The statute provides the additional element 
that the waiver must be in writing. 38 U.S.C. 4316(b)(2)(A)(ii). 
Because the test is based in common law and is intended to provide a 
flexible approach to the analysis of a wide variety of circumstances, 
the Department is reluctant to establish the legal elements within the 
text of the regulation. After considering all the comments applicable 
to section 1002.152, the Department has retained the provision in 
unchanged form. See section 1002.152.
    Section 1002.153 clarifies that an employer may not require the 
employee to use his or her accrued vacation, annual or similar leave to 
cover any part of the period during which the employee is absent due to 
military service. 38 U.S.C. 4316(d). The employee must be permitted 
upon request to use any accrued vacation, annual or similar leave with 
pay during the period of service. The employer may require the employee 
to request permission to use such accrued leave. The proposed rule 
stated that because sick leave is not comparable to vacation, annual or 
similar types of leave, and its entitlement is generally conditioned on 
the employee (or a family member) suffering an illness or receiving 
medical

[[Page 75265]]

care, an employee is not entitled to use accrued sick leave solely to 
continue his or her civilian pay during a period of service. The 
Department received one comment that disagreed with the restriction on 
use of accrued sick leave, arguing that the restriction is overly-
broad, particularly in cases in which an employer may permit the use of 
sick leave for non-illness-related or non-injury-related absences. The 
Department agrees with the comment, and has revised the provision 
accordingly. See section 1002.153.
    The Department received three additional comments on section 
1002.153, one of which was generally supportive of the provision. An 
additional comment regarding this provision asked that the Department 
specify that an employer cannot require an employee to use accrued 
annual leave while absent on military leave ``unless the employer's 
policy requires use of leave as part of a pay differential program, and 
the value of the forfeited leave is less than the value of the pay 
provided by the employer.'' The Department must decline to include this 
suggestion in the final rule because it does not comport with the 
statutory language in section 4316(d), which states without condition 
that ``[n]o employer may require any [employee on military leave] to 
use vacation, annual, or similar leave during such period of service.'' 
38 U.S.C. 4316(d).
    The final commenter regarding section 1002.153 seeks guidance on a 
situation in which an employer switches an employee's days off so that 
they coincide with the employee's obligation to participate in a 
regular, monthly two-day military drill or similar military obligation. 
This may be a hardship to the employee because he or she will lose 
leisure time as a result of having to perform service obligations 
during the scheduled time off. Because this comment does not concern 
the use of accrued leave, it does not require modification of section 
1002.153. However, the Department notes that such a scenario may 
constitute a violation of USERRA's anti-discrimination provisions if 
the employee successfully establishes the elements of a discrimination 
case set forth in sections 1002.22 and 1002.23. USERRA prohibits the 
denial of any ``benefit of employment'' on the basis of military 
service obligations, see section 1002.18, and it bears emphasis in 
response to this inquiry that USERRA includes an employee's 
``opportunity to select work hours'' as a ``benefit of employment,'' 
see 38 U.S.C. 4303(2); section 1002.5(b)).

Health Plan Coverage

    Section 4317 of USERRA provides that service members who leave work 
to perform military service have the right to elect to continue their 
existing employer-based health plan coverage for a period of time while 
in the military. ``Health plan'' is defined to include an insurance 
policy or contract, medical or hospital service agreement, membership 
or subscription contract, or other arrangement under which health 
services for individuals are provided, or the expenses of such services 
are paid. 38 U.S.C. 4303(7); 1002.5(e). USERRA's health plan provisions 
are similar but not identical to the continuation of health coverage 
provisions added to Federal law by the Consolidated Omnibus Budget 
Reconciliation Act of 1985 (COBRA). As with COBRA, the Act permits the 
continuation of employment-based coverage. Unlike COBRA, USERRA's 
continuation coverage is available without regard to either the size of 
the employer's workforce or to whether the employer is a government 
entity. As with every other right and benefit guaranteed by USERRA, the 
employer is free to provide continuation health plan coverage that 
exceeds that which is required by USERRA.
    Section 4317 also requires that the employee and eligible 
dependents must, upon the service member's reemployment, be reinstated 
in the employer's health plan without a waiting period or exclusion 
that would not have been imposed had coverage not been suspended or 
terminated due to service in the uniformed services. The employee need 
not elect to continue health plan coverage during a period of uniformed 
service in order to be entitled to reinstatement in the plan upon 
reemployment. Section 4317 of USERRA is the exclusive source in USERRA 
of service members' rights with respect to the health plan coverage 
they receive in connection with their employment. Section 4317 
therefore controls the entitlement of a person to coverage under a 
health plan, and supersedes more general provisions of USERRA dealing 
with rights and benefits of service members who are absent from 
employment. See 38 U.S.C. 4316(b)(5). Sections 1002.163 through 
1002.171 of this rule implement USERRA's health plan provisions.
    As an initial matter, the Department received several comments 
questioning the interaction of USERRA's health plan provisions with 
other Federal laws governing health plans. One commenter in particular 
requested that the Department provide a general statement in the final 
rule that an employee's rights under USERRA are protected and 
preserved, and USERRA will not be violated, where a health plan follows 
existing plan procedures concerning elections and re-enrollment that 
are in compliance with the Internal Revenue Code (IRC), the Employee 
Retirement Income Security Act (ERISA, 29 U.S.C. 1001, et. seq.) and 
the Health Insurance Portability and Accountability Act (HIPAA, Pub. L. 
104-191 (1996)). USERRA contains requirements that may be different 
from requirements established under other statutes, and compliance with 
those laws does not necessarily indicate full compliance with USERRA. 
In addition, providing guidance related directly to the provisions of 
the IRC, ERISA and HIPAA is beyond the scope of these regulations. 
However, as stated earlier, the Internal Revenue Service (IRS) and the 
Department of the Treasury have indicated that a health or pension plan 
will be deemed not to be in conflict with the applicable IRC 
requirements merely because of compliance with USERRA or its 
regulations.
    Similarly, the Department received three comments seeking 
clarification of the relationship between USERRA and so-called 
``cafeteria'' plans established pursuant to section 125 of the IRC. 26 
U.S.C. 125. Generally, ``cafeteria'' plans allow employees to pay for 
certain benefits, including health benefits, using pre-tax dollars. 
With respect to health benefits, an employee may be allowed to pay for 
health plan premiums on a pre-tax basis or to pay for health care 
expenses not covered by insurance, such as deductibles or co-payments, 
through a health flexible spending arrangement (health FSA) using pre-
tax dollars. Such plans qualify as health plans under USERRA because, 
as noted in the definition discussed above, they are an ``arrangement 
under which * * * expenses of [health] services are paid.'' See 38 
U.S.C. 4303(7); section 1002.5(e). Accordingly, these plans must comply 
with the statute's continuation and reinstatement provisions. See 38 
U.S.C. 4317. In cases in which cafeteria plans provide for health FSAs, 
it may be advantageous for an employee who is absent from employment 
due to military service to elect continuation coverage until amounts 
allocated to the health FSA are used. The IRS and the Department of the 
Treasury have indicated that an amount will not be treated as violating 
the cafeteria plan rules because a plan provides for a new election 
either upon leaving employment for military service or subsequent 
reemployment.

[[Page 75266]]

    In a final inquiry about USERRA's relationship to other Federal 
laws governing health plans, one comment requested clarification of 
whether an employee who elected continuation coverage under USERRA but 
did not return to the pre-service employer would then be eligible for 
COBRA coverage. Because this involves the interpretation of COBRA, not 
USERRA, it is beyond the scope of these regulations.
    Under USERRA, the term ``employer'' is defined broadly to cover 
entities, such as insurance companies or third party plan 
administrators, to which employer responsibilities such as 
administering employee benefit plans or deciding benefit claims have 
been delegated. 38 U.S.C. 4303(4); section 1002.5(d). The Department 
received two comments concerning the definition of ``employer'' and 
potential liability of third-party health plan administrators under 
USERRA. Of these, one commenter requested the final rule specify that 
plan administrators that perform employment-related functions on behalf 
of the employer be excluded from the definition of ``employer.'' The 
other commenter requested the final rule clarify that a plan 
administrator or a plan is liable under USERRA only when the delegation 
of employment-related responsibilities is made through a written 
agreement with the employer. The Department declines to adopt either of 
these recommendations. As noted in above in Subpart A, Introduction to 
the Regulations Under USERRA, the statute is clear that an entity to 
which an employer has delegated employment-related responsibilities is 
to be considered an ``employer'' for USERRA purposes and does not 
condition this application upon the existence of a written agreement. 
See 38 U.S.C. 4303(4)(A)(i). However, the Department has amended the 
definition of employer in section 1002.5 to clarify that those third-
party entities that perform purely ministerial functions at the request 
of an employer will not be considered ``employers'' for the purpose of 
determining USERRA liability. An example of a purely ministerial 
function would be maintaining an employer's personnel files. The 
examples provided in the revised section are not intended to be an 
exclusive list but rather are offered only as illustrations. See 
section 1002.5(d)(1)(i).
    Because USERRA's continuation coverage and reinstatement provisions 
only apply to health plan coverage that is provided in connection with 
a position of employment, coverage obtained by an individual through a 
professional association, club or other organization would not be 
governed by USERRA, nor would health plan coverage obtained under 
another family member's policy or separately obtained by an individual. 
The Department received two comments concerning the application of 
USERRA's continuing coverage and health plan reinstatement provisions 
to cases in which the dependent of a person receiving employer-based 
health plan coverage leaves to perform service in the uniformed 
services and both commenters sought the application of USERRA's right 
to continuing coverage for those dependents. In a similar vein, a third 
comment contended that retirees covered by their former employer's 
health plan who leave to perform military service should not be 
entitled to USERRA continuing coverage. USERRA's continuing coverage 
and reinstatement provisions are employment-based, and apply only in 
cases in which the service member has coverage under a health plan in 
connection with the service member's position of employment. 38 U.S.C. 
4317(a)(1). As a result, where the service member is a dependent of the 
covered employee or the service member is a retiree, USERRA's 
continuing coverage and reinstatement provisions would not apply 
because the coverage is not in connection with his or her position of 
employment. The regulation implements this statutory mandate and, as a 
result, no change is mandated in response to the comments. The 
Department notes, however, that while dependents and retirees who are 
service members are not covered by USERRA's continuing coverage 
provisions, such persons may be entitled to reinstatement of health 
plan coverage following periods of certain types of military service 
under the provisions of the Servicemembers Civil Relief Act (SCRA). See 
50 U.S.C. App. 594. The Department does not interpret the SCRA, but 
notes that, in general, attorneys or other experts in the military 
services may provide technical assistance on its provisions.
    The Department also received comments about the application of 
USERRA's health plan election provisions to dependents of service 
members receiving employment-based health coverage. Two commenters 
sought the establishment in the final rule of a separate right for 
dependents to elect or waive continuation coverage, arguing that this 
is necessary to avoid any sudden termination of civilian health plan 
coverage for dependents if the service member declines or fails to 
elect continuing coverage. Furthermore, the commenters state, such 
termination may be in conflict with a custody or child support 
agreement or court order. USERRA provides that individuals who are 
absent from employment to perform military service have the right to 
elect to continue employer-provided health plan coverage for themselves 
and their dependents. 38 U.S.C. 4317(a)(1). There is no provision in 
USERRA for a separate election for dependents. As a result, the 
Department concludes that such a modification is not compelled by the 
statute. However, as discussed below, Section 1002.165 of the rule 
provides plan administrators with the flexibility necessary to 
establish a comprehensive schedule of notice, election and waiver 
procedures, if they choose to do so.
    Section 1002.164 of the rule, which addresses the length of time 
the service member is entitled to continuing health plan coverage, 
reflects a recent amendment to USERRA. Congress amended the statute in 
December, 2004, with passage of the Veterans Benefits Improvement Act 
(VBIA, Pub. L. 108-454). As a result, 38 U.S.C. 4317(a)(1)(A), and 
section 1002.164 now provide that the maximum period of continued 
coverage is the lesser of 24 months or the period of military service 
(beginning on the date the absence begins and ending on the day after 
the service member fails to apply for reemployment).
    As noted above, section 1002.165 provides that plan administrators 
and fiduciaries may develop reasonable requirements and operating 
procedures for the election of continuing coverage, consistent with 
USERRA and the terms of the plan. Such procedures must take into 
consideration the requirement in USERRA section 4312(b) that where 
military necessity prevents the service member from giving the employer 
notice that he or she is leaving for military duty, or where giving 
such notice would be impossible or unreasonable, plan requirements may 
not be imposed to deny the service member continuation coverage. The 
Department invited comments as to whether this approach--allowing 
health plan administrators latitude to develop reasonable requirements 
for employees to elect continuation coverage--best effectuates the 
purpose of the statute. As an alternative to this flexibility, the 
Department requested comments on whether these regulations should 
establish a date certain by which time continuing health plan coverage 
must be elected.
    The provision in section 1002.165 that health plan administrators 
may establish reasonable rules that govern an

[[Page 75267]]

employee's election of continuation coverage, and the alternative 
question of whether the final rule should establish specific deadlines 
within which such elections must be made, received more comments than 
any other health plan issue. Six commenters, including America's Health 
Insurance Plans, ORC Worldwide, Equal Employment Advisory Council, 
Society for Human Resources, and U.S. Chamber of Commerce, generally 
favored the flexibility provided in the proposed rule, while nine 
commenters, including the Society of Professional Benefit Advisors, 
National Association of Employment Lawyers, WorldatWork, Illinois 
Credit Union League, TOC Management Services, National School Boards 
Association, and three law firms, requested more regulatory 
specificity. Most of the nine comments suggested that the final USERRA 
rule contain provisions identical to or substantially the same as those 
provided in COBRA, which establishes specific timeframes within which 
the employer must notify the employee of his or her COBRA rights, 
followed by a specific time within which the person must make an 
election to accept or decline continuation coverage. See 26 U.S.C. 
4980B(f). One commenter in particular captured the essence of those 
comments seeking the imposition of COBRA rules, arguing that the 
Department's uniform adoption of COBRA rules and timeframes would avoid 
disputes over what constitutes a ``reasonable'' rule. Several 
additional commenters suggested that the adoption of COBRA rules and 
timeframes would ease a plan's administration of USERRA's requirements.
    In response to those comments requesting the imposition of COBRA-
like timeframes for notice and election, the Department notes that it 
is generally averse to imposing on employers covered by USERRA 
relatively inflexible rules such as those established under COBRA. Such 
rules may unduly burden many smaller employers that are covered by 
USERRA but are not covered by COBRA. The Department views each 
individual plan as best qualified to determine what election rules are 
reasonable based on its own unique set of characteristics, and 
therefore declines to amend section 1002.165 in this manner. However, 
under the USERRA rule, plans themselves are permitted to adopt 
reasonable rules, and, depending on a particular plan's circumstances, 
these may include COBRA timeframes.
    However, the Department has decided to amend the election 
provisions in response to comments seeking a revision to those 
provisions for other reasons. Several commenters suggested that the 
Department should adopt specific rules and timeframes for election of 
continuing coverage because establishing a time certain by which an 
election must be made would help employers avoid paying premiums for 
employees who do not want continuation coverage but have failed to 
advise their employer of this fact. In addition, the Department 
received five comments regarding the provision in section 1002.165 
stating that service members must be provided continuing coverage if 
their untimely election was excused because it was impossible or 
unreasonable, or precluded by military necessity. These commenters 
shared the concern that employers may be required to pay premiums for 
employees who do not want continuation coverage but have failed to 
advise their employer of this fact.
    After considering these comments, the Department has added a new 
section 1002.167, and sequentially renumbered the succeeding health 
plan provisions,\1\ to permit an employer to cancel the employee's 
health insurance if the employee departs work for military service 
without electing continuing coverage, with a requirement for 
retroactive reinstatement under certain circumstances. See 1002.167. 
For instance, new section 1002.167(a) provides that in cases in which 
an employee's failure to give advance notice of service was excused 
under the statute because it was impossible, unreasonable, or precluded 
by military necessity, the employer will be required to retroactively 
provide continuing coverage during the period of service if the 
employee elects and pays all unpaid amounts due for the coverage, and 
the employee must not incur administrative reinstatement costs. Id. 
This is consistent with the statute's provision regarding excusal for 
failure to provide notice to the employer of service, which states that 
an employee is excused from giving advance notice of impending military 
service in cases where the giving of notice is precluded by military 
necessity or is otherwise impossible or unreasonable under the 
circumstances. See 38 U.S.C. 4312(b)(1); section 1002.86.
---------------------------------------------------------------------------

    \1\ The insertion of new section 1002.167 requires the 
sequential renumbering of proposed sections 1002.167, 1002.168, and 
1002.169, resulting in the contents of proposed section 1002.167 
being found in final rule section 1002.168, and so on. In discussing 
these sections below, the Department will use the new section 
numbers to refer to the sections as proposed. As an aid, the initial 
reference to provisions 1002.168, 1002.169, and 1002.170 will 
include a single reminder that the discussion involves the content 
of the provision as it was proposed.
---------------------------------------------------------------------------

    New section 1002.167(b) addresses those cases in which an employee 
leaves employment for uniformed service in excess of 30 days and 
provides advance notice of the military service but does not elect 
continuing coverage. In such cases, a plan administrator that has 
developed reasonable rules regarding the election of continuing 
coverage may cancel the employee's health plan coverage but must 
reinstate it upon the employee's election and full payment within the 
time periods established by the plan, without the imposition of 
administrative reinstatement costs. Alternatively, a plan administrator 
that has not developed rules regarding the election of continuing 
coverage may cancel the employee's health plan coverage but must 
reinstate it upon the employee's election and full payment within the 
time periods established under section 1002.164(a), also without the 
imposition of administrative reinstatement costs. See section 
1002.167(b).
    Section 1002.166 implements USERRA section 4317(a)(2), which 
provides that a service member who elects to continue employer-provided 
health plan coverage may be required to pay no more than 102 percent of 
the full premium (the employee's share plus the employer's share) for 
such coverage, except that service members who perform service for 
fewer than 31 days may not be required to pay more than the employee 
share, if any, for such coverage. The legislative history of USERRA 
indicates that the purpose of these provisions, and in particular the 
requirement that service members pay only the employee share for 
coverage during service lasting fewer than 31 days, is to ensure that 
there is no gap in health insurance coverage for the service member's 
family during a short period of service. Dependents of Reserve 
Component members are entitled to participate in the military health 
care system, called TRICARE, only if the period of service exceeds 30 
days. See H.R. Rep. No. 103-65, Pt. 1, at 34 (1993). USERRA does not 
provide specific guidance concerning the timing of payments for 
continuation coverage and the termination of coverage for failure to 
make payments, and section 1002.166(c) of the proposed rule provided 
that plan administrators may develop reasonable procedures for payment, 
consistent with the plan's terms.
    The Department received four comments concerning section 1002.166. 
One commenter queried whether the payment obligation began at the

[[Page 75268]]

beginning of the period of coverage or 31 days after the beginning of 
the continuation coverage. The statute states that an employee who 
elects continuation coverage may be required to pay no more than the 
employee share if the coverage pertains to service of less than 31 
days, and may be required to pay no more than 102% of the full premium 
under the plan if the coverage pertains to service of 31 days or more. 
In either case, the payment obligation begins on the first day of the 
continuation coverage.
    The three additional comments regarding section 1002.166 sought 
more guidance concerning payment for continuation coverage and the 
plan's entitlement to cancel coverage for non-election or non-payment. 
Of these, one recommended that the final rule adopt COBRA guidelines 
for payment and termination for non-payment. Another commenter 
suggested that the rule include a provision that the use of COBRA-
compliant forms and procedures is reasonable under USERRA. In addition, 
as noted in the discussion of section 1002.165 above, absent any 
affirmative provisions in the rule regarding the ability of employers 
to cancel employee coverage during military leave, employers and plan 
administrators noted that they would have to bear the entire cost of 
continuing coverage when the employee leaves employment without 
electing continuing coverage.
    After considering these comments, the Department has added a 
provision to new section 1002.167 that establishes that plans may 
develop reasonable rules to permit termination of coverage if an 
employee elects but does not pay for continuation coverage. In 
addition, new section 1002.167(c) provides that in cases where plans 
are covered by COBRA, it may be reasonable to adopt COBRA rules 
concerning election and payments so long as the plan complies with all 
related provisions of USERRA and these regulations. See section 
1002.167(c).
    Section 1002.168 (proposed section 1002.167) explains the right of 
a reemployed service member to reinstatement of coverage in a health 
plan if coverage has been terminated as a result of his or her failure 
to elect continuation coverage, or length of service. At the time of 
reemployment, no exclusion or waiting period may be imposed where one 
would not have been imposed if the coverage of the service member had 
not terminated as a result of service in the uniformed services. This 
provision also applies to the coverage of any other person who is 
covered under the service member's policy, such as a dependent. 
Injuries or illnesses determined by the Secretary of Veterans' Affairs 
to have been incurred in or aggravated during the performance of 
service in the uniformed services are excluded from the ban on 
exclusions and waiting periods; however, the service member and any 
dependents must be reinstated as to all other medical conditions 
covered by the plan.
    The Department received eight comments related to section 1002.168. 
Of these, three comments concerned issues addressed in relation to 
other provisions, and are covered elsewhere in this section of the 
preamble. One commenter requested the Department include in the rule a 
definition of ``prompt reinstatement'' in connection with this 
provision. Section 1002.168 provides for prompt reinstatement upon 
reemployment generally without the imposition of any waiting periods or 
exclusions, thus making further clarification unnecessary. The same 
commenter requested the rule state that the failure to promptly 
reinstate the health coverage as required by this section is evidence 
of discrimination in violation of section 4311 of USERRA. While the 
Department is disinclined to include such a far-reaching generalization 
in this context, the Department reiterates that the denial of any 
benefit of employment that is motivated by an employee's status or 
activity protected by USERRA is a violation of the statute's anti-
discrimination provisions. See 38 U.S.C. 4311(c); sections 1002.18-
1002.23.
    Two commenters expressed concern that if an insurance carrier 
imposes an exclusion or waiting period upon a returning employee in 
violation of section 4317(b) of USERRA, implemented by section 
1002.168(a), the employer could be liable for funding health claims 
that should have been paid by the insurance carrier. The commenters 
suggested that reinstatement be limited to those circumstances in which 
coverage is available through the plan's insurance carrier or, in the 
alternative, that the employer should not be liable for insurer's 
practices that violate USERRA. Section 4317(b) of USERRA requires 
reinstatement of employer-provided insurance upon reemployment, and 
section 1002.168(a) makes no exceptions to that reinstatement 
requirement other than the limited exceptions contained in 4317(b) 
itself. The additional exceptions proposed by the commentators are not 
appropriate, because they would reduce the protections provided by 
USERRA. Employers that utilize third-party insurance plans to provide 
health coverage for employees are obliged to negotiate coverage that is 
compliant with USERRA to avoid possible liability for failure to 
properly reinstate coverage upon reemployment. In this context, 
USERRA's legislative history suggests there are circumstances in which 
an insurance company could be considered an employer under USERRA and 
could not ``refuse to modify their policies in order for employer's 
(sic) to comply with [Section 4317 of USERRA].'' S. Rep. No. 103-158, 
at 42 (1993).
    One commenter recommended that section 1002.168 provide that 
reinstatement of health plan coverage must be immediate, even in cases 
where the employer is unable to immediately reemploy the returning 
employee for reasons permitted under the statute. USERRA requires 
prompt, but not necessarily immediate, reemployment. See section 
1002.181. The statute requires reinstatement of health plan coverage 
``upon reemployment,'' not upon application for reemployment. See 38 
U.S.C. 4317(b)(1). Therefore, an employer must reinstate coverage upon 
the employee's prompt reemployment, and the Department declines to 
adopt the commenter's suggestion.
    Section 1002.169 (proposed section 1002.168) provides that where a 
returning employee chooses to delay reinstatement of health plan 
coverage for a period of time following reemployment, the employer may 
allow the delay but is not required by USERRA to do so. The requirement 
to reinstate health plan coverage without the imposition of exclusions 
or waiting periods (except for service-connected conditions and 
exclusions or waiting periods that would have been imposed had coverage 
not been terminated as the result of military service) exists only upon 
reemployment, not later. The Department also sought comments on whether 
the rule should provide that a service member be permitted to delay 
electing continuation health plan coverage under some circumstances. In 
addition, in a case where health plan coverage was terminated or 
suspended by reason of military service, if the employee is permitted 
to delay reinstatement to the health plan for a period of time after 
the date of reemployment, the Department invited comments as to whether 
such delayed reinstatement coverage should be subject to an exclusion 
or waiting period. See 38 U.S.C. 4317(b)(1).
    The Department received six comments in response. Of these, one 
commenter recommended the final rule provide that where the employee 
chooses to delay reinstatement of health plan coverage to a time after

[[Page 75269]]

reemployment, the employer must reinstate the coverage immediately with 
no exclusions or waiting periods. Another commenter suggested allowing 
a reemployed service member the same amount of time to elect 
reinstatement in the health plan as the employer allows newly hired 
employees to choose to enroll in the plan, and such period of time 
would vary from employer to employer. Another commenter proposed that 
if an employee elects to delay reinstatement in the health plan, the 
employer should be permitted to impose exclusions or waiting periods. 
Two commenters noted that various rules under other statutes such as 
HIPAA and the IRC might affect the ability of the employer to 
immediately reinstate the coverage for an employee who chooses to wait 
until some time after reemployment to request reinstatement of the 
coverage. The final commenter suggested the rule provide that an 
employer should treat an employee who chooses to delay health plan 
reinstatement until some time following reemployment the same as it 
treats other similarly situated employees who are returning from a 
leave of absence where health plan coverage was interrupted.
    After reviewing these comments, the Department maintains its 
original position that an employer may, but is not required to, 
reinstate an employee's health plan coverage if the employee chooses to 
delay reinstatement following his or her reemployment under USERRA. 
This interpretation is consistent with the statute's requirement that 
reinstatement of health coverage must be made ``upon reemployment,'' 
and restores a service member to the position he or she would have been 
in if there had been no absence from work for military service. 
Although the provision does not mandate that an employer permit an 
employee to delay reinstatement at the employee's option, the provision 
balances the interests of both employers and employees, and provides 
sufficient flexibility for both.
    Section 1002.170 (proposed section 1002.169) deals with special 
rules governing multiemployer health plans. Generally, under USERRA, if 
the employer cancels health plan coverage for its employees while the 
service member is performing service, or if the employer goes out of 
business, the service member's coverage terminates also. USERRA's 
treatment of multiemployer health plans provides an exception to this 
result. Section 1002.170 requires continued health plan coverage in a 
multiemployer plan even when the service member's employer no longer 
exists, or no longer participates in the plan. Any liability under the 
multiemployer plan for employer contributions and benefits under USERRA 
is to be allocated as provided by the sponsor maintaining the plan. If 
the sponsor does not provide for an allocation of responsibility, the 
liability is allocated to the last employer employing the person before 
the period of uniformed service. Where that employer is no longer 
functional, the liability is allocated to the plan.
    The Department received three comments from the multiemployer plan 
community concerning the application of USERRA to those types of health 
plans referred to variously as ``credit bank,'' ``dollar bank'' or 
``hour bank'' plans. This type of plan (``bank'' plan) is typically 
provided by a multiemployer plan, particularly in industries where 
employment may be sporadic or seasonal. ``Bank'' plans establish 
accounts in which employees save prospective health benefits credits 
that may be spent later, and typically use a lag period system for 
accumulating credits for eligibility and coverage. For example, work 
performed by an employee in January could result in credit to the 
employee's health benefits bank account in February that will result in 
eligibility to use the credits in March. If under the terms of a 
``bank'' plan an employee must work 150 hours to have coverage for a 
month and the employee works 200 hours, the 50 hours in excess of the 
amount required for coverage is credited to the employee in a ``bank'' 
for future use. The hours from the ``bank'' can be used by the employee 
to provide health plan coverage for months when the employee does not 
work.
    The comments received concerning ``bank'' plans requested that the 
Department provide guidance as to whether an employee should be allowed 
to deplete the balance of ``banked'' credits during a period of service 
in the uniformed services. The commenters indicated that USERRA's 
requirement of immediate reinstatement in a health plan upon 
reemployment may require the plan to fund the health coverage of a 
person that had depleted the ``banked'' hours during service and 
therefore lacked the credits necessary to initiate or resume coverage 
upon reemployment. After considering these comments, the Department has 
added new section 1002.171 to provide that a ``bank'' plan may permit 
an employee to deplete ``banked'' credits in order to continue coverage 
at no cost to the employee so long as the plan provides for 
reinstatement of the coverage upon reemployment. The plan may require 
the employee to pay the full cost of the reinstated coverage until the 
employee has earned enough credits after reemployment to resume normal 
coverage. In addition, if the ``banked'' credits are depleted during 
the applicable eligibility period, the employee must be permitted at 
his or her option to pay for continuation coverage for the balance of 
the period. Alternatively, the plan may permit an employee to 
``freeze'' existing credits when leaving to perform military service, 
pay for continuation coverage as provided for in section 1002.166, and 
then restore those credits intact upon reemployment. The employer 
should counsel the employee about these options and the consequences of 
selecting one or the other. See new section 1002.171.
    Finally, one commenter expressed concern that the effective dates 
for coverage under USERRA and COBRA are different in the case of 
``bank'' plans, and recommended that the rule be amended to adopt the 
COBRA standard so that the two periods are consistent. The commenter 
states that under COBRA, the continuation coverage would not begin 
until any ``banked'' credits are depleted, whereas under USERRA the 
continuation coverage begins upon the person's departure from 
employment to perform military service. The Department declines to 
modify the effective date for continuation coverage under USERRA 
because it is mandated by statute. See 38 U.S.C. 4317(a)(1).
    In addition to the changes made in response to the comments, the 
Department made technical corrections to two health plan provisions. 
First, subsection (b) of section 1002.168 (proposed section 1002.167), 
which referenced reinstatement procedures applicable to multiemployer 
plans in proposed section 1002.169, was deleted, and the subsequent 
subsection was re-lettered accordingly, because proposed section 
1002.169 did not discuss reinstatement procedures. Second, section 
1002.170 (proposed section 1002.169) was revised to more closely track 
section 4317(a)(3) of the statute.

Subpart E--Reemployment Rights and Benefits

Prompt Reemployment

    One of the stated purposes of USERRA is ``to minimize the 
disruption to the lives of persons performing service in the uniformed 
services * * * by providing for [their] prompt reemployment.'' 38 
U.S.C. 4301(a)(2). Section 4313 requires that a returning service 
member who meets the eligibility requirements of section 4312 be 
``promptly reemployed'' in the

[[Page 75270]]

appropriate position. 38 U.S.C. 4313(a). The circumstances of each 
individual case will determine the meaning of ``prompt.'' See H.R. Rep. 
No. 103-65, Pt. I, at 32 (1993); S. Rep. No. 103-158, at 54 (1993). 
Section 1002.181 provides guidance for the ``prompt'' reinstatement of 
returning service members. The regulation states, as a general rule, 
that the employer shall reinstate the employee as soon as practicable 
under the circumstances. Reinstatement must occur within two weeks 
after he or she applies for reemployment ``absent unusual 
circumstances.'' The reasonableness of any delay depends on a variety 
of factors, including, for example, the length of the service member's 
absence or intervening changes in the circumstances of the employer's 
business. An employer does not have the right to delay or deny 
reemployment 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. Moreover, prompt reemployment should be 
required even in cases in which re-training or re-certification is 
mandated by law, because the obligation to reemploy in those 
circumstances may be met by reemployment to a comparable position while 
re-training or re-certification is sought. Finally, if the period of 
service is less than 31 days, then the statute requires that the 
returning employee simply report back to work; these regulations 
require that such a person will be immediately reemployed.
    The Department invited comments as to whether allowing the employer 
two weeks to reemploy the service member returning from a period of 
service of more than 30 days best effectuates the purpose of this 
provision of USERRA. In response, the Department received nine 
comments, which include three comments that agreed with the two-week 
reemployment period, three comments that recommended the Department 
enlarge the reemployment period to 30 days, particularly in those cases 
following long periods of military service, and two comments seeking 
guidance regarding those circumstances in which the two-week period may 
be excused. Finally, one commenter, concerned that the regulation can 
be misread to permit employer discretion to take up to two weeks to 
reemploy an employee absent for a period of service of less than 31 
days, seeks inclusion in the text of this provision a mandate requiring 
reemployment the next day following the completion of service.
    After reviewing these comments, the Department has concluded that 
it will retain section 1002.181 as it was proposed. The Department has 
considered the advantages and disadvantages associated with altering 
the two-week reemployment period, and has concluded that two weeks 
represents an equitable balance between the interests of employers, who 
may face some challenges in reemploying an employee in the 
organizational structure after a lengthy period of absence, and the 
interests of employees, who have been making the greatest of sacrifices 
in service to their country. In addition, employers unduly burdened by 
the two week reemployment period may rely on the ``unusual 
circumstances'' exception to reemployment within two weeks, although it 
is the Department's view that these exceptions should be narrowly drawn 
and will be relatively rare. An example of ``unusual circumstances'' 
would be where a service member seeks reemployment with his or her 
employer, who, apart from the service member, employs only one current 
employee. The current employee is near the end of a highly complex, 
months-long project, which is due to be completed just four weeks from 
the point at which the service member makes an application for 
reemployment. The employer is prepared to comply with its obligation to 
reemploy the returning service member, and will have work for him or 
her following the completion of the current project in four weeks, but 
cannot reemploy the returning employee until that time. Under these 
unusual circumstances, the employer would not be expected to reemploy 
its employee within two weeks. Finally, in response to the comment 
above seeking more clarity in the provision regarding prompt 
reemployment following brief periods of service, the Department notes 
that section 1002.181 already states that ``prompt reemployment'' 
following brief periods of service ``generally means the next regularly 
scheduled work day.'' See section 1002.181.

Reemployment Position

    In construing an early precursor statute to USERRA, the Selective 
Training and Service Act of 1940, 50 U.S.C. Appendix, 308(b, c), the 
Supreme Court recognized a basic principle in the early reemployment 
protections provided for veterans, which was to become a bedrock 
concept of all subsequent veterans reemployment legislation. Thus, in 
Fishgold v. Sullivan Drydock and Repair Corp., 328 U.S. 275, 284-85 
(1946), the Supreme Court stated that the returning service member 
``does not step back on the seniority escalator at the point he stepped 
off. He steps back on at the precise point he would have occupied had 
he kept his position continuously during the war.'' Id. Fishgold 
principally involved the issue of a veteran's seniority; however, the 
principle applies with equal force to all aspects of the service 
member's return to the work force. The returning service member 
therefore should be restored to ``a position which, on the moving 
escalator of terms and conditions affecting that particular [pre-
service] employment, would be comparable to the position which he would 
have held if he had remained continuously in his civilian employment.'' 
Oakley v. Louisville & Nashville R.R., 338 U.S. 278, 283 (1949). The 
position to which the returning service member should be restored has 
become known as the ``escalator position.'' The requirement that the 
service member be reemployed in the escalator position is codified in 
section 4313 of USERRA. 38 U.S.C. 4313.
    Sections 1002.191 and 1002.192 implement general principles related 
to a returning veteran's right to reemployment in this escalator 
position. Sections 1002.193, 1002.194 and 1002.195 clarify that 
seniority, status, pay, length of service, and service-related 
disability may affect the service member's reemployment position. 
Sections 1002.196 and 1002.197 explain the employer's obligations to 
reemploy the service member based on the duration of the person's 
absence from the workplace. Section 1002.198 describes the criteria to 
be followed by the employer in making reasonable efforts to enable the 
service member to qualify for the reemployment position. Finally, 
section 1002.199 provides guidance for employers in determining the 
priority of two or more service members who are eligible for the same 
employment position.
    The Department received several comments from employers and 
employer associations inquiring about the application of the escalator 
position to six particular circumstances: employers who use bidding 
systems for job assignments; the use of promotions based on an 
employer's discretion; reductions in force, layoffs, and disciplinary 
procedures; bargaining units on strike at time of reemployment; 
apprenticeships; and probationary periods. The Department will provide 
guidance on each of these cases in turn.
    Bidding Systems: Many employers, for example, employers in the 
airline and railroad industries, use seniority-based bidding systems to 
award jobs and other perquisites of employment to their employees. The 
Equal Employment Advisory Council (EEAC) submitted a

[[Page 75271]]

comment asking how the escalator principle should apply to a returning 
service member seeking reemployment when the employer has a seniority-
based bidding system in place. The EEAC proposed that the Department 
create an exception to the escalator principle, so that service members 
returning to a reemployment position in which they have missed an 
opportunity to bid on a particular job or other perquisite are not 
entitled to recover that missed opportunity: ``The final regulations 
should provide a temporary exception for employers that have a 
legitimate, bona fide bidding system in place. Where jobs, shifts, and/
or locations are opened to employee bid frequently, e.g. every 120 
days, returning employees could be slotted in accordance with the 
employer's operational needs (but with full escalator pay and benefits) 
until the next regularly occurring bid.''
    USERRA's intent is to ensure that returning service members are 
accorded the status, pay and benefits to which they are entitled had 
they not served in the uniformed services, generally without exception. 
In its administrative enforcement of the Act, the Department has long 
interpreted the statute and its predecessor to require that a returning 
service member should be awarded a job or other perquisite of 
employment if it is reasonably certain that the service member would 
have received it but for the interruption due to military service. See 
Veterans' Reemployment Rights Handbook at 13-4 (1988); sections 
1002.191, 1002.193, 1002.213, 1002.214; 1002.236. This approach 
comports with the statute and its legislative history governing the 
nature of the reemployment position. The Department concludes that, as 
a general matter, a reemployed employee should not be required to wait 
for the next regularly occurring opportunity to bid in order to seek 
promotions and other benefits tied to the ``escalator'' position.
    Discretionary Promotions: The EEAC suggests that in the case of 
promotions based on employer discretion, section 1002.192 requires 
employers ``to speculate whether a returning employee would have (1) 
sought the promotion in the first instance and (2) have been chosen 
over the successful candidate. * * * Section 1002.192 [should state] 
that: Your escalator position would not include a promotion based on 
discretionary factors.'' Similarly, a large human resources consulting 
firm submitted that ``[b]ecause most employees are promoted based on 
demonstrated ability and experience, rather than length of service, the 
escalator principle cannot operate even-handedly for all employees. The 
escalator principle is appropriate only in workforces where pay 
increases and promotions occur automatically (e.g. according to 
collective bargaining agreements or tenure tracks,) rather than for 
achievement or merit.''
    Under the statute and case law, a returning service member is 
entitled to a promotion upon reemployment if there is a reasonable 
certainty that the employee would have been promoted absent military 
service. Coffy v. Republic Steel, 447 U.S. 191, 197-98 (1980); Goggin 
v. Lincoln St. Louis, 702 F.2d 698, 701 (8th Cir. 1983). The statute's 
legislative history similarly states that returning service members are 
entitled to whatever position it is reasonably certain the employee 
would have attained but for the military service. H.R. Rep. No. 103-65, 
Pt. I, at 39 (1993). However, case law and longstanding Departmental 
policy are clear that if the promotion depends ``not simply on 
seniority or some other form of automatic progression but on an 
exercise of discretion on the part of the employer,'' the returning 
service member may not be entitled to the promotion. McKinney v. The 
Missouri-Kansas-Texas Railroad Company, 357 U.S. 265 (1958); Veterans' 
Reemployment Rights Handbook at 10-2 (``distinction must be made 
between those benefits which are largely dependent upon length of 
service, and thus are perquisites of seniority, and those benefits 
which are largely dependent upon management discretion. * * * A 
reemployed veteran claiming a right to a promotion or other benefit 
allegedly missed during military service must demonstrate that it was 
reasonably certain that he would have received the benefit if he had 
remained continuously employed.'')
    Sections 1002.191 and 1002.192 advances these principles, and 
incorporates the reasonable certainty test as it applies to 
discretionary and non-discretionary promotions. In addition, it is 
consistent with the case law because it does not rely on the label 
associated with particular personnel actions, e.g., ``discretionary 
promotions,'' or ``seniority-based promotions,'' and the analysis 
instead focuses on whether a personnel action was ``reasonably 
certain.'' The final rule promotes the application of a case-by-case 
analysis rather than a rule that could result in the unwarranted denial 
of promotions to returning service members based on how the promotion 
was labeled rather than whether or not it was ``reasonably certain.''
    Reductions in Force (RIFs), Layoffs, and Disciplined Employees: An 
individual submitted a comment asking that the final rule ``explicitly 
address layoffs, RIFs and, most significantly, disciplinary actions 
including removal/discharge actions which were interrupted by the 
employee's service.'' Regarding reductions-in-force and layoffs, 
section 1002.42 establishes that employees that are laid off with 
recall rights may be entitled to reemployment upon return if the 
employer would have recalled the employee but for the military service. 
This section also notes that similar principles apply in other cases in 
which an employee may be absent from work at the onset of military 
leave or upon return from service, such as in cases in which the 
employee is on non-military leave when activated.
    In the event that a returning employee was subject to a 
disciplinary review at the time of the onset of service, or in the 
event that the employer discovers conduct prior to reemployment that 
may subject the returning service member to disciplinary review upon 
reemployment, the Department concludes that the employer retains the 
reemployment obligation in such cases. However, the employer may resume 
the disciplinary review upon reemployment at the point at which it was 
left at the time of the onset of military service, or may initiate such 
review based on conduct discovered prior to reemployment. The 
Department has long interpreted the statute to prohibit an employer 
from denying reemployment rights on the basis that the employee would 
have been discharged had he or she not left for military service. 
Veterans' Reemployment Rights Handbook at 8-1 (1988). However, the 
Department recognizes that there may be some instances in which the 
returning employee may be legitimately subject to an employer's 
disciplinary review following reemployment. In these circumstances, the 
employer retains the obligation to reemploy the service member, thus 
giving rise to USERRA's prohibition of discharge following reemployment 
for one year except for just cause in section 4316(c), and serving to 
ensure that any post-service discipline or discharge will be 
justifiable, legitimate, and not pretextual. See also section 1002.247 
and 1002.248.
    Employee Bargaining Unit on Strike: The Department received one 
comment seeking further clarification on the determination of the 
escalator position when the returning service member's bargaining unit 
is or has been on strike. As section 1002.42 indicates, an employee in 
this situation remains an employee for purposes of reemployment

[[Page 75272]]

rights governed by USERRA. However, employers and employees should be 
aware that the employee's reemployment rights may be affected by 
Federal labor law under the National Labor Relations Act, 29 U.S.C. 
141, et seq. (NLRA), which includes decisional law under the NLRA 
governing reinstatement rights of workers engaged in a work stoppage.
    Apprenticeships and Probationary Periods: The Building and 
Construction Trades Department of the AFL-CIO argues that an employer 
should not be required to reemploy a returning service member who was 
part of a bona fide apprenticeship program on the escalator position 
with an advanced pay rate until the employee takes a test or undergoes 
a skills evaluation upon which the advanced rate is contingent. 
Similarly, the National School Board Association (NSBA) takes the 
position that a teacher's time away on military leave should not be 
counted towards a teacher's completion of a probationary period. The 
NSBA argues that the probationary period for a teacher is a time for 
the employer to observe and evaluate the teacher as well as a time to 
train the teacher, and urges the Department to determine that the 
probationary period for teachers is akin to a skills test and returning 
service members should still be required to complete the probationary 
period before attaining a tenured post probationary period.
    With regard to apprenticeships and the escalator position, the 
Department has long held that if the apprentice position is bona fide 
and not merely a time-in-grade requirement, the returning service 
member should be restored as an apprentice at a level that reflects 
both the experience and training he or she received pre-service. Upon 
completion of the apprenticeship post-service, the employee should be 
entitled to ``journeyman'' seniority plus any seniority that would have 
accrued during military service had the journeyman status been attained 
during the period of uniformed service. See Veterans' Reemployment 
Rights Handbook at 11-3. Similarly, the Department has long held that 
if a probationary period is a bona fide period of observation and 
evaluation, the returning service member must complete the remaining 
period of probation upon reemployment. See Veteran's Reemployment 
Rights Handbook at 3-6, 3-7, 13-11 (1988). Therefore, the Department 
concludes that if an employee who left employment for military service 
was in the midst of a bona fide apprenticeship program or probationary 
period that required actual training and/or observation in the 
positions, rather than merely time served in the position, the employee 
should be allowed to complete the apprenticeship or probationary period 
following reemployment. Once the employee completes the apprenticeship 
or probationary period, the employee's pay and seniority should reflect 
both the pre- and post-service time in the apprenticeship or 
probationary period, plus the time served in the military.
    In some workplaces, where opportunities for promotion are 
conditioned upon the employee passing a skills test or examination, 
determining the escalator position will require administering a makeup 
promotional exam. If a reemployed service member was eligible to take 
such a promotional exam and missed it while performing military 
service, the employer should provide the employee with an opportunity 
to take the missed exam after a reasonable period of time to acclimate 
to the employment position. See, e.g., Fink v. City of New York, 129 
F.Supp.2d 511, 519 (S.D.N.Y. 2001). In some cases, success on a 
promotional exam entitles an employee to an immediate promotion, and in 
some cases it entitles an employee only to a particular placement on an 
eligibility list. If the reemployed employee is successful on the 
makeup exam, and there is a reasonable certainty that, given the 
results of that exam, the reemployed employee would have been promoted 
during the time he or she was in military service, then the reemployed 
employee's promotion must be made effective as of the date it would 
have occurred had the employment not been interrupted by military 
service. Similarly, if the reemployed employee is successful on the 
makeup exam, and there is a reasonable certainty that, given the 
results of that exam, the reemployed employee would have been placed in 
a particular position on an eligibility list during the time he or she 
was in military service, then the reemployed employee's placement on 
the list must be made effective as of the date it would have occurred 
had the employment not been interrupted by military service. This 
requirement is similar to the requirement in section 1002.236, that 
obliges an employer to give a reemployed employee, after a reasonable 
amount of time to adjust to the reemployment position, a missed skills 
test or examination that is the basis of a merit pay increase. Section 
1002.193 implements these requirements.
    The Department invited comment as to whether this interpretation 
best effectuates the purpose of this provision, or whether the issue of 
promotional exams requires more detailed treatment in these 
regulations. The Department received six comments in response, several 
of which were generally supportive of the provision. The Society for 
Human Resources Management (SHRM) and WorldatWork expressed overall 
support for the requirements of the provision. Two commenters, the 
National Employment Lawyers Association and ORC Worldwide, a management 
consulting firm, seek more guidance on the provision, in particular, on 
the length of time that an employer reasonably permits an employee to 
adjust to the employment position before administering a makeup exam. 
Two commenters, EEAC and one representing a municipal government, argue 
that the provision is unworkable because it is impossible to accurately 
predict a returning service member's retroactive placement on the 
escalator having given him or her a makeup exam.
    Section 1002.193 is consistent with the general principles 
regarding the application of the escalator provision, which require 
that a service member receive a missed promotion upon reemployment if 
there is a reasonable certainty that the promotion would have been 
granted. McKinney v. Missouri-Kansas-Texas R.R. Co., 357 U.S. 265. 274 
(1958); Tilton v. Missouri Pacific R.R. Co., 376 U.S. 169, 177 (1964). 
In addition, recent USERRA case law dealing precisely with the issue of 
missed promotional exams also supports this provision of the rule. Fink 
v. City of New York, 129 F.Supp.2d 511, 519-20 (E.D.N.Y. 2001). In that 
case, the court affirmed the jury award in favor of a fire marshall who 
missed a promotional exam because of his military service, holding that 
there was enough evidence for the jury to conclude that the plaintiff's 
military status was a motivating factor in the decision to deny him a 
promptly administered promotional exam upon reemployment. Id. at 520. 
As the court stated, ``the employer must sometimes treat [service 
members] differently from other employees in order to assure that they 
receive the same benefits as their coworkers. Thus, * * * where a 
neutral employment policy provides that a promotional exam shall only 
be administered on a particular date to all employees, it may 
constitute discrimination to refuse to allow veterans away on leave on 
the date in question to take a make-up exam upon their return from 
service.'' Id. at 519.

[[Page 75273]]

    Accordingly, section 1002.193 requires an employer to administer 
its otherwise neutral evaluative employment practices in a manner that 
affords a returning service member the opportunity, after a reasonable 
period of time for adjustment, to participate in or meet the standards 
of that practice. As with apprenticeship systems and probationary 
periods addressed above, upon successfully meeting the evaluative 
standards, the employee's reemployment position should be adjusted 
based on the prior date he or she would have completed the process had 
he or she not entered military service. Regarding the question of what 
amount of time is reasonable to permit an employee to adjust, the 
Department has revised section 1002.193 to reflect that no fixed time 
will be deemed a reasonable amount of time in all cases. However, in 
determining a reasonable time to schedule a makeup exam, employers 
should take into account a variety of factors, including but not 
limited to, the length of time the returning employee was absent from 
work, the level of difficulty of the test itself, the typical time 
necessary to prepare or study for the test, the duties and 
responsibilities of the reemployment position and the promotional 
position, and the nature and responsibilities of the service member 
while serving in the uniformed service. See section 1002.193.
    The Department received two additional comments regarding 
promotions and the escalator position. The first commenter suggests 
that the rule require employers to permit employee access to all 
personnel records so that returning service members will be fully 
informed of missed promotional opportunities. The Department is without 
authority in the statute to require such a result. Finally, the 
Department declines to adopt the suggestion of one commenter that 
suggests the provision should state its applicability to cross-
departmental promotions within an organization because it is ambiguous.
    Depending on the circumstances, section 4313 of USERRA either 
permits or requires the employer to reemploy a returning service member 
in a position with equivalent (or the nearest approximation to 
``equivalent'') seniority, status and pay to the escalator or pre-
service position. 38 U.S.C. 4313(a)(2)(A), (B), (3)(A), (B). Although 
``seniority'' and ``pay'' are generally well-understood terms, USERRA 
does not define ``status'' as it is used in section 4313 of the Act. 
Case law interpreting VRRA, a precursor to USERRA, recognized status as 
encompassing a broader array of rights than either seniority or pay. 
Job status varies from position to position, but generally refers to 
the incidents or attributes attached to, and inherent in, a particular 
job. The term often includes the rank or responsibility of the 
position, its duties, location, working conditions, and the pay and 
seniority rights attached to the position. See H.R. Rep. No. 103-65, 
Pt. I, at p. 31 (1993); Duarte v. Agilent Technologies, Inc., 366 
F.Supp.2d 1039, 1045 (D.Colo. 2005). Examples of status may be the 
exclusive right to a sales territory; the opportunity to advance in a 
position; eligibility for possible election to a position with the 
employee representative organization; greater availability of work 
where piece rates apply; the opportunity to work additional hours and 
to advance in a job; the opportunity to withdraw from a union; the 
opportunity to obtain a license; or, the opportunity to work a 
particular shift. The facts and circumstances surrounding the position 
determine whether a specific attribute is part of the position's status 
for USERRA purposes. Sections 1002.193 and .194 implement these 
provisions of the Act.
    The Department received one comment regarding proposed section 
1002.194, which establishes the principle that the escalator principle 
may result in adverse consequences upon reemployment. The proposed 
section stated that depending on an employee's circumstances, his or 
her ``seniority rank'' may cause reemployment in a higher or lower 
position, laid off, or even terminated. The commenter correctly 
suggests that there are ``escalator-based'' factors other than 
seniority, such as job location, job classification, or shift 
assignment, which may affect the reemployment position. The Department 
agrees that the first two sentences of the provision are too narrowly 
drawn, although the latter portion of the provision accurately captures 
the issue. Accordingly, the Department has made the necessary revision. 
See section 1002.194.
    The statute makes the duration of a returning employee's period of 
service a critical factor in determining the reemployment position to 
which the employee is entitled upon return from service. After service 
of 90 days or less, the person is entitled to reinstatement in the 
position of employment in which he or she would have been employed if 
not for the interruption in employment due to uniformed service (the 
escalator position). 38 U.S.C. 4313(a)(1)(A). The employer must make 
reasonable efforts to assist the individual in becoming qualified for 
the reemployment position. In the event the returning employee cannot 
become qualified for the escalator position despite reasonable efforts 
by the employer, the returning employee is entitled to the employment 
position in which he or she was employed on the date that the period of 
service commenced. 38 U.S.C. 4313(a)(1)(B). These requirements are 
implemented in section 1002.196. The Department received one comment on 
this provision, requesting that it include the definition of 
``escalator position.'' ``Escalator position'' is defined in section 
1002.192, and consequently it is not necessary to define it in section 
1002.196.
    The service member returning from a period of service longer than 
90 days is similarly entitled to reemployment in the escalator 
position, but, at the employer's option, may also be reinstated in any 
position for which the employee is qualified with the same seniority, 
status, and pay as the escalator position. 38 U.S.C. 4313(a)(2)(A). 
This statutory option is intended to provide the employer with a degree 
of flexibility in meeting its reemployment obligations. As with an 
employee returning from a shorter period of service, the employer must 
first make reasonable efforts to qualify the individual for the 
escalator position or for the position of like seniority, status, and 
pay. In the event the returning employee cannot become qualified for 
one of these positions despite reasonable employer efforts, the person 
is entitled to the employment position in which he or she was employed 
on the date that the period of service commenced, or a position of like 
seniority, status, and pay. 38 U.S.C. 4313(a)(2)(B). These requirements 
are implemented in section 1002.197.
    In some instances, the service member may not be able to qualify 
for either the escalator position or the pre-service position (or a 
position similar in seniority, status, and pay to either of these 
positions) despite reasonable employer efforts. In such an event, the 
employee is entitled to be reemployed in any other position that is the 
nearest approximation to the escalator position. If there is no such 
position for which the returning service member is qualified, he or she 
is entitled to reemployment in any other position that is the nearest 
approximation to the pre-service position. In either event, the 
returning service member must be reemployed with full seniority. 38 
U.S.C. 4313(a)(4). This requirement is implemented by sections 
1002.196(c) and .197(c).
    The Department received one comment regarding section 1002.197, 
which sought an amendment to permit

[[Page 75274]]

employers to reemploy employees in lesser positions temporarily, while 
employers ``find a position of appropriate status.'' The Department 
declines the suggestion. The priority of positions established in 
section 1002.197 is based on priorities set by statute, 38 U.S.C 
4313(a)(2). Moreover, such an amendment would conflict with the 
statute's requirement that service members must be promptly reemployed, 
see section 1002.181, in the escalator position, see section 1002.192. 
Section 1002.197 reflects that a position other than the escalator 
position may be used only in those cases in which the service member is 
not qualified to perform the duties of the escalator position.
    Notwithstanding the escalator principle, USERRA does not require an 
employer to reinstate a returning service member in an employment 
position if he or she is not qualified to perform the civilian job. See 
section 1002.198. USERRA defines ``qualified'' as ``having the ability 
to perform the essential tasks of the position.'' 38 U.S.C. 4303(9). 
The Department understands the statutory term ``qualify'' in 38 U.S.C. 
4313 to include the employer's affirmative obligation to make 
reasonable efforts to assist the returning employee in acquiring the 
ability to perform the essential tasks of the reemployment position. 
This understanding is reflected in the language used in the 
regulations. The Department requested comments on whether this 
interpretation is proper, and received only two comments, both of which 
agreed with the interpretation.
    An individual's performance qualifications are a function of his or 
her ability to perform the ``essential tasks'' of the employment 
position. This regulation provides guidelines for determining whether a 
given task is essential for proper performance of the position. In 
general, whether a task is essential for a position will depend on its 
relationship to the actual performance requirements of the position 
rather than, for example, the criteria enumerated in a job description. 
An employer may not decline to rehire a returning service member simply 
because he or she is unable to do some auxiliary, but nonessential, 
parts of the job.
    The Department invited comments as to whether this interpretation 
best effectuates the purpose of this provision, and received seven 
comments in response. Four of the seven suggested, for reasons of 
consistency, that the USERRA rule adopt the definition of ``essential 
functions'' from the regulations promulgated under the Americans with 
Disabilities Act (ADA), 42 U.S.C 12101, et seq. See 29 CFR 1630.2(n). 
The ADA defines a ``qualified individual with a disability'' as an 
individual with a disability who, with or without reasonable 
accommodation, can perform the essential functions of the employment 
position the individual holds or desires. 42 U.S.C. 12111(8). The ADA 
regulations define ``essential functions'' generally as ``the 
fundamental job duties of the employment position * * *. The term * * * 
does not include the marginal functions of the position.'' 29 CFR 
1630.2(n)(1).
    The ADA regulation lists a number of factors that could render a 
job function ``essential,'' including: (1) The position exists to 
perform the function; (2) there are a limited number of employees 
available among whom performance of the job function can be 
distributed; and/or (3) the function is highly specialized so the 
incumbent is hired for his or her expertise or ability to perform the 
function. 29 CFR 1630.2(n)(2). The ADA regulation provides examples of 
``evidence of whether a particular function is essential,'' including: 
(1) The employer's judgment as to which functions are essential; (2) 
written job descriptions developed before the hiring process begins; 
(3) the amount of time on the job spent performing the function; (4) 
the consequences of not requiring the individual to perform the 
function; (5) the terms of a collective bargaining agreement; (6) the 
work experience of past incumbents in the job; and/or (7) the current 
work experience of incumbents in similar jobs. 29 CFR 1630.2(n)(3).
    After considering all these comments, the Department has revised 
section 1002.198 to adopt the regulatory definition of ``essential 
functions'' under the ADA. Many of the ``essential tasks'' listed in 
proposed section 1002.198 were similar to those listed in the ADA's 
``essential functions'' regulation. USERRA's legislative history does 
not address whether ``essential tasks'' is akin to or different from 
the ADA's ``essential functions.'' However, a number of ADA cases use 
the term ``tasks'' interchangeably with ``functions.'' See Allen v. 
Pacific Bell, 348 F.3d 1113, 1114-15 (9th Cir. 2003); Byrne v. Avon 
Prods. Inc., 328 F.3d 379, 381 (7th Cir.), cert. denied, 540 U.S. 881 
(2003); Kvorjak v. Maine, 259 F.3d 48, 55 (1st Cir. 2001); Reed v. Heil 
Co., 206 F.3d 1055, 1057, 1062-63 (11th Cir. 2000). Accordingly, in 
order to provide employers and employees with some regulatory 
consistency, the Department is making the suggested revision. See 
section 1002.198(a)(2).
    The remaining commenters on section 1002.198 made a variety of 
suggestions: one comment noted that the listing of essential tasks 
reads as if it were exhaustive, and suggested that it instead be 
revised so that it is non-exhaustive; one comment noted that the use of 
the word ``and'' between the penultimate and the last listed items 
suggests that all listed items must apply to a particular task in order 
for the task to be essential, and recommended using ``and/or'' instead, 
as does the ADA essential functions regulation; one comment objected to 
the provision's distinction between actual performance requirements and 
the criteria enumerated in a job description; one comment objected to 
the discussion of the listed items as ``factors'' because it thought 
that this suggested that all of the listed terms had to be considered, 
and suggested that the list should be written instead in terms of what 
would be evidence that a task is essential; the same comment also 
stated that the list should include a number of other items, including: 
(1) The business consequences of an employee's inability to perform a 
task, and not merely the safety consequences; (2) consideration of 
written job descriptions prepared before the issue of the employee's 
reemployment arose as evidence that the employer considered the task to 
be essential; (3) the work experience of other employees in the same or 
similar positions because the job may have changed in the employee's 
absence; and (4) a statement that performing the job under certain 
conditions could be essential, such as interacting with others, 
environmental extremes, attendance, etc. After considering these 
comments, the Department has revised the list in section 1002.198 to 
reflect that it is not exhaustive. These factors and other relevant 
circumstances may be employed to ascertain whether a task is essential 
to the performance of a particular position. See section 
1002.198(a)(2).
    Section 1002.198 also describes the employer's obligation to assist 
a service member returning for reemployment in becoming qualified for a 
civilian position. USERRA requires the employer to make reasonable 
efforts to enable the returning service member to qualify for a 
position that he or she would be entitled to if qualified. Section 
4303(10) defines ``reasonable efforts'' as ``actions, including 
training provided by an employer, that do not place an undue hardship 
on the employer.'' 38 U.S.C. 4303(10); section 1002.5(i). Section 
4303(15) defines ``undue hardship'' as ``actions [taken by an employer]

[[Page 75275]]

requiring significant difficulty or expense, when considered in light 
of * * * the overall financial resources of the employer'' and several 
other stated factors. 38 U.S.C. 4303(15); section 1002.5(n). Depending 
upon an employer's size and resources, a given level of effort might be 
an undue hardship for one employer and yet reasonable for another. The 
employer has the burden of proving that the training, retraining, or 
other efforts to enable the returning employee to qualify would impose 
an undue hardship. The rule describes the criteria that apply in 
determining whether the steps for aiding the service member in becoming 
qualified impose an undue hardship on the employer.
    The Department received five comments regarding an employer's 
obligation to make reasonable efforts to qualify returning service 
members in becoming qualified for the reemployment position. Of these, 
one comment generally agreed with the Department's approach. The second 
comment suggested that the employer's obligations should be reduced by 
placing limits on the training an employer must provide to assist a 
returning employee. The Department concludes that section 1002.198 
appropriately reflects the statute's intent, and reiterates that 
employers that are unduly burdened by this obligation may rely on the 
``undue hardship'' defense to reemployment. See section 1002.139(b).
    Two comments regarding section 1002.198 were submitted by one 
commenter, who requested that the provision be amended to reflect both 
that an employer's qualification efforts include any training necessary 
to update a returning employee's skills if the employee is no longer 
qualified to perform the job due to technological advances, and to 
reflect that an employer must permit an employee a sufficient amount of 
time to become qualified. The Department concludes that the commenter's 
suggestions are covered by section 1002.5(i), which defines an 
employer's ``reasonable efforts,'' and includes those actions, 
including training provided by an employer, that do not place an undue 
hardship on the employer.
    The final commenter on section 1002.198 suggested corrections to 
references to the regulatory definitions of ``reasonable efforts'' 
supplied in subsection (b) of the provision, and the Department has 
made the corrections.
    Section 1002.199 implements USERRA section 4313(b), which governs 
the priority of reemploying two (or more) service members who are 
entitled to reemployment in the same position. 38 U.S.C. 4313(b). The 
individual who first vacated the employment position for military 
service has the highest priority for reemployment. 38 U.S.C. 
4313(b)(1). If this priority means another returning service member is 
denied reemployment in that position, the USERRA rules that give 
reemployment options to the employer would govern the reemployment of 
the second person. Thus, the second service member is entitled to ``any 
other position'' offering status and pay similar to the denied position 
according to the statutory rules generally applicable to returning 
service members. 38 U.S.C. 4313(b)(2)(A). A disabled service member in 
this situation would be entitled to any other position offering status 
and pay similar to the denied position according to the rules governing 
disabled service members. 38 U.S.C. 4313(b)(2)(B).

Seniority Rights and Benefits

    Section 4316(a) provides that a reemployed service member is 
entitled to ``the seniority and other rights and benefits determined by 
seniority'' that the service member had attained as of the date he or 
she entered the service, together with the additional seniority he or 
she would have attained if continuously employed during the period of 
service. 38 U.S.C. 4316(a). As with the principles governing the 
determination of the reemployment position, this provision reflects the 
escalator principle. As applied to seniority rights under section 
4316(a), the escalator principle entitles the returning service member 
to the ``same seniority and other rights and benefits determined by 
seniority that [the service member] would have attained if [his or her] 
employment had not been interrupted by service in the uniformed 
services.'' S. Rep. No. 103-158, at 57 (1993); see also H.R. Rep. No. 
103-65, Pt. I, at 33 (1993). Section 1002.210 states the basic 
escalator principle as it applies to seniority and seniority-based 
rights and benefits. It bears emphasis here that the escalator 
principle is outcome-neutral in terms of the effect of restoring the 
service member's seniority. For example, the application of the 
principle does not offer protection against adverse job consequences 
that result from placing the service member in his or her proper 
position on the seniority escalator. Finally, this section explains 
that the rights and benefits protected by USERRA upon reemployment 
include those provided by employers and those required by statute, such 
as the right to leave under the Family and Medical Leave Act of 1993, 
29 U.S.C. 2601 et seq. (FMLA). Accordingly, a reemployed service member 
would be eligible for FMLA leave if the number of months and the number 
of hours of work for which the service member was employed by the 
civilian employer, together with the number of months and number of 
hours of work for which the service member would have been employed by 
the civilian employer during the period of military service, meet 
FMLA's eligibility requirements.
    The Department received two questions regarding the application of 
USERRA's seniority provisions to rights under the FMLA. The Equal 
Employment Advisory Council contended that allowing time spent on 
military leave to count when determining FMLA eligibility contradicts 
the definition of ``service'' under the FMLA regulations, and suggested 
its deletion or a revision consistent with the FMLA regulations. In 
2002, the Department issued guidance from VETS, the Wage and Hour 
Division, which administers and enforces the FMLA, and the Solicitor of 
Labor, concluding that the time and hours an employee would have worked 
but for his or her military service should be combined with the time 
employed and the hours actually worked to meet the eligibility criteria 
of the FMLA. See Memorandum of July 22, 2002, Protection of Uniformed 
Service Member's Rights to Family and Medical Leave at http://www.dol.gov/vets/media/fmlarights.pdf.
 The Department determined that:


    Under USERRA, a person who is reemployed is entitled to the 
rights and benefits he (or she) would have attained if he had 
remained continuously employed. [Footnote omitted.] The ``rights and 
benefits'' protected by USERRA include those provided by employers 
and those required by statute, such as the right to leave under the 
FMLA. Accordingly, a returning service member would be entitled to 
FMLA leave if the hours that he or she would have worked for the 
civilian employer during the period of military service would have 
met the FMLA eligibility threshold. Therefore, in determining 
whether a veteran meets the FMLA eligibility requirement, the months 
employed and the hours that were actually worked for the civilian 
employer should be combined with the months and hours that would 
have been worked during the twelve months prior to the start of the 
leave requested but for the military service.

    The Department has read the two statutes in harmony, so that 
neither is made ineffective, and so that reemployed service members are 
not denied family leave to which they would otherwise be entitled but 
for their uniformed service. See, e.g., Pittsburgh & Lake Erie Railroad 
Company v.

[[Page 75276]]

Railway Labor Executives' Association, 491 U.S. 490, 510 (1989) (when 
two statutes are capable of coexistence, the two should be construed, 
absent clearly expressed Congressional intention to the contrary, to 
regard each as effective). Therefore, the Department has retained 
section 1002.210's inclusion of rights protected under the FMLA, except 
that it has clarified that in the event that a service member is denied 
FMLA leave for failing to satisfy the FMLA's hours of work requirement 
due to absence from employment necessitated by military service, the 
service member may have a cause of action under USERRA but not under 
the FMLA. See section 1002.210.
    The Department received one comment from a human resources firm 
requesting further guidance on the computation, for FMLA purposes, of 
hours a service member would have worked but for military service. 
Because of the variables involved with each employer and each employee, 
the Department is unable to provide detailed guidance in this 
regulation in response to the inquiry. However, employers should 
develop reasonable methods for computation of hours that would have 
been worked but for the military service. The guidance provided in 
section 1002.267 regarding the computation of pension contributions 
during military absence may serve as a model in many cases.
    The final comment regarding section 1002.210 resulted in an 
additional modification to the text of the rule. The commenter asked 
whether an employee continues to accrue seniority and seniority-based 
rights and benefits if the employee is not immediately reemployed 
following discharge from service due to a service-related illness or 
injury. USERRA provides, and this rule reiterates, that an employee may 
have up to two years to report to or submit an application for 
reemployment to the employer if necessary in order to recover from the 
illness or injury incurred in, or aggravated during, the performance of 
service. See section 1002.116. Section 1002.210 has been amended to 
reflect that an employee continues to accrue seniority-based rights and 
benefits during any period required for recovery from service-related 
illnesses or injuries. The Department made a corresponding modification 
to section 1002.259, which establishes the period of time that must be 
considered to determine pension entitlement, in order to respond to an 
inquiry whether the time that an employee is absent from work under 
section 1002.74 prior to the beginning of a period of military service 
should be considered service with the employer for purposes of 
determining the employee's USERRA pension entitlements upon 
reemployment. Under the revisions to both section 1002.210 and section 
1002.259, the entire period of absence from work due to or necessitated 
by service in the uniformed services, including preparation time and 
recuperation time, is to be considered service with the employer upon 
reemployment for computation of seniority and seniority-based rights, 
including pension entitlements.
    Section 1002.211 makes clear that USERRA section 4316(a) is not a 
statutory mandate to impose seniority systems on employers. Rather, 
USERRA requires only that those employers who provide benefits based on 
seniority restore the returning service member to his or her proper 
place on the seniority ladder.
    Section 1002.212 adopts the basic definition of seniority-based 
rights and benefits developed in Supreme Court decisions. This 
definition imposes two requirements: First, the benefit must be 
provided as a reward for length of service rather than a form of short-
term compensation for services rendered; second, the service member's 
receipt of the benefit, but for his or her absence due to service, must 
have been reasonably certain. See Coffy v. Republic Steel Corp., 447 
U.S. 191, 197-98 (1980); Alabama Power Co. v. Davis, 431 U.S. 581 
(1977); see also S. Rep. No.103-158, at 57 (1993), citing with approval 
Goggin v. Lincoln, St. Louis, 702 F.2d 698, 701 (8th Cir. 1983) 
(summarizing Supreme Court formulation of two-part definition of 
``perquisites of seniority''). Section 1002.212(c) adds a third 
consideration which derives from another Supreme Court decision, 
McKinney v. Missouri-Kansas-Texas R.R. Co., 357 U.S. 265 (1958). In 
that case, the Court allowed consideration of the employer's ``actual 
practice'' in making advancement an automatic benefit based on 
seniority under the collective bargaining agreement. Id. at 274. 
Accordingly, section 1002.212(c) adds the requirement that ``actual 
custom or practice'' in conferring or withholding a benefit also 
determines whether the benefit is a perquisite of seniority.
    The Department received a comment requesting additional guidance on 
the determination of rights and benefits based on length of service 
versus rights and benefits for actual services rendered. Because the 
Department anticipates that a bright-line rule would be unworkable in 
application to the myriad of factual situations that may arise in the 
employment setting, the analysis must revolve around the general 
guidelines established in the rule. Finally, the Department received a 
comment suggesting that, with regard to an employer's ``actual custom 
or practice'' as a consideration in providing or withholding a right or 
benefit as a reward for length of service, the word ``actual'' should 
be deleted. The commenter argues that the term will breed disputes over 
whether a practice is ``actual'' or in flux. The Department views the 
inclusion of the word ``actual'' as key to the implementation of this 
provision, and intends it to differentiate between those practices that 
are carried out in the workplace and those that are merely written in a 
handbook but have not been realized.
    Section 1002.213 further defines one aspect of seniority-based 
rights and benefits: The requirement that receipt of the benefit be 
``reasonably certain.'' The proposed regulation describes a 
``reasonably certain'' likelihood as a ``high probability'' that the 
returning service member would have obtained the seniority-based 
benefit if continuously employed. A ``high probability'' is less than 
an ``absolute certainty,'' which the Supreme Court has rejected in 
analyzing the degree of probability a reemployed service member must 
satisfy in order to establish that his or her advancement would have 
been ``reasonably certain'' but for the period of service. See Tilton 
v. Missouri Pacific Railroad Co., 376 U.S. 169, 180 (1964). The 
employer may not deny a reemployed service member seniority-based 
rights or benefits based on a scenario of unlikely events that 
allegedly could have occurred during the period of service.
    Proposed section 1002.214 established that the returning employee 
is also entitled to claim perquisites of seniority that first became 
available to co-workers or that were modified while he or she was in 
the service. The Department received one comment on this provision, 
suggesting that it provide an alternate, and more lucid, illustration 
of the application of this provision in section 1002.214(b). After 
considering the comment, and reviewing a number of examples that may 
serve to illustrate the point, the Department has concluded that the 
response provided in section 1002.214(b) is vague and does not provide 
practical guidance on the issue addressed. In addition, the principle 
established in section 1002.214(a) is simply a reiteration of the 
principle established in section 1002.210 regarding the seniority-based 
rights and benefits to which a returning

[[Page 75277]]

employee is entitled. As a result, the Department has removed the 
section in its entirety from the final rule.

Disabled Employees

    USERRA imposes additional requirements in circumstances involving 
the reemployment of a disabled service member. A disabled service 
member is entitled, to the same extent as any other individual, to the 
escalator position he or she would have attained but for military 
service. If the disability is not an impediment to the service member's 
qualifications for the escalator position, then the disabling condition 
is irrelevant for USERRA purposes. If the disability limits the service 
member's ability to perform the job, however, the statute imposes a 
duty on the employer to make reasonable efforts to accommodate the 
disability. 38 U.S.C. 4313(a)(3). In some instances, an employer is 
unable to accommodate a service member's disability despite reasonable 
efforts. If, despite the employer's reasonable efforts to accommodate 
the disability, the returning disabled service member cannot become 
qualified for his or her escalator position, that person is entitled to 
be reemployed ``in any other position which is equivalent in seniority, 
status, and pay, the duties of which the person is qualified to perform 
or would become qualified to perform with reasonable efforts by the 
employer.'' 38 U.S.C. 4313(a)(3)(A). If no such position exists, the 
service member is entitled to reemployment ``in a position which is the 
nearest approximation * * *in terms of seniority, status, and pay 
consistent with circumstances of such person's case.'' 38 U.S.C. 
4313(a)(3)(B). See, e.g., Hembree v. Georgia Power Co., 637 F.2d 423 
(5th Cir. 1981); Blake v. City of Columbus, 605 F. Supp. 567, 571 (D. 
Ohio 1984).
    Section 1002.225 sets forth the priority of reemployment positions 
for which the disabled service member should be considered. The 
regulation also implements the statutory requirement for reasonable 
accommodation of the returning service member's disability. Such 
accommodations may include placing the reemployed person in an 
alternate position, on ``light duty'' status; modifying technology or 
equipment used in the job position; revising work practices; or, 
shifting job functions. The appropriate level of accommodation depends 
on the nature of the service member's disability, the requirements for 
properly performing the job, and any other circumstances surrounding 
the particular situation. See 38 U.S.C. 4303(9), (10), and (15); 
4313(a)(3); H.R. Rep. No. 103-65, Pt. I, at 31 (1993); S. Rep. No. 103-
158, at 53 (1993).
    Section 1002.226 establishes that the employer must make reasonable 
accommodations for any disability incurred in, or aggravated during, a 
period of service. The accommodation requirement is not limited to 
disabilities incurred during training or combat, so long as they are 
incurred during the period of service. Any disability that is incurred 
or aggravated outside of a period of service (including a disability 
incurred between the end of the period of service and the date of 
reemployment) is not covered as a service-related disability for USERRA 
purposes. The disability must have been incurred or aggravated when the 
service member applies for reemployment, even if it has not yet been 
detected. If the disability is discovered after the service member 
resumes work and it interferes with his or her job performance, then 
the reinstatement process should be restarted under USERRA's disability 
provisions.
    A returning service member may have rights under USERRA based on a 
service-related disability that is not permanent. A service member who 
incurs a temporary disability may be entitled to interim reemployment 
in an alternate position provided he or she is qualified for the 
position and the disability will not affect his or her ability to 
perform the job. If no such alternate position exists, the disabled 
service member would be entitled to reinstatement under a ``sick 
leave'' or ``light duty'' status until he or she completely recovers.
    In identifying an alternate position for a disabled service member, 
the focus should be on the returning service member's ability to 
perform the essential duties of the job. The position must be one that 
the person can safely perform without unreasonable risk to the person 
or fellow employees. The disabled service member is required to provide 
information on his or her education and experience, the extent of the 
disability, and his or her present capabilities. The employer then has 
the duty to disclose all positions that the service member may be 
qualified to perform. Because the employer has greater knowledge of the 
various positions and their requirements in the organization, the 
employer, and not the service member, is exclusively responsible for 
accommodating the disability by identifying suitable positions within 
the service member's abilities and capabilities.
    The Department received four comments regarding the provisions 
implementing USERRA's requirements concerning the reemployment of a 
disabled service member. One commenter suggests that the Department 
should amend section 1002.225 to moderate the employer's duty to make 
reasonable efforts to accommodate the disability to reflect that an 
employee should bear some responsibility in cooperating in his or her 
own reemployment. The Department views the statute as imposing a duty 
on the employer to make reasonable efforts to accommodate the 
disability. 38 U.S.C. 4313(a)(3). In addition, as stated above, because 
the employer has greater knowledge of the various positions and their 
requirements in the organization, the burden is appropriately placed on 
the employer. Nevertheless, it is customary to assume that an employee 
seeking reemployment will cooperate with the employer's reasonable 
efforts to accommodate a disabled employee.
    The Department received two comments regarding this provision from 
one commenter. The commenter requested that the provision include a 
statement indicating that as with a non-disabled employee, a disabled 
employee is entitled to reemployment on the escalator position. The 
commenter also requested that the Department indicate in section 
1002.225(b) that in reemploying a returning service member in ``the 
nearest approximation'' to the equivalent escalator position, such 
position may be one that is higher or lower, depending on the 
circumstances. The Department agrees that both suggestions clarify the 
text of the final rule, and has made the amendments. See section 
1002.225.
    Finally, the Department received a suggestion that it employ the 
ADA's regulatory standards, in particular, the ADA's provisions 
concerning a ``qualified individual with a disability'' and 
``reasonable accommodations.'' The Department declines this suggestion 
because neither term is used in USERRA. In addition, although 
interpretations of the ADA may be useful in providing some guidance 
under USERRA's provisions regarding accommodating an employee with a 
disability, the Department is reluctant to adopt extensive portions of 
complex regulations promulgated under other statutes not administered 
or enforced by the Department, and notes that there are significant 
differences in the coverage of the two statutes. For example, the ADA 
covers only ``disabilities'' as defined in that statute, whereas USERRA 
covers any disability incurred in or aggravated during service in the 
uniformed services.

[[Page 75278]]

    Finally, the Department received one comment requesting that it 
require employers to provide lifetime disability coverage for employees 
disabled as the result of their service in the uniformed services. Such 
a request is beyond the mandates set out in the statute.

Rate of Pay

    The escalator principle also determines the returning service 
member's rate of pay after an absence from the workplace due to 
military service. As with respect to benefits and the reemployment 
position, the application of this fundamental principle with respect to 
pay is intended to restore the returning service member to the 
employment position that he or she would have occupied but for the 
interruption in employment occasioned by military service. See 
generally Fishgold v. Sullivan Drydock and Repair Corp, 328 U.S. 275 
(1946). Section 1002.236 implements the escalator principle for 
purposes of determining the reemployed service member's rate of pay. 
The regulation also addresses the various elements of compensation that 
often comprise the returning service member's ``rate of pay.'' 
Depending on the particular position, the rate of pay may include more 
than the basic salary. The regulation lists various types of 
compensation that may factor into determining the employee's overall 
compensation package under the escalator principle. The list is not 
exclusive; any compensation, in whatever form, that the employee would 
have received with reasonable certainty if he or she had remained 
continuously employed should be considered an element of compensation. 
The returning employee's rate of pay may therefore include pay 
increases, differentials, step increases, merit increases, periodic 
increases, or performance bonuses.
    In some workplaces, merit pay increases are conditioned upon the 
employee passing a skills or performance evaluation. The employer 
should allow a reasonable period of time for the employee to become 
acclimated in the escalator position before such an evaluation is 
administered. In order that the employee not be penalized financially 
for his or her military service, the employee must be reemployed at the 
higher rate of pay, assuming that it is reasonably certain that the 
employee would otherwise have attained the merit pay increase during 
the period of military service. This requirement is similar to the 
requirement in Section 1002.193, which obliges an employer to give a 
reemployed employee, after a reasonable amount of time to adjust to the 
reemployment position, a missed skills test or examination that is the 
basis of an opportunity for promotion.
    The Department invited comments as to whether this interpretation 
best effectuates the purpose of this provision, or whether the issue of 
merit pay requires more detailed treatment in these regulations, and 
received seven comments in response. One commenter expressed overall 
support for the provision, but found it unworkable due to the 
difficulty in accurately predicting the date of the returning service 
member's retroactive placement on the escalator. Three commenters seek 
more guidance on the provision, in particular, on the length of time 
given to the returning service member to acclimate before administering 
a makeup evaluation and on the amount of the merit or performance pay 
increase. One commenter argues that granting full seniority, and 
awarding equal pay, to returning service members penalizes workers 
remaining on the job who have obtained valuable training and experience 
while the service member was on military leave. One commenter argues 
that the escalator principle uses a ``presumption'' in favor of 
granting a salary increase, which it believes is inappropriate when 
advancements are based on measurable performance or merit evaluations. 
Finally, one commenter argues the escalator principle does not apply to 
merit or performance based salary increases because they are not 
seniority-based, and even if the principle applies, it should be pro 
rated and not retroactive.
    The regulation's provision regarding rate of pay is consistent with 
general principles concerning the application of the escalator 
provision under the statute and case law, which require that a service 
member receive such compensation upon reemployment if there is a 
reasonable certainty that the compensation would have been granted. 
See, e.g., McKinney v. Missouri-Kansas-Texas R.R. Co., 357 U.S. 265 
(1958); Tilton v. Missouri Pacific R.R. Co., 376 U.S. 169 (1964). A 
returning veteran cannot show within the reasonable certainty required 
by the Act that he or she would have enjoyed the advancement or 
increased compensation by virtue of continuing employment where the 
advancement or increased compensation depends on an employer's 
discretionary choice not exercised prior to the entry into service. 
Tilton, 376 U.S. at 180. Therefore, in response to those comments that 
object to this provision and its retroactive application for reasons of 
impracticality, burden, or unfairness, the Department declines to 
modify the provision in reaction to these concerns, as the provision 
adheres to the obligations required under the statute and the long-
standing case law governing its interpretation.
    Consistent with section 1002.193 concerning a similar comment about 
missed promotional exams, the Department has amended section 1002.236 
to include factors an employer should consider in timing the 
administration of a makeup test or examination for the purposes of 
determining applicable pay increases. The Department suggests that no 
fixed time will be appropriate to all cases, and in determining a 
reasonable time to schedule a makeup test or examination, employers 
should take into account a variety of factors, including but not 
limited to the length of time the returning employee was absent from 
work, the duties and responsibilities of the reemployment position, and 
the nature and responsibilities of the service member while serving in 
the uniformed service. See section 1002.236.
    Finally, in response to comments stating that the escalator 
principle should not apply to merit pay increases, the Department 
emphasizes that what is critical is not whether the employer 
characterizes the compensation increases as merit-based, but whether 
the raise would have been attained with reasonable certainty if not for 
the service in the uniformed services. To clarify this point, the 
Department has amended section 1002.236 to reflect that 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, his or her history of merit 
increases, and the work and pay history of employees in the same or 
similar position. See section 1002.236. Finally, in determining rate of 
pay, as in other situations, application of the escalator principle may 
leave the returning service member with less than he or she had before 
performing service. Thus, if nondiscriminatory adverse changes in the 
employment position's pay structure would with reasonable certainty 
have lowered the compensation rate during the period of service if he 
or she had remained continuously employed, the escalator principle may 
operate to diminish the returning service member's pay.

Protection Against Discharge

    Section 4316(c) of USERRA provides service members special 
protection from discharge from civilian employment after returning from 
uniformed service. If the individual served over 180 days

[[Page 75279]]

before reemployment, then he or she may not be discharged from the 
employment position within one year after reemployment except for 
cause. 38 U.S.C. 4316(c)(1). If the individual served between 31 and 
180 days in the military, he or she may not be discharged from the 
employment position within 180 days after reemployment except for 
cause. 38 U.S.C. 4316(c)(2). 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, as explained in sections 
1002.18-.23. Section 1002.247 elaborates the general rules for 
protection against discharge based on the duration of service prior to 
reemployment.
    Prohibiting a reemployed service member's discharge, except for 
cause, ensures that the service member has a reasonable amount of time 
to get accustomed to the employment position after a significant 
absence. A period of readjustment may be especially warranted if the 
service member has assumed a new employment position after the military 
service. The discharge protection also guards against an employer's bad 
faith or pro forma reinstatement followed by an unjustified termination 
of the reemployed service member. Moreover, the time period for special 
protection does not start until the service member has been fully 
reemployed and any benefits to which the employee is entitled have been 
restored. Even assuming the service member receives the benefit of the 
full protection period prior to dismissal, an employer nevertheless 
violates the Act if the reason for discharging the service member is 
impermissible under USERRA.
    Section 4316(c) does not provide complete protection from discharge 
to a reemployed service member for the duration of the protected 
period. An employer may dismiss a reemployed service member even during 
the protected period for just cause. Depending on the circumstances of 
the specific case, 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 position 
itself, provided the person would have faced the same consequences had 
he or she remained continuously employed. Section 1002.248 provides 
general guidelines for establishing just cause to discharge a 
reemployed service member during the protected period, and places the 
burden of proof on the employer to demonstrate that it is reasonable to 
discharge the person. See H.R. Rep. No. 103-65, Pt. 1, at 35 (1993); S. 
Rep. No. 103-158, at 63 (1993).
    The Department received six comments regarding these provisions. 
One commenter took issue with proposed section 1002.248's statement 
that a reemployed service member may be discharged either for cause or 
because of the application of the escalator principle. The commenter 
suggests that citing only two potential reasons for discharge is too 
limited, and there are other ``legitimate nondiscriminatory reasons'' 
for an employee's discharge. After considering the comment, the 
Department concludes that proposed section 1002.248 was unclear, and 
has amended the provision. Accordingly, to sustain an employee's 
discharge during the protected period, the employer bears the burden of 
proving either that the discharge was based on the employee's conduct 
or it was the result of some other legitimate nondiscriminatory reason 
that would have affected any employee in the reemployed service 
member's position, regardless of his or her protected status or 
activity. See Duarte v. Agilent Technologies, Inc., 366 F.Supp.2d 1039, 
1046 (D.Colo. 2005). Other reasons for discharge may include the 
elimination of the employee's position, corporate reorganization or 
``downsizing,'' and layoff, provided that those reasons are legitimate, 
nondiscriminatory and non-pretextual.
    A second comment on these provisions criticizes the use of the 
phrase ``just cause'' interchangeably with ``cause'' in the preamble, 
and suggests that the Department should refrain from using ``just 
cause.'' The Department notes that the text of the rule employs only 
the term ``cause,'' as does the statute, although the statute's 
drafters employed both terms in the legislative history. See S. Rep. 
103-158 (1993) at 63. The Department intends that its use of the term 
``just cause'' in the preamble is synonymous with its use of the term 
``cause'' in the text of the rule, and concludes that the use of both 
terms is not misleading or confusing. A third comment objects to the 
Department placing the burden on the employer to prove that a discharge 
during the protected period was based on cause. The inclusion of this 
provision was based on the legislative history regarding USERRA's 
protection against discharge, which itself stated that the burden of 
proving that the discharge was for cause belongs on the employer. See 
H.R. Rep. 103-65, Pt. I, at 35 (1993); S. Rep. 103-158, at 63 (1993). A 
fourth commenter suggests that section 1002.248 either provide a 
specific list of what events constitute cause for discharge, or refer 
to the application of State law for a definition of what constitutes 
cause. The Department must reject both suggestions. First, it is 
impossible to identify an exhaustive list of all events or conduct that 
would justify a discharge for cause. Second, for the purposes of the 
protection against discharge, the Department intends that USERRA's 
interpretation and enforcement rely not on the importation or 
application of State statute or common law, but instead on the 
development of Federal decisional law under the statute and these 
regulations. The fifth comment argued that a discharge for cause should 
apply only where an employer has an established formal grievance and 
appeal process. USERRA allows an employer to discharge a reemployed 
employee for cause, and does not require that the employer have a 
formal grievance and appeal procedure in order to exercise this right. 
However, as discussed above, in any case involving a discharge during 
the statutorily protected period, the employer has the burden of 
proving that the discharge was for cause. Consequently, this suggested 
change has not been made.
    Finally, the last comment regarding these provisions resulted in a 
change to the text of the rule. The commenter requests that the 
provision should clarify that the prerequisite of notice to employees 
that certain conduct may result in discharge should include a reference 
that such notice may either be express or fairly implied, citing H.R. 
Rep. 103-65, Pt. I, at 35 (1993). The Department agrees that the 
legislative history supports the suggestion, and has made the requested 
revision. See section 1002.248.

Pension Plan Benefits

    USERRA establishes specific rights for reemployed service members 
in their employee pension benefit plans; the Act's specific provisions 
for pension benefit plans supersede general provisions elsewhere in the 
statute. 38 U.S.C. 4318(a)(1)(A). USERRA defines an employee pension 
benefit plan in the same way that the term is defined under the 
Employee Retirement Income Security Act of 1974 (ERISA). See 29 U.S.C. 
Chapter 18; 38 U.S.C. 4318(a). The term ``employee pension benefit 
plan'' includes any plan, fund or program established or maintained by

[[Page 75280]]

an employer or by an employee organization, or by both, that provides 
retirement income or results in the deferral of income for a period of 
time extending to or beyond the termination of the employment covered 
by the plan. Profit sharing and stock bonus plans that meet this test 
are included. USERRA provides that once the service member is 
reemployed, he or she is treated as not having a break in service with 
the employer or employers maintaining the plan even though the service 
member was away from work performing military service.
    Sections 1002.259 to .267 describe the types of employee pension 
benefit plans that come within the Act and the pension benefits that 
must be provided to reemployed service members. Although USERRA relies 
on the ERISA definition of an employee pension benefit plan, some plans 
excluded from ERISA coverage may be subject to USERRA. For example, 
USERRA (but not ERISA) extends coverage to plans sponsored by religious 
organizations and plans established under State or Federal law for 
governmental employees. Benefits paid pursuant to federally legislated 
programs such as Social Security or the Railroad Retirement Act, 
however, are not covered by USERRA. USERRA coverage also does not 
include benefits under the Thrift Savings Plan (TSP); the rights of 
reemployed service members to benefits under the TSP are governed by 
another Federal statute. See 5 U.S.C. 8432b. 38 U.S.C. 4318(a)(1)(B). 
Section 1002.260.
    As sections 1002.259 to .267 illustrate, each period of uniformed 
service is treated as an uninterrupted period of employment with the 
employer(s) maintaining the pension plan in determining eligibility for 
participation in the plan, the non-forfeitability of accrued benefits, 
and the accrual of service credits, contributions and elective 
deferrals (as defined in section 402(g)(3) of the Internal Revenue 
Code) under the plan. 38 U.S.C. 4318(a)(2)(B). As a result, for 
purposes of calculating these pension benefits, or for determining the 
amount of contributions or deferrals to the plan, the reemployed 
service member is treated as though he or she had remained continuously 
employed for pension purposes.
    The Department received a comment apparently suggesting that 
USERRA's provisions regarding employer pension obligations conflict 
with an employer's ability to terminate a pension plan under the 
Employee Retirement Income Security Act (ERISA). USERRA does not 
prohibit pension plan termination, and therefore no change to the final 
rule is warranted.
    The Department received one comment concerning pension plan 
entitlements of employees whose employers provide them with partial or 
full civilian pay while the employees are absent from employment to 
perform military service. This compensation is commonly referred to as 
``differential pay,'' and the amount and duration of the benefit varies 
widely. The commenter asked the Department to indicate whether 
employees who receive ``differential pay'' are entitled to make 
employee contributions or elective deferrals to their pension plan 
based on the differential pay received while absent from employment to 
perform military service. The Department notes that ``differential 
pay'' is not required by USERRA, and is a form of compensation from 
employers to employees.
    The Department of the Treasury (Treasury Department) and the 
Internal Revenue Service (IRS) issued proposed regulations that address 
the ability of employees on military leave to make pension 
contributions based on differential pay. These proposed regulations can 
be found at 70 FR 31214-0 (May 31, 2005), and interpret the provisions 
of section 415 of the IRC, which governs benefits and contributions 
under qualified retirement plans. The Treasury Department's press 
release concerning the proposed rule states, in pertinent part:

    Significantly, the proposed regulations will specifically 
provide that National Guard and Reserve members are permitted to 
continue to contribute to their employer's retirement plan while on 
active duty. . . The rules relating to post termination compensation 
and the associated clarifications on the ability to contribute to 
retirement plans for members of the National Guard and Reserve will 
also apply to section 403(b) tax deferred annuities and Section 457 
eligible deferred compensation plans. Plan administrators may rely 
on today's proposed regulations immediately to allow service members 
to contribute to qualified retirement plans.

JS-2471, Office of Public Affairs, Department of the Treasury, May 25, 
2005.
    The Department received two comments regarding section 1002.259, 
which establishes the general principle that upon reemployment, an 
employee must be treated as not having a break in service with the 
employer for the purposes of ``participation, vesting and accrual'' of 
pension benefits. Both comments requested that the provision be 
broadened to include an employee's ``eligibility'' for pension 
benefits. The phrase ``participation, vesting and accrual'' includes an 
employee's ``eligibility'' for pension benefits, and therefore no 
modification is needed in response to the commenters' suggestions.
    Another commenter requested that the Department clarify the 
entitlement to pension credit in cases in which an employee permanently 
and lawfully loses reemployment rights, for instance, where an employee 
dies during the period of military service or where an employer is 
excused from its reemployment obligations based on a statutory defense 
under 38 U.S.C 4312(d)(1) (incorporated in section 1002.139). The 
commenter suggested that the final rule provide that if a person 
permanently and lawfully loses the right to reemployment during a 
period of military service, such person (or his or her estate) is 
entitled to receive pension credit for the period beginning with 
departure from pre-service employment and ending on the date 
reemployment rights are lost. Because section 4318(a) of USERRA states 
that pension entitlements do not accrue until the returning employee is 
reemployed, the Department declines to adopt the commenter's proposal.
    As noted in Subpart C, above, section 1002.74 of the final rule 
provides that an employee is, in some cases, entitled to time off from 
employment prior to the beginning of a period of military service where 
such time off is ``necessitated by'' the employee's forthcoming service 
in the uniformed services. A commenter requested the Department clarify 
whether such period of time must also be considered service with the 
employer for purposes of determining the employee's USERRA pension 
entitlements upon reemployment following the service. The Department 
has responded by amending section 1002.259 to clarify that the entire 
period of absence due to or necessitated by service in the uniformed 
services is to be considered service with the employer upon 
reemployment for pension purposes. This period includes preparation 
time, as described above, and time following the completion of service 
within which a person may apply for reemployment and/or recover from an 
illness or injury incurred in or aggravated by the military service. 
See section 1002.259. The Department made a corresponding amendment to 
the final rule to clarify that the entire period of absence due to or 
necessitated by military service is to be considered in determining a 
person's entitlement to seniority and seniority benefits upon 
reemployment. See Subpart E, above, and section 1002.210.
    Sections 1002.261 and 1002.262 clarify who must make the 
contribution

[[Page 75281]]

and/or deferral attributable to a particular period of military service 
and the timeframes within which payments are to be made to the plan. 
Section 1002.261 also describes how funding obligations differ 
depending on whether a plan is a defined benefit or defined 
contribution plan. The Department received one comment requesting the 
final rule indicate whether ``cash balance'' and similar ``hybrid'' 
plans should be considered defined benefit plans for USERRA purposes. 
The Department consulted with the IRS and the Treasury Department on 
this issue, and has been advised that, for their purposes, ``cash 
balance'' and other ``hybrid'' plans are considered defined benefit 
plans. The Department will apply the same treatment to these plans for 
USERRA's purposes.
    The employer who reemploys the service member is responsible for 
funding any employer contribution to the plan to provide the benefits 
described in the Act and the regulation. 38 U.S.C. 4318(b)(1). Some 
plans do not require or permit employer contributions. In that case, 
the plan is funded by employee contributions or elective deferrals. 
Other plans provide that the employer will match a certain portion of 
the employee contribution or deferral. If employer contributions are 
contingent on employee contributions or elective deferrals, such as 
where the employer matches all or a portion of the employee deferral or 
contribution, the reemployed service member is entitled to the employer 
contribution only to the extent that he or she makes the employee 
contributions or elective deferrals to the plan. 38 U.S.C. 4318(b)(2).
    USERRA is silent with respect to the amount of time the employer 
has to pay to the plan the contributions attributable to a reemployed 
service member's period of military service. In proposed section 
1002.262, the Department required that employer contributions to a 
pension plan that are not contingent on employee contributions or 
elective deferrals must be made no later than 30 days after the date of 
the person's reemployment. An exception to this limit was provided in 
cases in which it was impossible or unreasonable for the employer to 
meet the timeframe, and, in that case, contributions were to be made as 
soon as practicable. Interested parties were requested to comment on 
this proposed requirement, and the Department specifically requested 
public comment on whether the proposed 30-day period is too long or too 
short.
    The Department received eight comments on proposed section 
1002.262, and only one commenter, the National Employment Lawyer's 
Association, favored the provision, suggesting that the 30-day period 
was reasonable in light of the exception for situations where it was 
impossible or unreasonable to comply. Other commenters included 
WorldatWork, Profit Sharing/401(k) Council of America, Investment 
Company Institute, Society for Human Resources Management, Hewitt 
Associates, and two law firms. Seven comments indicated that the 30-day 
period was too short, and requested that the period be extended. Three 
of the seven commenters suggested the period be expanded to ninety days 
following reemployment. A fourth comment proposed that employer 
contributions be made when they would normally be due for the plan year 
in which the employee is reemployed. Two additional commenters 
suggested the contributions be due no earlier than the end of the 
calendar quarter following the quarter in which the employee is 
reemployed. The final commenter suggested the contributions be due 
either when they can reasonably be segregated from the employer's 
general assets or at the beginning of the quarter following the quarter 
in which the employee is reemployed, whichever is earlier. Because the 
beginning of the quarter following reemployment could conceivably be 
the next day, the Department construes this commenter to have intended 
the inclusion of the statement, ``whichever is later.''
    After weighing all these comments, the Department has amended 
section 1002.262(a) to provide that employer contributions to a pension 
plan that are not dependent on employee contributions must be made 
within ninety days following reemployment or when contributions are 
normally made for the year in which the military service was performed, 
whichever is later. In some cases involving an extended period of 
service, both timeframes may apply. For instance, assume a case in 
which employer contributions for a particular calendar year are made on 
February 15 of the following year. An employee leaves the employer to 
perform military service on May 1, 2004. The employee completes the 
service in early 2005, applies for reemployment, and is reemployed on 
February 10, 2005. In this case, pension contributions attributable to 
the period of the absence due to military service in 2004 (May 1-
December 31) would be due 90 days after February 10, 2005, the date of 
reemployment, because that date is later than February 15, 2005, the 
date contributions for 2004 are normally made. Pension contributions 
attributable to the period of the absence for military service in 2005 
(January 1-February 9) would be due on February 15, 2006, because that 
date is later than the date that is 90 days following reemployment.
    Where pension benefits are derived from employee contributions or 
elective deferrals, or from a combination of employee contributions or 
elective deferrals and matching employer contributions, the reemployed 
service member may make his or her contributions or deferrals during a 
time period starting with the date of reemployment and continuing for 
up to three times the length of the employee's immediate past period of 
military service, with the repayment period not to exceed five years. 
38 U.S.C. 4318(b)(2); section 1002.262(b). No payment by the service 
member may exceed the amount that would have been required or permitted 
during the period of time had the service member remained continuously 
employed. 38 U.S.C. 4318(b)(2). Any permitted or required amount of 
employee contributions or elective deferrals would be adjusted for any 
employee contributions or elective deferrals made to the plan during 
the employee's period of service. Any employer contributions that are 
contingent on employee contributions or elective deferrals must be made 
according to the plan's requirements for employer matching 
contributions.
    The Department invited comments as to whether this interpretation 
best effectuates the purpose of this provision, and received three 
general comments in response. One commenter requested the final rule 
specify that the employee make-up contributions be sequential, that is, 
that the first make-up payments be attributable to the earliest part of 
the absence to perform service. The Department declines to impose this 
requirement on all employers and pension plans, and instead suggests 
that employers and plan administrators develop reasonable rules for the 
allocation of make-up contributions that are appropriate for the type 
and size of the particular plan.
    The second general comment asked that the Department indicate how 
to apply the provision in the case of a reemployed employee who began 
making up missed contributions or elective deferrals, and then entered 
a subsequent period of military service during the repayment period but 
before having made up all the missed contributions or elective 
deferrals. Specifically, the commenter proposed

[[Page 75282]]

that the repayment period should be tolled during the second period of 
military service, and then resumed when the person was reemployed 
following the subsequent service. USERRA provides that the repayment 
period for a particular period of military service begins upon 
reemployment. See 38 U.S.C. 4318(b)(2). Therefore, the Department 
concludes that if a person enters a second period of military service 
during the make-up period for a prior period of military service, 
USERRA does not require that the first makeup period be tolled; the 
repayment period for the first period of service will continue to run 
during the subsequent period of service. When the person returns from 
the second period of service, the repayment period for the second 
period would commence upon the ``second'' reemployment, and the person 
may also have any time remaining from the first repayment period. The 
Department notes, however, that USERRA does not prevent an employer or 
plan from voluntarily extending the first period in the event of an 
employee's second period of military service.
    The third general comment concerning employee make-up of missed 
contributions or elective deferrals suggested that section 1002.262(b) 
be amended to provide a period of five years within which a reemployed 
employee may make up missed contributions or elective deferrals. The 
Department declines to adopt this recommendation, because the period 
permitted in section 1002.262(b) is based on the period established 
under the statute. See 38 U.S.C. 4318(b)(2).
    Under USERRA, a reemployed service member has the right to make his 
or her contributions or elective deferrals, but is not required to do 
so. Elective deferrals can be made up only to the extent that the 
employee has compensation from the employer that can be deferred. 
Proposed section 1002.262 provided that, if an individual cannot make 
up missed contributions as an elective deferral because he or she does 
not have enough compensation from the employer to defer (for example, 
if the individual is no longer employed by the employer), the plan must 
provide an equivalent opportunity for the individual to receive the 
maximum employer matching contributions that were available under the 
plan during the period of uniformed service through a match of after-
tax contributions. This provision generated ten separate comments from 
eight sources, including WorldAtWork, Profit Sharing/401(k) Council of 
America, National Employment Lawyers Association, Investment Company 
Institute, and two law firms with expertise in the field, and none of 
the commenters expressed support for the provision. Four of the 
comments requested clarification with respect to four issues: the 
effect of the provision on the treatment of highly compensated 
employees; the effect of these contributions on non-discrimination 
testing provisions in various sections of the Internal Revenue Code; 
whether an employee who is terminated for cause based on conduct is 
entitled to this right; and issues associated with after-tax 
contributions generally.
    The remaining commenters were opposed to this provision on various 
additional grounds. Commenters cited administrative costs in re-tooling 
administrative systems for plans that do not currently allow after-tax 
contributions, because pre- and after-tax contributions must be tracked 
and accounted for separately. Most significantly, commenters expressed 
concerns that compliance with the proposed provision might cause a plan 
to encounter problems with the IRC or tax regulations because of this 
rule's requirement that plans accept after-tax contributions from 
persons who are not employees. Finally, two commenters suggested that 
to avoid after-tax contributions to a former employer's pension plan 
and achieve the same result, the final rule should provide for 
establishment of an Individual Retirement Account by the former 
employee with matching contributions from the former employer.
    After considering all the comments, the Department has concluded 
that it will remove from section 1002.262(b) of the final rule the 
provision that would have required a plan to permit a person to 
continue to make-up missed contributions or elective deferrals after 
leaving employment with the post-service employer. In construing the 
statute liberally in favor of service members, the Department's 
original view of section 4318(b)(2) of the Act was that service members 
should be permitted the entire period established by the statute for 
missed contributions, regardless of whether the service member remained 
reemployed during that period. This view was supported by the fact that 
neither the face of section 4318(b)(2), nor the legislative history, 
contains a limitation on the statutory period that requires a service 
member to remain reemployed in order to make up contributions. However, 
after considering the comments, the Department ultimately views section 
4318(b)(2) as unclear on this point, in particular, because of its 
references to ``a person reemployed.'' Thus, this provision of the Act 
is better viewed as establishing a right to make up missed 
contributions that is conditioned upon continued employment following 
reemployment. This interpretation of section 4318(b)(2) is consistent 
with the statute as a whole, which generally establishes no rights or 
benefits that extend beyond the termination of employment or 
reemployment. Notwithstanding, if a reemployed employee leaves and then 
returns to employment with his or her post-service employer, the 
employee may resume repayments at his or her discretion regardless of 
the break in employment, so long as time remains in the statutory 
period (three times the length of the employee's immediate past period 
of military service, not to exceed five years).
    Policy reasons further support the revision to this provision. VETS 
recognizes that the proposed section would have benefited a relatively 
small number of returning service members who were reemployed, sought 
to make up missed contributions, left employment with the post-service 
employer, and still wanted the opportunity to make up missed 
contributions. Comments from industry experts indicated that the costs 
to pension plans associated with the provision would be significant. In 
addition, industry experts noted that those plan costs were likely to 
be allocated to the plan, so that other plan participants, including 
other uniformed service members, may suffer some detriment to their 
pension entitlements. As a result of this extensive legal and policy 
analysis, and the conclusions reached above, the Department has 
modified this provision. See section 1002.262(b).
    USERRA does not specify whether the returning service member is 
entitled to partial credit in return for making up part (but not all) 
of the missed employee contributions or elective deferrals, but it does 
not require that the employee make up the full amount. Given that 
returning service members sometimes face financial hardships on their 
return to civilian employment, and in view of the remedial purposes of 
USERRA, the Department interprets the Act to permit the employee to 
partially make up missed employee contributions (including required 
employee contributions to a defined benefit plan) or elective 
deferrals. In such a situation, the employer is required to make any 
contributions that are contingent on employee make-up contributions or 
elective deferrals only to the extent that the employee makes such 
partial

[[Page 75283]]

contributions or elective deferrals. See section 1002.262(c). For 
example, in a plan where the employee may or must contribute from zero 
to five percent of his or her compensation, and receive a commensurate 
employer match, the reemployed service member must be permitted to 
partially make up a missed contribution and receive the employer match. 
Where contributions from all employees are handled in a similar, 
consistent fashion under the plan, either the plan documents or the 
normal, established practices of the plan control the disposition of 
partial contributions or elective deferrals. See section 1002.262(e) 
and (f).
    Section 1002.263 of the proposed rule provided that employees are 
not required to pay any interest when making up contributions or 
elective deferrals attributable to a period of military service. The 
Department received a comment asking whether employees are permitted to 
include interest when making up missed contributions or elective 
deferrals attributable to a period of military service. The statute 
requires that such employee payments must not exceed the amount the 
employee would have been permitted or required to contribute had the 
person remained continuously employed. See 38 U.S.C. 4318(b)(2). Based 
on the statute, the Department has amended section 1002.263 to clarify 
that employees are neither permitted nor required to pay interest when 
making up missed contributions or elective deferrals. See section 
1002.263.
    Under section 1002.264 in the proposed rule, if the service member 
has withdrawn his or her account balance from the employee pension 
benefit plan prior to entering military service, he or she must be 
allowed to repay the withdrawn amounts upon reemployment. The amount to 
be repaid also includes any interest that would have been earned had 
the monies not been withdrawn. Repayment entitles the individual to 
appropriate credit in the plan. The reemployed service member may repay 
his or her withdrawals during a time period starting with the date of 
reemployment and continuing for up to three times the length of the 
employee's immediate past period of military service, with the 
repayment period not to exceed five years; during the time period 
provided by 26 U.S.C. 411(a)(7)(C) (if applicable); or within such 
longer time period as may be agreed to between the employer and service 
member. Proposed section 1002.264 applied to defined benefit plans and 
defined contribution plans. The Department invited comments on whether 
or how this section should apply to defined contribution plans.
    Five commenters responded to the Department concerning this 
provision, including Profit Sharing/401(k) Council of America (PSCA), 
Investment Company Institute, Hewitt Associates, and Society for Human 
Resource Management. PSCA was generally supportive of the proposed 
section, but recommended the repayment period be amended to ``be 
consistent with the requirements under the IRC.'' Three commenters were 
unequivocally opposed to the provision allowing for repayment of 
withdrawals. As with the first comment, these commenters were concerned 
that compliance with the proposed provision could cause plans to become 
disqualified under the IRC. Additionally, the commenters noted that 
plans would incur substantial costs in amending procedures to 
accommodate this repayment provision, which could involve after-tax 
payments being made in some cases. Additionally, one commenter 
requested the Department clarify the timing of the withdrawal, 
submitting that proposed section 1002.264 could be read to apply the 
repayment entitlement to withdrawals made far in advance of the 
military service and unrelated to that service.
    After weighing all the comments, the Department has made 
significant revisions to section 1002.264. First, the Department 
concludes that this provision is more appropriately applied only to 
defined benefit plans. As in the case of the provision regarding the 
entitlement to make up missed contributions or elective deferrals in 
section 1002.262(b), VETS recognizes this provision would benefit 
relatively few returning service members who incurred the penalties and 
tax burden associated with a withdrawal from a defined contribution 
plan and wanted to repay that amount, generally through after-tax 
payments. VETS also recognizes that this provision similarly would have 
required defined contribution plans to incur the substantial costs of 
compliance in order to track and account for pre- and after-tax money 
separately, and that those costs could reduce the benefits paid to 
other plan participants, including other uniformed service members. 
Accordingly, the final rule will limit the entitlement to repay 
withdrawals to defined benefit plans. Second, the Department agrees 
with the comment above, and originally intended, that plan withdrawals 
covered under this provision would be limited to those made in 
connection with a period of military service. Accordingly, section 
1002.264 has been revised to reflect this limitation. Third, for 
reasons similar to those stated above regarding the limitation on the 
entitlement to make up missed contributions or elective deferrals in 
section 1002.262(b), the entitlement to repay withdrawals will be 
conditioned upon the person being employed with their post-service 
employer. As is the case in section 1002.262(b), if a reemployed 
employee leaves and then returns to employment with the post-service 
employer, the employee may resume repayments at his or her discretion 
regardless of the break in post-service employment, so long as time 
remains in the repayment period. Finally, proposed section 1002.264(b), 
which allowed for repayment within the time period provided by 26 
U.S.C. 411(a)(7)(C), has been deleted from the final rule because the 
Department has determined that its inclusion was confusing and 
ultimately unnecessary because the time period is already established 
by the Internal Revenue Code. See section 1002.264.
    The final comment received concerning section 1002.264 recommended 
the repayment period be extended in cases where an employee is unable 
to repay in a timely manner for a reason related to the person's 
military service. The Department is not adopting this suggestion, as 
the current language allows for a longer repayment period that is 
agreed to by the employer and the employee. See section 1002.264. The 
Department expects that employers and employees will negotiate such 
longer periods in good faith.
    Section 1002.265 specifies that a reemployed service member's 
pension entitlement may vary depending on the type of pension plan, and 
the Department received a single comment on this provision. In 
referring to the defined contribution plans provision, in which the 
reemployed person is not entitled to earnings experienced and 
forfeitures that occurred during military service, the commenter 
appears to confuse it with section 1002.264, related to withdrawal of 
funds from a plan. Because the meaning and intent of the comment are 
vague and unclear, the Department is unable to supply a response.
    The employer must allocate its contribution on behalf of the 
employee in the same manner as contributions made for other employees 
during the period of the service member's service were allocated. 
However, under proposed section 1002.265, the employer is not required 
to allocate earnings experienced and forfeitures that occurred during 
the period of military service to the reemployed

[[Page 75284]]

service member. 38 U.S.C. 4318(b)(1). A commenter asked whether the 
amount of funds in the employee's pension account when the person 
leaves employment to perform military service should experience normal 
gains and losses (excluding forfeitures) during the period of absence 
to the same extent as the accounts of active employees. Funds left in 
the employee's account when he or she departs to perform military 
service accrue normal gains and losses (excluding forfeitures). 
However, the gains or losses that accrued during the person's absence 
for uniformed service are not applied to contributions made by the 
employer or the employee after reemployment.
    Special rules apply to multiemployer plans. 38 U.S.C. 4318(b)(1). 
Section 1002.266 focuses on the operation of multiemployer plans. ERISA 
defines the term ``multiemployer plan'' as a plan to which more than 
one employer is required to contribute; which is maintained pursuant to 
one or more collective bargaining agreements between one or more 
employee organizations and more than one employer; and which satisfies 
regulations prescribed by the Secretary of Labor. 29 U.S.C. 1002(37). 
An individual's period of uniformed service that qualifies as 
employment for purposes of section 4318(a)(2) is also employment under 
the terms of the pension benefit plan; any applicable collective 
bargaining agreement under 29 U.S.C. 1145; or any similar Federal or 
State law requiring employers who contribute to multiemployer plans to 
make contributions as specified in plan documents.
    With a multiemployer plan, a service member does not have to be 
reemployed by the same employer for whom he or she worked prior to the 
period of service in order to be reinstated in the pension plan. 
Proposed section 1002.266(c) stated that so long as the post-service 
employer is a contributing employer to the plan, the service member is 
entitled to be treated as though he or she experienced no break in 
service under the plan. One commenter contended that this provision is 
overly broad and should be limited based on the language of the 
statute, the legislative history, and the applicable case law. The 
commenter proposed that in cases in which the pre-service and post-
service employer are different, but both employers participate in the 
same multiemployer pension plan, the pre- and post-service employers 
must be related by a common job referral or hiring scheme beyond their 
common participation in the plan.
    USERRA bases the availability of pension protections on the 
reemployment of a service member. 38 U.S.C. 4318(a)(2)(A) (``a person 
reemployed under this chapter shall be treated as not having incurred a 
break in service with the employer or employer's maintaining the 
plan''). The statute's legislative history indicates that term 
``employer'' is to be construed broadly so that it encompasses not just 
the traditional single employer relationship, but also those employer 
relationships in which ``a service member works for several employers 
in industries such as construction, longshoring, etc., where the 
employees are referred to employment.'' H.R. Rep. No. 103-65, Pt. I, at 
21 (1993); accord S. Rep. No. 103-158, at 42 (1993) (``In addition to 
the traditional interpretations of the term, the Committee intends a 
broad construction of ``employer'' to include relationships in which an 
employee works for multiple employers within an industry or is referred 
to employment in such industries as construction or longshoring.'')
    Both the House and the Senate reports cite Imel v. Laborers Pension 
Trust Fund for Northern California, 904 F.2d 1327 (9th Cir.), cert. 
denied, 489 U.S. 939 (1990), as a leading case on the pension 
obligations where the pre- and post-service employers are different. In 
Imel, the court imposed liability on the multiemployer plan to provide 
pension credit to the plaintiff for his years of military service where 
the pre-service and post-service employers were dissimilar. The court 
found that the two employers were operating in the same Northern 
California construction industry which, broadly construed, was Imel's 
employer, and that the two employers both utilized, and were therefore 
connected by, their common use of the union's job referral practice. 
Id. at 1330, 1333.
    The Department concludes that this legislative history suggests 
that mere participation by different pre- and post-service employers in 
a common multiemployer plan is not enough to invoke pension liability 
for service-related absences. Accordingly, the Department has amended 
section 1002.266(c) to reflect that in cases in which an employee is 
reemployed by an employer that is different from his or her pre-service 
employer, and the pre- and post-service employer contribute to the same 
multiemployer pension plan, the two employers must be connected by a 
common job referral plan or practice in order for USERRA's pension 
obligations to attach to the post-service employer. See section 
1002.266(c).
    Section 1002.266 describes the allocation of the employer's 
obligation to fund employer contributions for reemployed service 
members participating in multiemployer plans. Initially, the benefits 
liability is to be allocated as specified by the sponsor maintaining 
the plan. 38 U.S.C. 4318(b)(1)(A). Both of the bargaining parties, 
usually the union(s) and the employers, and the plan trustees of a 
multiemployer plan are sponsors of the plan. The initial allocation by 
the plan sponsor(s) is likely to vary from plan to plan. For purposes 
of USERRA, if the plan documents make no provision to allocate the 
obligation to contribute, then the individual's last employer before 
the service period is liable for the employer contributions. In the 
event that entity no longer exists or functions, the plan must 
nevertheless provide coverage to the service member. 38 U.S.C. 
4318(b)(1)(B).
    By authorizing the plan sponsors to designate how the contribution 
is to be paid, Congress intended to give employers, employee 
organizations and plan trustees (all of whom are plan sponsors) 
flexibility in structuring the payment obligation to suit the plan's 
particular circumstances. ``The Committee intends that multiemployer 
pension plan trustees or bargaining parties should be able to adopt 
uniform standard rules under which another employer, such as the last 
employer for which the individual worked before going into the 
uniformed service or the employer for which the returning service 
member had the most service during a given period following release 
from the uniformed service, may be considered the `reemploying' 
employer for purposes of the pension provisions of Chapter 43. The 
Committee also intends for multi-employer pension plan trustees to have 
the right to determine that it would be more appropriate not to make 
any individual employer liable for such costs and thus to be able to 
adopt rules under which returning service members' reconstructed 
benefits would be funded out of plan contributions and other assets 
without imposing a specific additional funding obligation on any one 
employer.'' S. Rep. No. 103-158, at 65 (1993). With respect to both 
multiemployer and single employer plans, however, the Committee 
indicated: ``It is the intent of the Committee that, with respect to 
allocations to individual account plans under section 3(34) of ERISA, 
allocations to the accounts of returning service members not be 
accomplished by reducing the account balances of other plan 
participants.'' Id.
    The Department received one comment concerning funding obligations 
of defined contribution

[[Page 75285]]

multiemployer pension plans. The commenter requested the Department 
explain how such plans ``might be expected'' to fund obligations, 
particularly given Congress's intent that funding obligations not be 
met by reducing the account balances of other plan participants. The 
commenter points out that, unlike single-employer plans, multiemployer 
defined contribution plans often will not have a designated source of 
funds that is sufficient to fund a plan's USERRA obligations, 
particularly in cases in which such obligations are significant, such 
as when employees return following an extended absence to perform 
military service. While forfeitures and interest provide a source of 
funds that might be utilized to fund USERRA obligations, that source 
may not always be enough. The commenter submits that in some cases, the 
only way in which a multiemployer defined contribution plan can fund 
its obligations under USERRA might be to reduce the account balance of 
other participants in the plan. While the Department acknowledges this 
possibility, it nevertheless expects plans to comport with USERRA's 
intent that the funding of obligations required by USERRA should avoid 
a reduction in the account balances of other plan participants, and 
plans should develop reasonable procedures to achieve this result to 
the greatest extent possible.
    If an employer participating in a multiemployer plan reemploys an 
individual who is entitled to pension benefits attributable to military 
service, then the employer must notify the plan administrator of the 
reemployment within 30 days. 38 U.S.C. 4318(c). USERRA requires this 
notice because multiemployer plan administrators may not be aware that 
a contributing employer has reemployed a person who may have a pension 
claim arising from his or her military service. In contrast, 
administrators of single employer pension plans are more likely to have 
access to such information. This notice requirement is implemented by 
section 1002.266(b).
    The Department received one comment recommending that in the 
multiemployer context, section 1002.266 should require that ``non-
obvious entities,'' such as hiring halls, share the obligation to 
notify the plan of the reemployment. The commenter points out that in 
cases in which the reemploying employer is different from the pre-
service employer, the reemploying employer may be unaware that it has 
reemployed the person pursuant to USERRA and therefore will be unable 
to fulfill its notice obligation. As noted above, the Department has 
modified section 1002.266(c) to reflect that in cases in which 
different pre-service and post-service employers participate in a 
multiemployer plan, they must also be linked by a common means or 
practice of hiring the employee, such as common participation in a 
union hiring hall. In addition, the Department agrees with the comment 
that in these cases, the post-service employer may be unable to comply 
with its 30-day notice obligation to the plan until it knows that it 
has reemployed a person pursuant to USERRA. Accordingly, the Department 
has modified section 1002.266(b) to provide that the 30-day period 
within which notice to the plan must be made does not begin until the 
reemploying employer has knowledge that the employee was reemployed 
under USERRA. In addition, the amended provision further states that 
the returning service member should notify the employer upon 
reemployment that he or she has been reemployed following a period of 
military service. The Department declines to adopt the recommendation 
to require that non-employers such as hiring halls provide notice to 
plans, because the statute places that obligation only upon the 
reemploying employer. See 38 U.S.C. 4318(c).
    Section 4318(b)(3) of the statute describes the method for 
calculating the reemployed service member's compensation for the period 
of military service to determine the amount the employer and service 
member must contribute under the plan. 38 U.S.C. 4318(b)(3). Section 
1002.267 provides that the compensation the reemployed service member 
would have earned had he or she remained continuously employed provides 
the usual benchmark. If that amount cannot be determined with 
reasonable certainty (for example, where the compensation rate varies 
based on commissions or tips), the compensation rate may be based on 
the service member's average compensation rate during the 12-month 
period before the service period. For an employee who worked fewer than 
12 months before entering the service, the entire employment period 
just prior to the service period may be used.
    The Department received three comments regarding this provision. 
One commenter recommended this provision should apply only where the 
employee's absence for military service was a year or more in duration. 
The Department declines to adopt this recommendation, which would 
create a hierarchy of entitlements based on the duration of service 
that is not supported by the statute. The Department received two 
comments concerning the method in which the employee's imputed 
compensation during the period of absence for military service should 
be calculated. One of the commenters proposed the rule state that pay 
raises that would have been awarded during the period of service be 
included in the calculation. The other suggested the rule state that 
any seasonal variations in compensation be included in the calculation. 
The Department concludes that section 1002.267 adequately addresses 
these issues, and therefore no change is necessary.
    Although a service member who is not reemployed under the Act would 
not be entitled to pension benefits for his or her period of service, 
any vested accrued benefit in the plan to which the service member was 
entitled prior to entering military service would remain intact whether 
or not he or she was reemployed. Joint Explanatory Statement on H.R. 
995, 103-353, at 2507 (1994); H.R. Rep. No. 103-65, Pt. I, at 36-37 
(1993). The terms of the plan document control the manner and timing of 
distributions of vested accrued benefits from the plan if the service 
member is not reemployed by a participant employer.
    USERRA provides specific guidance on certain aspects of the 
reemployed service member's pension plan rights. At the same time, 
employers, fiduciaries and plan administrators must also comply with 
other laws that regulate plan administration but are beyond the scope 
of these proposed regulations. Federal and State laws governing the 
establishment and operation of pension plans, such as ERISA or the 
Internal Revenue Code of 1986, as amended, and the regulations of the 
Pension Benefit Guaranty Corporation, continue to apply in the context 
of providing benefits under USERRA. Thus, for example, while section 
4318(b)(1)(A) provides that liability for funding multiemployer pension 
plan benefits for a reemployed service member shall be allocated as the 
plan sponsor specifies, laws other than USERRA govern the technical 
aspects of the allocation.

Subpart F--Compliance Assistance, Enforcement and Remedies

Compliance Assistance

    USERRA authorizes the Secretary of Labor to provide assistance to 
any person regarding the employment and reemployment rights and 
benefits provided under the statute. 38 U.S.C. 4321. The Secretary acts 
through the Veterans' Employment and Training Service (VETS). USERRA 
promotes the

[[Page 75286]]

resolution of complaints without resort to litigation. In order to 
facilitate this process, section 4321 allows VETS to request assistance 
from other Federal and State agencies and volunteers engaged in similar 
or related activities. Section 1002.277 describes VETS' authority to 
provide assistance to both employees and employers. VETS' assistance is 
not contingent upon the filing of a USERRA complaint.
    The Department received two comments concerning its assistance in 
USERRA cases. The first commenter suggested that the regulation 
explicitly provide in section 1002.277, which states that that the 
``Secretary of Labor, through [VETS], provides assistance to any person 
or entity with respect to [USERRA],'' that the Secretary is 
``required'' to provide such assistance. The Department concludes that 
in stating that the Secretary ``shall provide'' such assistance, 
USERRA's directive is mandatory, and the proposed rule adequately 
reflects the mandate. A second commenter requested that the assistance 
provided to the Department by the National Committee for Employer 
Support of the Guard and Reserve (ESGR) be mentioned in the final rule. 
The ESGR is an agency within the Office of the Assistant Secretary of 
Defense for Reserve Affairs, and was established to promote cooperation 
and understanding between Reserve component members and their civilian 
employers and to assist in the resolution of conflicts arising from an 
employee's military commitment. The Department works closely with ESGR 
in its administration of USERRA, and the ESGR provides valuable service 
to this Department in this regard. However, the Department concludes it 
is not necessary to amend the text of the rule to include this 
acknowledgement.

Investigation and Referral

    Section 1002.288 implements USERRA's section 4322, which authorizes 
VETS to enforce an individual's USERRA rights. Any person claiming 
rights or benefits under USERRA may file a complaint with VETS if his 
or her employer fails or refuses to comply with the provisions of 
USERRA, or indicates that it will not comply in the future. 38 U.S.C. 
4322(a). This avenue, however, is optional. Nothing in section 4322 
requires an individual to file a complaint with VETS, to request 
assistance from VETS, or to await notification from VETS of the right 
to bring an enforcement action. Palmatier v. Michigan Dept. of State 
Police, 1996 WL 925856 (W.D. Mich. 1996). Invoking VETS' enforcement 
authority is an alternative provided by the statute once an employee 
decides to file a USERRA complaint. See Gagnon v. Sprint Corp., 284 
F.3d 839, 854 (8th Cir.), cert. denied 537 U.S. 1001 (2002). See also 
sections 1002.288 and 1002.303. Alternatively, the individual may file 
a complaint directly in the appropriate United States district court or 
State court in cases involving a private sector or State employer, 
respectively (or the Merit Systems Protection Board in cases involving 
a Federal executive agency). See 38 U.S.C. 4323(b) (direct action 
against State or private employer); 38 U.S.C. 4324(b) (direct action 
against Federal executive agency). The Office of Personnel Management 
has issued a separate body of regulations that implement USERRA for 
employees of Federal executive agencies. See 5 CFR Part 353.
    Section 1002.288 also implements the statutory criteria for the 
form of a complaint. 38 U.S.C. 4322(b). Any complaint submitted to VETS 
must be in writing, using VETS Form 1010, which may be found at http://webapps.dol.gov/libraryforms/forms/vets/vets-1010.pdf.
 In addition, VETS 

has recently developed an electronic Form 1010, which can be accessed 
through the USERRA e-laws Advisor on its Web site at: http://www.dol.gov/vets.
 Claimants may complete and submit the ``e1010'' 

online, and they will be automatically notified that their complaint 
has been received and forwarded to the appropriate VETS staff member. 
The Department has amended section 1002.288 to include the option of 
electronic filing of the form 1010.
    The regulation also contains the procedures for processing a 
complaint. See section 1002.289. VETS provides technical assistance to 
a potential claimant upon request, and his or her employer if 
appropriate. 38 U.S.C. 4322(c). Technical assistance is not limited to 
filing a complaint; it also includes responding to requests for 
information on specific issues that are not yet part of a formal USERRA 
complaint. Once an individual files a complaint, VETS must conduct an 
investigation. If the agency determines that a violation of USERRA has 
occurred, VETS undertakes ``reasonable efforts'' to effectuate 
compliance by the employer (or other entity) with its USERRA 
obligations. Section 1002.289-.290; 38 U.S.C. 4322(d). VETS notifies 
the claimant of the outcome of the investigation and the claimant's 
right to request that VETS refer the case to the Attorney General. See 
38 U.S.C. 4322(e), 4323.
    The Department received one comment concerning its efforts to 
achieve compliance with USERRA, specifically regarding its obligation 
to notify the claimant of the results of a USERRA investigation. The 
commenter voiced disapproval that the Department ``communicate[s] the 
results of its investigation to complaining employees but not to 
employers.'' The comment requests that the final rule be modified to 
provide that VETS will inform both the employee and the employer of the 
results of its investigation. Section 4322(e) of USERRA requires that 
the Department ``shall notify the person who submitted the complaint'' 
of the results of the investigation if the Department is unable to 
resolve the complaint, and section 1002.290 reflects this mandate. 
Further, in those cases in which VETS' investigation indicates that a 
violation of USERRA has occurred, VETS must make reasonable efforts to 
resolve the complaint by ensuring that the employer comes into 
compliance. See 38 U.S.C. 4322(d). As a practical matter, efforts to 
achieve compliance would necessitate notice to the employer and an 
opportunity to discuss the investigative findings.
    Section 1002.289 sets forth VETS' authority to use subpoenas in 
connection with USERRA investigations. VETS may (i) require by subpoena 
the attendance and testimony of witnesses and the production of 
documents relating to any matter under investigation; and (ii) enforce 
the subpoena by requesting the Attorney General to apply to a district 
court for an appropriate order. 38 U.S.C. 4326(a)-(b). VETS' subpoena 
authority does not apply to the judicial or legislative branch of the 
Federal Government. 38 U.S.C. 4326(d).

Enforcement of Rights and Benefits Against a State or Private Employer

    Section 4323 establishes the procedures for enforcing USERRA rights 
against a State or private employer. ``State'' includes the several 
States of the United States, the District of Columbia, the Commonwealth 
of Puerto Rico, Guam, the Virgin Islands, and other territories of the 
United States. 38 U.S.C. 4303(14). The political subdivisions of a 
State (counties, municipalities and school districts), however, are 
private employers for enforcement purposes. 38 U.S.C. 4323(j). Although 
USERRA does not define ``private employer,'' the term includes all 
employers other than the Federal Government or a State. Sections 
1002.303 to .314 implement section 4323 of the Act.
    An aggrieved individual may initiate a USERRA action either by 
filing an action in court or by filing a complaint

[[Page 75287]]

with VETS. If a complaint is filed with VETS and voluntary compliance 
cannot be achieved, the claimant may request VETS to refer the 
complaint to the Attorney General. 38 U.S.C. 4323(a)(1). If the 
Attorney General considers the complaint meritorious, the Attorney 
General may represent the claimant and file a complaint in the 
appropriate U.S. district court. In cases where representation is 
provided by the Attorney General, the complainant is the plaintiff if 
the case is brought against a private employer, including a political 
subdivision of a State; however, if the complaint involves a State 
employer, it is brought in the name of the United States. A claimant 
may also proceed directly to the courts in the following circumstances: 
(i) The claimant foregoes informal resolution by VETS; (ii) the 
claimant declines referral of the complaint to the Attorney General 
after an unsuccessful informal resolution; or, (iii) the Attorney 
General refuses to represent the claimant after referral. 38 U.S.C. 
4323(a)(2). Sections 1002.303 and .304 implement these provisions.
    Section 4323 establishes requirements for several aspects of the 
judicial process involving USERRA complaints, which are explained in 
sections 1002.305 through 1002.311. The United States district courts 
have jurisdiction over actions against a State or private employer 
brought by the United States, and actions against a private employer by 
a person. For actions brought by a person against a State, the action 
may be brought in a State court of competent jurisdiction. 38 U.S.C. 
4323(b); section 1002.305. Venue for an action between the United 
States and a State lies in any Federal district in which the State 
exercises authority or carries out functions. Venue for an action 
against a private employer lies in any Federal district in which the 
employer maintains a place of business. 38 U.S.C. 4323(c); section 
1002.307. Only persons claiming rights or benefits under USERRA (or the 
United States acting on their behalf) have standing to initiate a 
USERRA action. 38 U.S.C. 4323(f). Section 1002.308 therefore prohibits 
employers or other entities (such as pension plans or unions) from 
initiating actions. See H.R. Rep. No. 103-65, Pt. I, at 39 (1993). As 
for the respondents necessary to maintain an action, the statute 
requires only the employer or prospective employer to be named as 
necessary parties, and section 1002.239 implements this provision. 38 
U.S.C. 4323(g); see H.R. Rep. No. 103-65, Pt. I, at 39 (1993).
    No fees or court costs may be imposed on the claimant. In addition, 
the court may award a prevailing claimant his or her attorney's fee, 
expert witness fees, and other litigation expenses. 38 U.S.C. 4323(h); 
section 1002.310.
    No State statute of limitations applies to a USERRA proceeding. 38 
U.S.C. 4323(i). Section 1002.311 provides that an unreasonable delay by 
the claimant in asserting his or her rights that causes prejudice to 
the employer may result in dismissal of the claim under the doctrine of 
laches. See H.R. Rep. No. 103-65, Pt. I, at 39 (1993). The legislative 
history relies in part on a Sixth Circuit decision, which held that any 
limitation upon a former employee's right to sue is derived from the 
equitable doctrine of laches rather than an analogous State statute of 
limitations. See Stevens v. Tennessee Valley Authority, 712 F.2d 1047, 
1049 (6th Cir. 1983) (decided under the predecessor Veterans' 
Reemployment Rights Act).
    The Department has long taken the position that no Federal statute 
of limitations applied to actions under USERRA. USERRA's provision that 
State statutes of limitations are inapplicable, together with USERRA's 
legislative history, show that the Congress intended that the only 
time-related defense that may be asserted in defending against a USERRA 
claim is the equitable doctrine of laches. 38 U.S.C. 4323(i); see S. 
Rep. No. 103-158, at 70 (1993); H.R. Rep. No. 103-65, Pt. I, at 39 
(1993). However, a Federal district court has ruled that USERRA claims 
are subject to a four-year statute of limitations enacted prior to the 
enactment of USERRA that imposes a general limitations period for all 
Federal causes of action where no statute of limitations is ``otherwise 
provided by law,'' 28 U.S.C. 1658. Rogers v. City of San Antonio, 2003 
WL 1566502, *7 (W.D. Tex.) (applying section 1658 because ``USERRA was 
essentially a new Act'' designed to replace entirely the VRRA in order 
to ``clarify, simplify, and where necessary, strengthen the existing 
veterans'' employment and reemployment rights provisions''), reversed 
on other grounds, Rogers v. City of San Antonio, 392 F.3d 758, 772 fn. 
36, 773 (5th Cir. 2004) (court declined to consider whether no statute 
of limitations applies to USERRA, noting the Department of Labor's 
position in its Notice of Proposed Rule Making, because the plaintiffs 
argued at the district court level that the four-year limitations 
period applied and therefore waived the no-limitations argument in the 
proceedings below).
    Another recent district court decision, Akhdary v. City of 
Chattanooga, No. 1:01-CV-106, 2002 WL 32060140 (E.D. Tenn. May 22, 
2002), held that 28 U.S.C. 1658 does not apply to USERRA claims. The 
recent decision of the United States Supreme Court in Jones v. R.R. 
Donnelley & Sons Co., 541 U.S. 369(2004) is not dispositive because 
USERRA ``otherwise provides by law'' that no statute of limitations 
applies, and because, with respect to some USERRA claims, the cause of 
action previously existed under the VRRA and consequently predates the 
effective date of 28 U.S.C. 1658.
    The Department received seven comments concerning the applicability 
of a Federal statute of limitations to actions under USERRA. Commenters 
included the National Employment Lawyers Association (NELA), ORC 
Worldwide, Equal Employment Advisory Council, Society for Human 
Resource Management, Food Marketing Institute, U.S. Chamber of 
Commerce, and a law firm. NELA recommended that the Department declare 
in the final rule that 28 U.S.C. 1658 does not apply to actions under 
USERRA, and that the Department rejects those court decisions to the 
contrary. The remaining six commenters opposed the Department's 
position on the issue for various reasons: Two comments argued that the 
proposed provision exceeds the Department's regulatory authority 
because it is outside of any statutory authority and because it is 
``vague and unclear''; one comment suggested deleting the provision 
pending resolution of the matter by the courts; and the three remaining 
comments submitted that 28 U.S.C. 1658 conclusively applies to actions 
under USERRA.
    After considering these comments, the Department will continue to 
adhere to its view that section 1658 does not apply to USERRA for two 
reasons. First, as noted above, because USERRA ``otherwise provides by 
law'' adequate guidance on the statute of limitations issue, the 
residual limitations period in section 1658 is inapplicable. See, e.g., 
Miller v. City of Indianapolis, 281 F.3d 648, 653-654 (7th Cir. 2002) 
(court held that laches barred claims under USERRA; parties did not 
argue the application of Sec.  1658 and the court did not raise its 
applicability). In addition, as noted above, the Wallace court 
specifically rejected the argument that a Federal statute of 
limitations applied to a claim under USERRA's predecessor, the Vietnam 
Era Veterans' Readjustment Assistance Act (VEVRAA), which includes the 
same Congressional intent that no limitations period other than laches 
should apply. Wallace v. Hardee's of Oxford, 874 F. Supp. 374, 376-77 
(M.D. Ala. 1995). The court

[[Page 75288]]

reasoned that Congress enacted the bar on use of State statutes of 
limitations specifically to overrule case law on that issue. The 
Wallace court further concluded that Congress did not enact a bar on 
use of Federal statutes of limitations because there was no need--no 
court had ever applied a Federal limitations statute to decide a claim 
under USERRA. Id.
    The Department views the Supreme Court's interpretation of section 
1658 in R.R. Donnelley as supportive of the argument that the four-year 
limitations period should apply only to statutes whose claims have been 
resolved through the borrowed application of State statutes of 
limitations, a category that does not include USERRA. In R.R. 
Donnelley, the Court relied heavily on Congress's purpose in enacting 
section 1658, and looked beyond the terms of the phrase ``arising 
under'' to examine ``the context in which [section 1658] was enacted 
and the purposes it was designed to accomplish.'' Id. at 377. The Court 
concluded that ``a central purpose'' of section 1658 was to minimize 
the occasions for the practice of borrowing State statutes of 
limitations. Id. at 380, fn. 13 (citing H.R. Rep. No. 101-734 at 24 
(1990)). The Court's holding thus ``best serves Congress'' interest in 
alleviating the uncertainty inherent in the practice of borrowing State 
statutes of limitations while at the same time protecting settled 
interests.'' Id. at 382.
    Unlike statutes to which section 1658 was intended to apply, USERRA 
has no ``void'' that has ``created so much unnecessary work for federal 
judges.'' Id at 380. Because USERRA already prohibits borrowing of 
State statutes of limitations, it is not the type of statute Congress 
had in mind when it enacted section 1658. In fact, courts have 
``borrowed'' from USERRA and its predecessors in order to determine an 
appropriate statute of limitations for claims under other statutes. 
See, e.g., Stevens, 712 F.2d at 1056 (``borrowing'' from the most 
analogous Federal statute, VRRA, to determine that laches rather than 
State limitations period applies to action under the Veteran's 
Preference Act). These decisions indicate that USERRA offers enough 
guidance on the statute of limitations issue that it should fall within 
the ``otherwise provided by law'' exception to section 1658.
    The second basis for the argument that section 1658 does not apply 
to claims under USERRA is also found in the R.R. Donnelley case. In 
R.R. Donnelley, the Court determined that the limitations statute 
governs a cause of action ``if the plaintiff's claim against the 
defendant was made possible by a post-1990 enactment.'' R.R. Donnelley, 
541 U.S. at 382. Many, and possibly most, claims arising under 1994's 
USERRA were possible under USERRA's predecessor statutes and therefore 
not ``made possible by a post-1990 enactment'' within the meaning of 
R.R. Donnelley. USERRA is simply a Congressional reaffirmation of 
decades-old law governing reemployment rights of service members, and 
contains few new causes of action, See, e.g., Akhdary v. City of 
Chattanooga, 2002 WL 32060140, *6 (E.D. Tenn. 2002) (section 1658 does 
not apply to claims under USERRA because USERRA amends the preexisting 
law of the VRRA). But see Rogers v. City of San Antonio.
    Although the Department will continue to advance the view that 
section 1658 does not apply to cases arising under USERRA, there are 
conflicting decisions regarding the applicability of section 1658 to 
USERRA, and the issue will ultimately be resolved by the courts. Until 
the issue is resolved, potential USERRA plaintiffs would be well 
advised to file USERRA claims within section 1658's four-year period. 
Accordingly, the Department has amended section 1002.311 to acknowledge 
that at least one court has held that 28 U.S.C. 1658 applies to actions 
under USERRA, and that individuals asserting rights under USERRA should 
determine whether the issue of the applicability of the Federal four-
year statute of limitations has been resolved and, in any event, act 
promptly to preserve their rights under USERRA.
    Finally on the issue of time-barred claims, Rep. John Boehner, 
Chairman of the U.S. House of Representatives Committee on Education 
and the Workforce, requested the final rule provide some explanation of 
the ``equitable doctrine of laches,'' which is the common-law principle 
applicable to USERRA cases that serves to bar untimely actions. Section 
1002.311, which states that USERRA claims may be barred as untimely if 
``an individual unreasonably delays asserting his or her rights, and 
that unreasonable delay causes prejudice to the employer,'' adequately 
incorporates the principles that govern the doctrine of laches.
    With respect to remedies, the court has broad authority to protect 
the rights and benefits of persons covered by USERRA. The court may 
order the employer to comply with USERRA's provisions; compensate the 
claimant for lost wages and/or benefits; and pay additional, 
liquidated, damages equivalent to the lost wages/benefits if it 
determines that the employer's violation is willful. 38 U.S.C. 
4323(d)(1). The legislative history establishes that ``a violation 
shall be considered to be willful if the employer or potential employer 
`either knew or showed reckless disregard for the matter of whether its 
conduct was prohibited by the [provisions of this chapter].' '' H.R. 
Rep. No. 103-65, Pt. I, at 38 (1993), quoting Hazen Paper Co. v. 
Biggins, 507 U.S. 604, 617 (1993) (holding that a violation of the ADEA 
is willful if the employee either knew or showed reckless disregard for 
whether the statute prohibited its conduct); see also Fink v. City of 
New York, 129 F.Supp.2d 511, 523-25; Duarte v. Agilent Technologies, 
Inc., 366 F.Supp.2d 1039, 1048. Section 1002.312 lists the possible 
remedies allowed under section 4323(d). Section 1002.313 states that 
compensation consisting of lost wages, benefits or liquidated damages 
derived from any action brought on behalf of the United States shall be 
paid directly to the aggrieved individual. Finally, the court may use 
its equity powers to enforce the rights guaranteed by USERRA. 38 U.S.C. 
4323(e); section 1002.314.
    The Department received one comment broadly concerning the issues 
of enforcement and court procedures, arguing that the proposed 
regulations were attempting to create substantive rights not provided 
for by USERRA and that are ``inconsistent with a number of federal 
statutes and court decisions.'' In addition, the comment states that 
through the regulations, the Department is attempting to ``establish 
jurisdiction, venue, statutes of limitation, * * * [and] provide 
remedies not set forth by statute.'' In registering its complaint, the 
commenter fails to specify the allegedly conflicting ``federal statutes 
and court decisions'' to which it refers. Moreover, following a 
thorough review during the rule-making process and the preparation for 
publication of the final rule, the Department is confident that every 
provision in the final rule has a sound basis in the statute's 
directives, its legislative intent, and in case law under USERRA.

Effective Date and Compliance Deadlines

    These regulations impose no new legal requirements but explain 
existing ones, in some cases for the first time. In the Notice of 
Proposed Rulemaking, the Department proposed that these regulations be 
effective 30 days after publication of the final rule, and requested 
comment on whether this would allow adequate time for covered parties 
to come into full compliance. The Department noted at that time that it 
expected that most employers were already in full compliance. However, 
to

[[Page 75289]]

the extent that these regulations clarify USERRA's requirements and 
require adjustments in employer policies and practices, the Department 
expressed its intent to allow a reasonable amount of time for the 
transition to take place.
    The Department received eight comments concerning the proposed 
effective date of the final rule following its publication. One of the 
commenters, an employer association, agreed that the 30-day effective 
date was reasonable. Three commenters recommended adoption of a 90-day 
effective date. The remaining four commenters recommended longer 
periods that ranged from 180 days to the end of the benefits plan year 
following the plan year in which the final rule is published. In 
addition, one commenter who proposed a 90-day effective date indicated 
that the additional time is necessary to permit small businesses the 
opportunity to ``study'' the regulations. All commenters proposing an 
expansion of time based their recommendations on the need for employers 
and plan administrators to have sufficient time to make adjustments to 
health and benefit plans necessitated by provisions in the proposed 
rule.
    As noted in Subparts D and E, above, the Department has made 
several significant revisions to the health and pension plan 
provisions. After considering the comments from health and pension plan 
experts, the Department concludes that these modifications have 
eliminated the administrative burden associated with those sections of 
the proposed rule. As a result, the Department anticipates that 
significant plan adjustments, as raised in the comments, will not be 
necessary. In addition, as stated above, the regulations impose no new 
legal requirements but merely explain existing ones; small and large 
businesses alike should not require additional time to ``study'' and 
come into compliance with a statute to which they have been subject for 
many years. For all these reasons, the Department has retained the 
provision that states that the rule will become effective 30 days after 
publication of the final rule.

VI. Procedural Determinations

A. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501, et 
seq.), Federal agencies must seek Office of Management and Budget (OMB) 
approval for all collections of information (i.e., paperwork). As part 
of the approval process, agencies must solicit comment from affected 
parties with regard to the collections of information, including the 
cost and burden-hour estimates made for these collections by the 
agencies. The paperwork cost and burden-hour estimates that an agency 
submits to OMB are termed an ``Information Collection Request'' (ICR).
    In the proposed rule, VETS requested the public to comment on the 
information-collection (i.e., reporting and recordkeeping) requirements 
contained in the ICR that it submitted to OMB (69 FR 56282). The 
following chart describes these requirements.

  Comparison of Final Rule and Statutory Language Containing Paperwork
                              Requirements
------------------------------------------------------------------------
                                             Statutory provision and
      Final provision and language                   language
------------------------------------------------------------------------
1002.85(a) The employee or an            4312(a)(1) [Reemployment rights
 appropriate officer of the uniformed     and benefits available if] the
 service in which his or her service is   person (or an appropriate
 to be performed, must notify the         officer of the uniformed
 employer that the employee intends to    service in which such service
 leave the employment position to         is performed) has given
 perform service in the uniformed         advance written or verbal
 services. * * *                          notice of such service to such
                                          person's employer[.]
1002.85(c) The employee's notice to the
 employer may be either verbal or
 written.
1002.115 * * * Upon completing service   4312(a)(3) [Reemployment rights
 in the uniformed services, the           and benefits available if] the
 employee must notify the pre-service     person reports to, or submits
 employer of his or her intent to         an application for
 return to the employment position by     reemployment to, such employer
 either reporting to work or submitting   in accordance with the
 a timely application for reemployment.   provisions of subsection (e).
1002.118 * * * The employee may apply
 orally or in writing.
1002.193 * * * The employer must         4313(a)(2)(A) [A person
 determine the seniority rights,          entitled to reemployment shall
 status, and rate of pay as though the    be promptly reemployed] in the
 employee had been continuously           position of employment in
 employed during the period of service.   which the person would have
                                          been employed if the
                                          continuous employment of such
                                          person with the employer had
                                          not been interrupted by such
                                          service, or a position of like
                                          seniority, status and pay
                                          [with certain exceptions].
1002.266(b) * * * An employer that       4318(c) Any employer who
 contributes to a multiemployer plan      reemploys a person under this
 and that reemploys the employee * * *    chapter and who is an employer
 must provide written notice of           contributing to a
 reemployment to the plan                 multiemployer plan * * * under
 administrator. * * *                     which benefits are or may be
                                          payable to such person by
                                          reason of the obligations set
                                          forth in this chapter, shall *
                                          * * provide information, in
                                          writing, of such reemployment
                                          to the administrator of the
                                          plan.
1002.288 A complaint may be filed with   4322(b) Such complaint shall be
 VETS either in writing, using VETS       in writing, be in such form as
 Form 1010, or electronically, using      [VETS] may prescribe, include
 VETS Form e1010 * * * [and] must         the name and address of the
 include the name and address of the      employer against whom the
 employer, a summary of the basis for     complaint is filed, and
 the complaint, and a request for         contain a summary of the
 relief.                                  allegations that form the
                                          basis of for the complaint.
------------------------------------------------------------------------
Note: VETS Form 1010 currently is approved by OMB, 1293-0002,
  expiration date March 2007.

    The following four paragraphs describe the burden and cost 
estimates for the paperwork requirements described in this chart.
    Notifying employers of departure from employment (1002.85). Based 
on its extensive industry knowledge, VETS determined that, in the 
overwhelming majority of cases, employees will provide this information 
orally, and that it will take them only a few seconds to complete the 
necessary communication. In view of the brief period of communication 
involved, VETS believes that this information-collection provision will 
impose a de minimus burden on employees and employers; therefore, VETS 
claims no burden for this activity.
    Notifying employers of plan to return to pre-service employment 
(1002.115). Similar to the previous paragraph, VETS estimates that in 
the vast majority of instances in which employees communicate the 
required notice to employers, they will do so orally and

[[Page 75290]]

will take only a few seconds to complete the task. Therefore, VETS 
considers this information-collection provision to be de minimus, and 
claims no burden for this activity.
    Determining reemployment positions (1002.193). Estimates made by 
the Department of Defense indicate that 50,000 to 125,000 service 
members covered by USERRA will demobilize in the coming year. For the 
purpose of making burden-hour and cost estimates for this provision, 
VETS assumes that the maximum number of service members (i.e., 125,000) 
will demobilize each year, and that all of these service members plan 
to resume their pre-service employment positions (a highly unlikely 
possibility). Using its extensive experience with the same provision in 
the USERRA statute, VETS estimates that a secretary (at an hourly wage 
rate of $18.99, including benefits) takes about 20 minutes (.33 hour) 
to compile and review the necessary information (i.e., seniority 
rights, status, and rate of pay) and to make a preliminary 
determination regarding a returning service member's reemployment 
position, and that a supervisor (at an hourly wage rate of $22.97, 
including benefits) requires an average of 10 minutes (.17 hour) to 
review this information and approve the final determination. Therefore, 
this provision will result in an annual employer burden of 62,500 hours 
at a cost of $1,271,451.
    Notifying plan administrators of reemployment (1002.266(b)). Data 
compiled by the Department of Labor from 1998 indicate that about 6 
percent of all private-wage and salary workers participate in 
multiemployer defined-benefit plans. As noted previously, 50,000 to 
125,000 service members covered by USERRA will demobilize in the coming 
year. If 6 percent of these uniformed-service members reenroll in a 
multiemployer pension plan after demobilization, then this information-
collection provision will apply to 7,500 of these returning service 
members. Based on its previous experience with this provision in the 
USERRA statute, VETS determined that it takes about 30 minutes (.5 
hours) for a secretary to type and mail a standardized letter to a plan 
administrator that provides the administrator with notification of an 
employee's reemployment status. Therefore, the annual burden-hour and 
cost estimates for the proposed information-collection provision are 
3,750 hours and $71,213.
    VETS received no public comment on the four proposed collections of 
information, nor is any other record evidence available indicating that 
the Agency's cost and burden-hour estimates as described in the 
proposal are incorrect or need revision. Therefore, VETS did not revise 
any of the proposed collections of information contained in the ICR for 
this final rule.
    In the final rule, the Department added the following statement to 
section 1002.171: ``The employer should counsel the employee about 
these options and the consequences of selecting one or the other.'' The 
use of the verb ``should'' makes this provision advisory, i.e., the 
employer has discretion in determining whether to communicate 
information about the available options to an employee. Therefore, this 
provision is not enforceable, and will not be enforced, by VETS. 
Consequently, the Agency is not including this provision in its 
estimate of the paperwork burden attributable to this final rule.
    The first four paperwork requirements described in the Table above 
have been approved by OMB,  1293-0011, which expires December, 
2008. The final paperwork requirement relating to VETS Form 1010, was 
previously approved by OMB,  1293-0002, which expires March, 
2007.

B. Final Economic Analysis and Regulatory Flexibility Certification

    VETS is treating this final rule as a ``significant regulatory 
action'' within the meaning of Executive Order 12866 (58 FR 51735; 
September 30, 1993) (``Order''), because of its importance to the 
public and the Department's priorities. However, because this final 
rule is not ``economically significant'' as defined in section 3(f)(1) 
of EO 12866 as discussed below, it does not require a full economic-
impact analysis under section 6(a)(3)(C) of the Order. Additionally, 
the rule will impose no additional costs on any private or public 
sector entity, and will not meet any of the criteria for an 
economically significant or major rule specified by the Order or 
relevant statutes. Consequently, the final rule is not a ``major rule'' 
under the Unfunded Mandates Reform Act, 2 U.S.C. 1501, et seq., or 
Section 801 of the Small Business Regulatory Enforcement Fairness Act 
(SBREFA), 5 U.S.C. 801.
    One commenter took exception to the cost determinations made by 
VETS in the proposed rule. This commenter had concerns about the cost 
of the proposed regulations for small businesses. In expressing these 
concerns, the commenter asserted:

    Because there is no size limitation in the USERRA, these 
regulations will apply to employers of any size. To say that this 
regulation will impose no costs at all on employers is unrealistic * 
* *. To the extent that employers have handled [compliance with 
USERRA] differently because of ambiguity, these changes will likely 
have a cost impact which will apply to all employers, even the 
smallest. Merely by publishing these regulations, employers will be 
on more notice about their obligations and[,] therefore[,] will be 
more likely to come into compliance.

    The Agency concludes that this commenter misunderstood its use of 
the term ``cost'' as used in this context. Accordingly, VETS used the 
term in the proposal to describe additional costs, over and above the 
costs of complying with USERRA, that employers would bear in complying 
with the proposed regulations. In addition, the commenter noted that 
compliance with the proposed standard may increase employer costs 
because some employers may have misinterpreted the USERRA provisions, 
or because additional employers may come into compliance. However, VETS 
believes that employers have an existing statutory obligation to comply 
with USERRA, and any increase in compliance, or alteration in the 
manner of compliance, that results from the final rule only ensures 
that employers are meeting these statutory obligations. Consequently, 
the final regulations will afford service members with all of the 
benefits to which they are entitled under USERRA.
    Another commenter objected to the statement in the proposal that 
the regulations would ``impose no new legal requirements'' and ``would 
not impose any additional costs on employers'' (Ex. 60). Accordingly, 
this commenter asserted that proposed section 1002.266(c) would 
increase compliance costs by holding contributing employers to a 
multiemployer pension plan responsible for the participation, vesting, 
and benefit-accrual protections to which returning service members 
would be entitled, even though they were not the pre-service employers 
of that employee. The Agency has responded to this comment in Subpart E 
of Section V (``Section-by-Section Summary of Final Rule and Discussion 
of Comments'') of this preamble. Based on this response, VETS believes 
that final section 1002.266(c) will not increase the cost to employers 
of complying with these final regulations.
    In the proposed rule, VETS noted that the Senate Committee report 
accompanying the passage of USERRA noted that the ``[Congressional 
Budget Office] estimates that the enactment of [section 9 of USERRA, 
transitioning from the predecessor veterans' reemployment rights law to 
USERRA] would entail no significant cost.'' (See

[[Page 75291]]

S. Rep. No. 103-158, at 82 (1993)). The same report states further on 
page 84, under the heading ``Regulatory Impact Statement,'' that:

    [T]he Committee [on Veterans' Affairs] has made an evaluation of 
the regulatory impact which would be incurred in carrying out the 
Committee bill. The Committee finds that the enactment of the bill 
would not entail any significant new regulation of individuals or 
business * * *.

    In this regard, USERRA is the latest in a series of laws protecting 
veterans' employment and reemployment rights going back to the 
Selective Training and Service Act of 1940. USERRA's immediate 
predecessor was the Veterans' Reemployment Rights Act (``VRRA''). 
USERRA continued the fundamental protections of the VRRA and the case 
law interpreting the VRRA while clarifying that law, and VETS considers 
that by recodifying and clarifying longstanding statutory and case law 
under the VRRA, USERRA did not impose new economic burdens on 
employers.
    This final rule implements USERRA, and while it imposes no new 
costs, VETS considers that it may provide some economic benefits. For 
example, delays may occur when employers respond to employee claims and 
inquiries concerning USERRA due to confusion or ambiguity as to the 
correct interpretation of USERRA. Moreover, some employee claims are 
contested in part because of a lack of employer knowledge about the 
statute. The final rule should reduce these costs by: providing 
employers with accurate information necessary to respond efficiently 
and effectively to employee claims; potentially reducing the number of 
contested claims and the resulting need for administrative resolution 
or legal action; expediting the settlement of outstanding claims 
because employers and employees will have an enhanced knowledge of 
their rights and responsibilities under USERRA; and reducing the number 
of inquiries made by employers and employees to administrative agencies 
such as VETS and the Office of Personnel Management. In addition, by 
lessening the possibility of contested claims, the final rule also will 
reduce the likelihood that employees will receive liquidated damages 
from employers should the claims prove successful.
    VETS noted in the proposal that it:

    [E]xpects the rule to benefit both pension- and health-plan 
sponsors and participants by helping to dispel plan administrators' 
uncertainty about compliance with USERRA provisions, and by reducing 
delays and the risk of inadvertent noncompliance. The rule may 
assist participants and beneficiaries to better understand their 
USERRA rights as well, thereby averting disputes and lost 
opportunities to elect continuing health-plan coverage, or to obtain 
reinstated pension-plan coverage.

    VETS maintains these views with respect to this final rule. 
Therefore, based on this discussion and the record evidence, VETS 
concludes that the final rule will not impose any additional costs on 
employers. Consequently, this final rule requires no final economic 
analysis. Furthermore, because the final rule imposes no costs on 
employers, VETS certifies that it will not have a significant impact on 
a substantial number of small businesses; accordingly, the Agency need 
not prepare a final regulatory flexibility analysis. In this regard, 
VETS finds that the economic burden of the final rule is equitably 
distributed across businesses, including small businesses, because the 
number of employees covered by the final rule will vary in proportion 
to the size of the business (i.e., small businesses have proportionally 
fewer covered employees than medium or large businesses).

C. Unfunded Mandates

    The Congressional Budget Office (``CBO'') determined that State and 
local governments would incur no cost resulting from passage of USERRA 
(see S. Rep. No. 103-158, at 84 (1993)). Consequently, under this final 
rule, State and local governments will incur an obligation to comply 
with USERRA to the same extent as private employers; therefore, when 
USERRA (and this final rule) impose no cost on private employers, they 
also impose no cost on State and local government employers. The House 
Committee Report for USERRA (H.R. Rep. No. 103-65, Pt. I, at 49-51 
(1993)) contained similar CBO language. However, the CBO determined 
that, because of changes to Thrift Savings Plan provisions, the cost 
for the Federal government to comply with USERRA are about $1 million 
in FY 1994 and 1995, and zero cost thereafter.
    The Agency reviewed this final rule according to the Unfunded 
Mandates Reform Act of 1995 (2 U.S.C. 1501 et seq.) and Executive Order 
12875 (58 FR 58093; October 26, 1993). Based on the CBO determinations 
described in the previous paragraph, the Agency has determined that 
this final rule does not include any Federal mandate that will result 
in increased expenditures by State, local, or tribal governments in the 
aggregate of more than $100 million, or increased expenditures by the 
private sector of more than $100 million. Therefore, the Agency 
concludes that this final rule: (1) Will not affect State, local, or 
tribal entities significantly or uniquely; (2) does not contain an 
unfunded mandate requiring consultation with these entities; and (3) 
will not impose substantial direct compliance costs on Native American 
tribal governments. Accordingly, this final rule does not mandate that 
State, local, or tribal governments adopt new, unfunded regulatory 
obligations.

D. Federalism

    This final rule does not have federalism implications as specified 
under Executive Order 13132 (64 FR 43255; August 10, 1999) because it 
has no substantial direct effect on the States, on the relationship 
between the national government and the States, or on the distribution 
of power and responsibilities among the various levels of government. 
Section 4302 of USERRA provides that its provisions supersede any and 
all laws of the States as they relate to any rights and benefits 
provided under USERRA if such State laws reduce, limit, or eliminate in 
any manner any right or benefit provided by USERRA. Accordingly, the 
requirements implemented by this final rule do not alter these 
fundamental statutory provisions with respect to military service 
members' and veterans' employment and reemployment rights and benefits. 
Therefore, this final rule has no implications for the States, or for 
the relationship or distribution of power between the national 
government and the States.

E. Congressional Review Act and Executive Order 12866

    Consistent with the Congressional Review Act, 5 U.S.C. 801, et 
seq., the Department will submit to Congress and to the Comptroller 
General of the United States, a report regarding the issuance of this 
Final Rule prior to the effective date set forth at the outset of this 
document.
    OMB has determined that this rule is not a ``major rule'' as 
defined by the Congressional Review Act (Section 804 of the Small 
Business Regulatory Enforcement Fairness Act of 1996), and that it is 
not ``economically significant,'' as defined by Executive Order 12866, 
as it will not have an economic impact of $100 million in any one year. 
USERRA is the latest in a series of laws protecting service members' 
employment and reemployment rights dating back to 1940, and USERRA 
continues the fundamental protections contained in those longstanding 
statutes. As the Senate Committee report accompanying the passage of 
USERRA noted, the Congressional Budget Office determined that the 
enactment of USERRA would impose no new economic burdens on

[[Page 75292]]

employers. See S. Rep. No. 103-158, at 82 (1993). Similarly, the Senate 
Report's Regulatory Impact Statement concluded that USERRA's regulatory 
impact ``would not entail any significant new regulation of individuals 
or business* * *.'' As would be expected, therefore, the vast majority 
of these regulations simply restate statutory requirements that would 
be self-implementing, even in the absence of the regulatory action. 
Accordingly, USERRA and promulgation of this rule impose no additional 
costs on employers or on any private or public sector entity that would 
approach the $100 million threshold.
    As noted above, VETS received two comments regarding its conclusion 
in the proposed rule that the regulation would not impose any 
additional costs on the regulated community. One comment suggested that 
the final rule would increase compliance costs to employers because the 
clarifications contained in the rule may result in modifications to 
employers' compliance strategies and the novelty of the rule may 
increase overall compliance. VETS recognizes that the rule may lead to 
an increase in compliance, but the complexity inherent in assessing the 
economic costs and benefits of this rule and the relative paucity of 
data associated with implementation costs provide insufficient 
information to estimate what the effect of additional compliance might 
be. However, as discussed below, VETS does not consider that such costs 
would approach the $100 million threshold, and no commenter suggested 
that it would.
    One of the primary effects of USERRA is that employees who have 
been absent from civilian employment due to military service will be 
reinstated to the appropriate reemployment position. Because employees 
absent from employment for military service are not required to be 
compensated by their civilian employer during that service, and because 
temporary replacements hired during the period of military service may 
be displaced by returning service members, costs to employers in 
complying with the reinstatement obligation will reflect insubstantial 
administrative expenditures. An additional effect of USERRA is its 
reduction of employment discrimination against members of the uniformed 
service, which presents no additional costs to compliant employers and 
offers an intangible economic good to the economy, which is moved 
toward a discrimination-free model. Similarly, USERRA's provision that 
employees may continue their employment-based health coverage during 
uniformed service specifies that employees must pay for that benefit at 
no more than 102% of the cost of the premium, so that employers' 
premium and administrative costs of maintaining the coverage are 
minimized.
    USERRA's requirement that employers reasonably accommodate 
employees returning from service with a service-related illness or 
injury presents some costs to employers. However, when costs to the 
economy associated with a similar requirement under the Americans with 
Disabilities Act, 42 U.S.C 12101, were evaluated, those costs were 
calculated to be well below the $100 million threshold, in part due to 
increased productivity resulting from the optimization of investment in 
human capital. See 56 FR 8578, 8582-8584 (Feb. 28, 1991). Moreover, by 
comparison, the ADA's ``reasonable accommodation'' requirement is 
broader than USERRA's in that it is not limited to the provision of 
reasonable accommodations only to employees returning from service with 
service-related illnesses or injuries. Accordingly, reasonable 
accommodation costs to employers under USERRA should be less 
significant than similar costs generated by implementation of the ADA.
    USERRA's provision that employers maintain their obligation to 
provide pension benefits to employees absent from employment due to 
military service as if there were no break in service does impose costs 
on employers and plans. However, VETS estimates that such costs will be 
incurred by a small percentage of covered employers, and that the 
resulting impact on the economy from this provision is not great. A 
second comment suggested that the rule imposed additional pension-
related costs on post-service employers beyond those costs already 
imposed by the statute. However, VETS has narrowed the provision of the 
rule at issue in the comment, and concludes that the provision includes 
no additional regulatory costs beyond those associated with statutory 
compliance. As a final note, the benefits of USERRA and this 
implementing regulation include outcomes that cannot be readily and 
precisely monetized or quantified but that greatly outweigh any minimal 
additional costs. As noted above, these include the societal benefit of 
nondiscrimination in employment. Further, by protecting employment and 
reemployment rights of service members, USERRA and this regulation 
remove disincentives to enlistment and promote a national defense. 
After considering all comments, the conclusion that this rule presents 
minimal additional costs to private or public sector entities remains 
sound. Accordingly, this regulation is not a major rule for purposes of 
the Congressional Review Act, nor economically significant for purposes 
of Executive Order 12866.

VII. Statutory and Rulemaking Background

    The Uniformed Services Employment and Reemployment Rights Act 
(USERRA), Pub. L. 103-353, 108 Stat. 3150 (codified at 38 U.S.C. 4301-
4333), became law on October 13, 1994, replacing the Veterans' 
Reemployment Rights Act (VRRA). Congress enacted USERRA, in part, to 
clarify the ambiguities of the VRRA and strengthen the rights of 
service members and veterans. USERRA's guiding principle is that a 
person who leaves civilian employment to perform service in the 
uniformed services is entitled to return to that job with the 
seniority, status, and rate of pay that would have accrued during the 
absence, provided the person meets USERRA's eligibility criteria. 
USERRA applies to voluntary or involuntary military service in 
peacetime as well as wartime. Its provisions apply to virtually all 
employers, regardless of size. USERRA also codifies 55 years of 
accumulated case law and clarifies previously existing rights and 
obligations. For most purposes, USERRA applies to reemployments 
initiated on or after December 12, 1994. Congress enacted amendments to 
the Act in 1996, 1998, 2000, and 2004.

VIII. Statutory Authority

    This regulation is proposed pursuant to the authority in section 
4331(a) of USERRA (Pub. L. 103-353, 108 Stat. 3150, 38 U.S.C. 4331(a)).

List of Subjects in 20 CFR Part 1002

    Labor, Veterans, Pensions.

Final Regulation

0
For the reasons set out in the preamble, the Department revises Part 
1002 of Chapter IX of Title 20 of the Code of Federal Regulations 
implementing the provisions of USERRA as follows:

[[Page 75293]]

PART 1002--REGULATIONS UNDER THE UNIFORMED SERVICES EMPLOYMENT AND 
REEMPLOYMENT RIGHTS ACT OF 1994

Subpart A--Introduction to the Regulations Under the Uniformed Services 
Employment and Reemployment Rights Act of 1994

General Provisions

Sec.
1002.1 What is the purpose of this part?
1002.2 Is USERRA a new law?
1002.3 When did USERRA become effective?
1002.4 What is the role of the Secretary of Labor under USERRA?
1002.5 What definitions apply to USERRA?
1002.6 What types of service in the uniformed services are covered 
by USERRA?
1002.7 How does USERRA relate to other laws, public and private 
contracts, and employer practices?
Subpart B--Anti-Discrimination and Anti-Retaliation

Protection From Employer Discrimination and Retaliation

1002.18 What status or activity is protected from employer 
discrimination by USERRA?
1002.19 What activity is protected from employer retaliation by 
USERRA?
1002.20 Does USERRA protect an individual who does not actually 
perform service in the uniformed services?
1002.21 Do the Act's prohibitions against discrimination and 
retaliation apply to all employment positions?
1002.22 Who has the burden of proving discrimination or retaliation 
in violation of USERRA?
1002.23 What must the individual show to carry the burden of proving 
that the employer discriminated or retaliated against him or her?
Subpart C--Eligibility for Reemployment

General Eligibility Requirements for Reemployment

1002.32 What criteria must the employee meet to be eligible under 
USERRA for reemployment after service in the uniformed services?
1002.33 Does the employee have to prove that the employer 
discriminated against him or her in order to be eligible for 
reemployment?

Coverage of Employers and Positions

1002.34 Which employers are covered by USERRA?
1002.35 Is a successor in interest an employer covered by USERRA?
1002.36 Can an employer be liable as a successor in interest if it 
was unaware that an employee may claim reemployment rights when the 
employer acquired the business?
1002.37 Can one employee be employed in one job by more than one 
employer?
1002.38 Can a hiring hall be an employer?
1002.39 Are States (and their political subdivisions), the District 
of Columbia, the Commonwealth of Puerto Rico, and United States 
territories, considered employers?
1002.40 Does USERRA protect against discrimination in initial hiring 
decisions?
1002.41 Does an employee have rights under USERRA even though he or 
she holds a temporary, part-time, probationary, or seasonal 
employment position?
1002.42 What rights does an employee have under USERRA if he or she 
is on layoff, on strike, or on a leave of absence?
1002.43 Does an individual have rights under USERRA even if he or 
she is an executive, managerial, or professional employee?
1002.44 Does USERRA cover an independent contractor?

Coverage of Service in the Uniformed Services

1002.54 Are all military fitness examinations considered ``service 
in the uniformed services?''
1002.55 Is all funeral honors duty considered ``service in the 
uniformed services?''
1002.56 What types of service in the National Disaster Medical 
System are considered ``service in the uniformed services?''
1002.57 Is all service as a member of the National Guard considered 
``service in the uniformed services?''
1002.58 Is service in the commissioned corps of the Public Health 
Service considered ``service in the uniformed services?''
1002.59 Are there any circumstances in which special categories of 
persons are considered to perform ``service in the uniformed 
services?''
1002.60 Does USERRA cover an individual attending a military service 
academy?
1002.61 Does USERRA cover a member of the Reserve Officers Training 
Corps?
1002.62 Does USERRA cover a member of the Commissioned Corps of the 
National Oceanic and Atmospheric Administration, the Civil Air 
Patrol, or the Coast Guard Auxiliary?

Absence From a Position of Employment Necessitated by Reason of Service 
in the Uniformed Services

1002.73 Does service in the uniformed services have to be an 
employee's sole reason for leaving an employment position in order 
to have USERRA reemployment rights?
1002.74 Must the employee begin service in the uniformed services 
immediately after leaving his or her employment position in order to 
have USERRA reemployment rights?

Requirement of Notice

1002.85 Must the employee give advance notice to the employer of his 
or her service in the uniformed services?
1002.86 When is the employee excused from giving advance notice of 
service in the uniformed services?
1002.87 Is the employee required to get permission from his or her 
employer before leaving to perform service in the uniformed 
services?
1002.88 Is the employee required to tell his or her civilian 
employer that he or she intends to seek reemployment after 
completing uniformed service before the employee leaves to perform 
service in the uniformed services?

Period of Service

1002.99 Is there a limit on the total amount of service in the 
uniformed services that an employee may perform and still retain 
reemployment rights with the employer?
1002.100 Does the five-year service limit include all absences from 
an employment position that are related to service in the uniformed 
services?
1002.101 Does the five-year service limit include periods of service 
that the employee performed when he or she worked for a previous 
employer?
1002.102 Does the five-year service limit include periods of service 
that the employee performed before USERRA was enacted?
1002.103 Are there any types of service in the uniformed services 
that an employee can perform that do not count against USERRA's 
five-year service limit?
1002.104 Is the employee required to accommodate his or her 
employer's needs as to the timing, frequency or duration of service?

Application for Reemployment

1002.115 Is the employee required to report to or submit a timely 
application for reemployment to his or her pre-service employer upon 
completing the period of service in the uniformed services?
1002.116 Is the time period for reporting back to an employer 
extended if the employee is hospitalized for, or convalescing from, 
an illness or injury incurred in, or aggravated during, the 
performance of service?
1002.117 Are there any consequences if the employee fails to report 
for or submit a timely application for reemployment?
1002.118 Is an application for reemployment required to be in any 
particular form?
1002.119 To whom must the employee submit the application for 
reemployment?
1002.120 If the employee seeks or obtains employment with an 
employer other than the pre-service employer before the end of the 
period within which a reemployment application must be filed, will 
that jeopardize reemployment rights with the pre-service employer?
1002.121 Is the employee required to submit documentation to the 
employer in connection with the application for reemployment?
1002.122 Is the employer required to reemploy the employee if 
documentation establishing the employee's eligibility does not exist 
or is not readily available?
1002.123 What documents satisfy the requirement that the employee 
establish eligibility for reemployment after a period of service of 
more than thirty days?

[[Page 75294]]

Character of Service

1002.134 What type of discharge or separation from service is 
required for an employee to be entitled to reemployment under 
USERRA?
1002.135 What types of discharge or separation from uniformed 
service will make the employee ineligible for reemployment under 
USERRA?
1002.136 Who determines the characterization of service?
1002.137 If the employee receives a disqualifying discharge or 
release from uniformed service and it is later upgraded, will 
reemployment rights be restored?
1002.138 If the employee receives a retroactive upgrade in the 
characterization of service, will that entitle him or her to claim 
back wages and benefits lost as of the date of separation from 
service?

Employer Statutory Defenses

1002.139 Are there any circumstances in which the pre-service 
employer is excused from its obligation to reemploy the employee 
following a period of uniformed service? What statutory defenses are 
available to the employer in an action or proceeding for 
reemployment benefits?
Subpart D--Rights, Benefits, and Obligations of Persons Absent from 
Employment Due to Service in the Uniformed Services

Furlough and Leave of Absence

1002.149 What is the employee's status with his or her civilian 
employer while performing service in the uniformed services?
1002.150 Which non-seniority rights and benefits is the employee 
entitled to during a period of service?
1002.151 If the employer provides full or partial pay to the 
employee while he or she is on military leave, is the employer 
required to also provide the non-seniority rights and benefits 
ordinarily granted to similarly situated employees on furlough or 
leave of absence?
1002.152 If employment is interrupted by a period of service in the 
uniformed services, are there any circumstances under which the 
employee is not entitled to the non-seniority rights and benefits 
ordinarily granted to similarly situated employees on furlough or 
leave of absence?
1002.153 If employment is interrupted by a period of service in the 
uniformed services, is the employee permitted upon request to use 
accrued vacation, annual or similar leave with pay during the 
service? Can the employer require the employee to use accrued leave 
during a period of service?

Health Plan Coverage

1002.163 What types of health plans are covered by USERRA?
1002.164 What health plan coverage must the employer provide for the 
employee under USERRA?
1002.165 How does the employee elect continuing health plan 
coverage?
1002.166 How much must the employee pay in order to continue health 
plan coverage?
1002.167 What actions may a plan administrator take if the employee 
does not elect or pay for continuing coverage in a timely manner?
1002.168 If the employee's coverage was terminated at the beginning 
of or during service, does his or her coverage have to be reinstated 
upon reemployment?
1002.169 Can the employee elect to delay reinstatement of health 
plan coverage until a date after the date he or she is reemployed?
1002.170 In a multiemployer health plan, how is liability allocated 
for employer contributions and benefits arising under USERRA's 
health plan provisions?
1002.171 How does the continuation of health plan coverage apply to 
a multiemployer plan that provides health plan coverage through a 
health benefits account system?
Subpart E--Reemployment Rights and Benefits

Prompt Reemployment

1002.180 When is an employee entitled to be reemployed by his or her 
civilian employer?
1002.181 How is ``prompt reemployment'' defined?

Reemployment Position

1002.191 What position is the employee entitled to upon 
reemployment?
1002.192 How is the specific reemployment position determined?
1002.193 Does the reemployment position include elements such as 
seniority, status, and rate of pay?
1002.194 Can the application of the escalator principle result in 
adverse consequences when the employee is reemployed?
1002.195 What other factors can determine the reemployment position?
1002.196 What is the employee's reemployment position if the period 
of service was less than 91 days?
1002.197 What is the reemployment position if the employee's period 
of service in the uniformed services was more than 90 days?
1002.198 What efforts must the employer make to help the employee 
become qualified for the reemployment position?
1002.199 What priority must the employer follow if two or more 
returning employees are entitled to reemployment in the same 
position?

Seniority Rights and Benefits

1002.210 What seniority rights does an employee have when reemployed 
following a period of uniformed service?
1002.211 Does USERRA require the employer to use a seniority system?
1002.212 How does a person know whether a particular right or 
benefit is a seniority-based right or benefit?
1002.213 How can the employee demonstrate a reasonable certainty 
that he or she would have received the seniority right or benefit if 
he or she had remained continuously employed during the period of 
service?

Disabled Employees

1002.225 Is the employee entitled to any specific reemployment 
benefits if he or she has a disability that was incurred in, or 
aggravated during, the period of service?
1002.226 If the employee has a disability that was incurred in, or 
aggravated during, the period of service, what efforts must the 
employer make to help him or her become qualified for the 
reemployment position?

Rate of Pay

1002.236 How is the employee's rate of pay determined when he or she 
returns from a period of service?

Protection Against Discharge

1002.247 Does USERRA provide the employee with protection against 
discharge?
1002.248 What constitutes cause for discharge under USERRA?

Pension Plan Benefits

1002.259 How does USERRA protect an employee's pension benefits?
1002.260 What pension benefit plans are covered under USERRA?
1002.261 Who is responsible for funding any plan obligation to 
provide the employee with pension benefits?
1002.262 When is the employer required to make the plan contribution 
that is attributable to the employee's period of uniformed service?
1002.263 Does the employee pay interest when he or she makes up 
missed contributions or elective deferrals?
1002.264 Is the employee allowed to repay a previous distribution 
from a pension benefits plan upon being reemployed?
1002.265 If the employee is reemployed with his or her pre-service 
employer, is the employee's pension benefit the same as if he or she 
had remained continuously employed?
1002.266 What are the obligations of a multiemployer pension benefit 
plan under USERRA?
1002.267 How is compensation during the period of service calculated 
in order to determine the employee's pension benefits, if benefits 
are based on compensation?
Subpart F--Compliance Assistance, Enforcement and Remedies

Compliance Assistance

1002.277 What assistance does the Department of Labor provide to 
employees and employers concerning employment, reemployment, or 
other rights and benefits under USERRA?

Investigation and Referral

1002.288 How does an individual file a USERRA complaint?
1002.289 How will VETS investigate a USERRA complaint?

[[Page 75295]]

1002.290 Does VETS have the authority to order compliance with 
USERRA?
1002.291 What actions may an individual take if the complaint is not 
resolved by VETS?
1002.292 What can the Attorney General do about the complaint?

Enforcement of Rights and Benefits Against a State or Private Employer

1002.303 Is an individual required to file his or her complaint with 
VETS?
1002.304 If an individual files a complaint with VETS and VETS' 
efforts do not resolve the complaint, can the individual pursue the 
claim on his or her own?
1002.305 What court has jurisdiction in an action against a State or 
private employer?
1002.306 Is a National Guard civilian technician considered a State 
or Federal employee for purposes of USERRA?
1002.307 What is the proper venue in an action against a State or 
private employer?
1002.308 Who has legal standing to bring an action under USERRA?
1002.309 Who is a necessary party in an action under USERRA?
1002.310 How are fees and court costs charged or taxed in an action 
under USERRA?
1002.311 Is there a statute of limitations in an action under 
USERRA?
1002.312 What remedies may be awarded for a violation of USERRA?
1002.313 Are there special damages provisions that apply to actions 
initiated in the name of the United States?
1002.314 May a court use its equity powers in an action or 
proceeding under the Act?

    Authority: Veterans Benefits Improvement Act of 2004 (VBIA) Pub. 
L. 108-454 (Dec. 10, 2004).

Subpart A--Introduction to the Regulations under the Uniformed 
Services Employment and Reemployment Rights Act of 1994

General Provisions


Sec.  1002.1  What is the purpose of this part?

    This part implements the Uniformed Services Employment and 
Reemployment Rights Act of 1994 (``USERRA'' or ``the Act''). 38 U.S.C. 
4301-4334. USERRA is a law that establishes certain rights and benefits 
for employees, and duties for employers. USERRA affects employment, 
reemployment, and retention in employment, when employees serve or have 
served in the uniformed services. There are five subparts to these 
regulations. Subpart A gives an introduction to the USERRA regulations. 
Subpart B describes USERRA's anti-discrimination and anti-retaliation 
provisions. Subpart C explains the steps that must be taken by a 
uniformed service member who wants to return to his or her previous 
civilian employment. Subpart D describes the rights, benefits, and 
obligations of persons absent from employment due to service in the 
uniformed services, including rights and obligations related to health 
plan coverage. Subpart E describes the rights, benefits, and 
obligations of the returning veteran or service member. Subpart F 
explains the role of the Department of Labor in enforcing and giving 
assistance under USERRA. These regulations implement USERRA as it 
applies to States, local governments, and private employers. Separate 
regulations published by the Federal Office of Personnel Management 
implement USERRA for Federal executive agency employers and employees.


Sec.  1002.2  Is USERRA a new law?

    USERRA is the latest in a series of laws protecting veterans' 
employment and reemployment rights going back to the Selective Training 
and Service Act of 1940. USERRA's immediate predecessor was commonly 
referred to as the Veterans' Reemployment Rights Act (VRRA), which was 
enacted as section 404 of the Vietnam Era Veterans' Readjustment 
Assistance Act of 1974. In enacting USERRA, Congress emphasized 
USERRA's continuity with the VRRA and its intention to clarify and 
strengthen that law. Congress also emphasized that Federal laws 
protecting veterans' employment and reemployment rights for the past 
fifty years had been successful and that the large body of case law 
that had developed under those statutes remained in full force and 
effect, to the extent it is consistent with USERRA. USERRA authorized 
the Department of Labor to publish regulations implementing the Act for 
State, local government, and private employers. USERRA also authorized 
the Office of Personnel Management to issue regulations implementing 
the Act for Federal executive agencies (other than some Federal 
intelligence agencies). USERRA established a separate program for 
employees of some Federal intelligence agencies.


Sec.  1002.3  When did USERRA become effective?

    USERRA became law on October 13, 1994. USERRA's reemployment 
provisions apply to members of the uniformed services seeking civilian 
reemployment on or after December 12, 1994. USERRA's anti-
discrimination and anti-retaliation provisions became effective on 
October 13, 1994.


Sec.  1002.4  What is the role of the Secretary of Labor under USERRA?

    (a) USERRA charges the Secretary of Labor (through the Veterans' 
Employment and Training Service) with providing assistance to any 
person with respect to the employment and reemployment rights and 
benefits to which such person is entitled under the Act. More 
information about the Secretary's role in providing this assistance is 
contained in Subpart F.
    (b) USERRA also authorizes the Secretary of Labor to issue 
regulations implementing the Act with respect to States, local 
governments, and private employers. These regulations are issued under 
this authority.
    (c) The Secretary of Labor delegated authority to the Assistant 
Secretary for Veterans' Employment and Training for administering the 
veterans' reemployment rights program by Secretary's Order 1-83 
(February 3, 1983) and for carrying out the functions and authority 
vested in the Secretary pursuant to USERRA by memorandum of April 22, 
2002 (67 FR 31827).


Sec.  1002.5  What definitions apply to USERRA?

    (a) Attorney General means the Attorney General of the United 
States or any person designated by the Attorney General to carry out a 
responsibility of the Attorney General under USERRA.
    (b) Benefit, benefit of employment, or rights and benefits means 
any advantage, profit, privilege, gain, status, account, or interest 
(other than wages or salary for work performed) that accrues to the 
employee because of an employment contract, employment agreement, or 
employer policy, plan, or practice. The term includes rights and 
benefits under a pension plan, health plan, or employee stock ownership 
plan, insurance coverage and awards, bonuses, severance pay, 
supplemental unemployment benefits, vacations, and the opportunity to 
select work hours or the location of employment.
    (c) Employee means any person employed by an employer. The term 
also includes any person who is a citizen, national or permanent 
resident alien of the United States who is employed in a workplace in a 
foreign country by an employer that is an entity incorporated or 
organized in the United States, or that is controlled by an entity 
organized in the United States. ``Employee'' includes the former 
employees of an employer.
    (d)(1) Employer, except as provided in paragraphs (d)(2) and (3) of 
this section, means any person, institution, organization, or other 
entity that pays salary or wages for work performed, or

[[Page 75296]]

that has control over employment opportunities, including--
    (i) A person, institution, organization, or other entity to whom 
the employer has delegated the performance of employment-related 
responsibilities, except in the case that such entity has been 
delegated functions that are purely ministerial in nature, such as 
maintenance of personnel files or the preparation of forms for 
submission to a government agency;
    (ii) The Federal Government;
    (iii) A State;
    (iv) Any successor in interest to a person, institution, 
organization, or other entity referred to in this definition; and,
    (v) A person, institution, organization, or other entity that has 
denied initial employment in violation of 38 U.S.C. 4311, USERRA's 
anti-discrimination and anti-retaliation provisions.
    (2) In the case of a National Guard technician employed under 32 
U.S.C. 709, the term ``employer'' means the adjutant general of the 
State in which the technician is employed.
    (3) An employee pension benefit plan as described in section 3(2) 
of the Employee Retirement Income Security Act of 1974 (ERISA)(29 
U.S.C. 1002(2)) is considered an employer for an individual that it 
does not actually employ only with respect to the obligation to provide 
pension benefits.
    (e) Health plan means an insurance policy, insurance contract, 
medical or hospital service agreement, membership or subscription 
contract, or other arrangement under which health services for 
individuals are provided or the expenses of such services are paid.
    (f) National Disaster Medical System (NDMS) is an agency within the 
Federal Emergency Management Agency, Department of Homeland Security, 
established by the Public Health Security and Bioterrorism Preparedness 
and Response Act of 2002, Public Law 107-188. The NDMS provides 
medical-related assistance to respond to the needs of victims of public 
health emergencies. Participants in the NDMS are volunteers who serve 
as intermittent Federal employees when activated. For purposes of 
USERRA coverage only, these persons are treated as members of the 
uniformed services when they are activated to provide assistance in 
response to a public health emergency or to be present for a short 
period of time when there is a risk of a public health emergency, or 
when they are participating in authorized training. See 42 U.S.C. 
300hh-11(e).
    (g) Notice, when the employee is required to give advance notice of 
service, means any written or verbal notification of an obligation or 
intention to perform service in the uniformed services provided to an 
employer by the employee who will perform such service, or by the 
uniformed service in which the service is to be performed.
    (h) Qualified, with respect to an employment position, means having 
the ability to perform the essential tasks of the position.
    (i) Reasonable efforts, in the case of actions required of an 
employer, means actions, including training provided by an employer 
that do not place an undue hardship on the employer.
    (j) Secretary means the Secretary of Labor or any person designated 
by the Secretary of Labor to carry out an activity under USERRA and 
these regulations, unless a different office is expressly indicated in 
the regulation.
    (k) Seniority means longevity in employment together with any 
benefits of employment that accrue with, or are determined by, 
longevity in employment.
    (l) Service in the uniformed services means the performance of duty 
on a voluntary or involuntary basis in a uniformed service under 
competent authority. 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 such duty. The term also includes a period for 
which a person is absent from employment to perform funeral honors duty 
as authorized by law (10 U.S.C. 12503 or 32 U.S.C. 115). The Public 
Health Security and Bioterrorism Preparedness and Response Act of 2002, 
Pub. L. 107-188, provides that service as an intermittent disaster-
response appointee upon activation of the National Disaster Medical 
System (NDMS) or as a participant in an authorized training program is 
deemed ``service in the uniformed services.'' 42 U.S.C. 300hh-11(e)(3).
    (m) State means each of the several States of the United States, 
the District of Columbia, the Commonwealth of Puerto Rico, Guam, the 
Virgin Islands, and other territories of the United States (including 
the agencies and political subdivisions thereof); however, for purposes 
of enforcement of rights under 38 U.S.C. 4323, a political subdivision 
of a State is a private employer.
    (n) Undue hardship, in the case of actions taken by an employer, 
means an action requiring significant difficulty or expense, when 
considered in light of--
    (1) The nature and cost of the action needed under USERRA and these 
regulations;
    (2) The overall financial resources of the facility or facilities 
involved in the provision of the action; the number of persons employed 
at such facility; the effect on expenses and resources, or the impact 
otherwise of such action upon the operation of the facility;
    (3) The overall financial resources of the employer; the overall 
size of the business of an employer with respect to the number of its 
employees; the number, type, and location of its facilities; and,
    (4) The type of operation or operations of the employer, including 
the composition, structure, and functions of the work force of such 
employer; the geographic separateness, administrative, or fiscal 
relationship of the facility or facilities in question to the employer.
    (o) Uniformed services means the Armed Forces; the Army National 
Guard and the Air National Guard when engaged in active duty for 
training, inactive duty training, or full-time National Guard duty; the 
commissioned corps of the Public Health Service; and any other category 
of persons designated by the President in time of war or national 
emergency. For purposes of USERRA coverage only, service as an 
intermittent disaster response appointee of the NDMS when federally 
activated or attending authorized training in support of their Federal 
mission is deemed ``service in the uniformed services,'' although such 
appointee is not a member of the ``uniformed services'' as defined by 
USERRA.


Sec.  1002.6  What types of service in the uniformed services are 
covered by USERRA?

    USERRA's definition of ``service in the uniformed services'' covers 
all categories of military training and service, including duty 
performed on a voluntary or involuntary basis, in time of peace or war. 
Although most often understood as applying to National Guard and 
reserve military personnel, USERRA also applies to persons serving in 
the active components of the Armed Forces. Certain types of service 
specified in 42 U.S.C. 300hh-11 by members of the National Disaster 
Medical System are covered by USERRA.


Sec.  1002.7  How does USERRA relate to other laws, public and private 
contracts, and employer practices?

    (a) USERRA establishes a floor, not a ceiling, for the employment 
and reemployment rights and benefits of

[[Page 75297]]

those it protects. In other words, 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.
    (b) USERRA supersedes any State law (including any local law or 
ordinance), contract, agreement, policy, plan, practice, or other 
matter that reduces, limits, or eliminates in any manner any right or 
benefit provided by USERRA, including the establishment of additional 
prerequisites to the exercise of any USERRA right or the receipt of any 
USERRA benefit. For example, an employment contract that determines 
seniority based only on actual days of work in the place of employment 
would be superseded by USERRA, which requires that seniority credit be 
given for periods of absence from work due to service in the uniformed 
services.
    (c) USERRA does not supersede, nullify or diminish any Federal or 
State law (including any local law or ordinance), contract, agreement, 
policy, plan, practice, or other matter that establishes an employment 
right or benefit that is more beneficial than, or is in addition to, a 
right or benefit provided under the Act. For example, although USERRA 
does not require an employer to pay an employee for time away from work 
performing service, an employer policy, plan, or practice that provides 
such a benefit is permissible under USERRA.
    (d) If an employer provides a benefit that exceeds USERRA's 
requirements in one area, it cannot reduce or limit other rights or 
benefits provided by USERRA. For example, even though USERRA does not 
require it, an employer may provide a fixed number of days of paid 
military leave per year to employees who are members of the National 
Guard or Reserve. The fact that it provides such a benefit, however, 
does not permit an employer to refuse to provide an unpaid leave of 
absence to an employee to perform service in the uniformed services in 
excess of the number of days of paid military leave.

Subpart B--Anti-Discrimination and Anti-Retaliation

Protection From Employer Discrimination and Retaliation


Sec.  1002.18  What status or activity is protected from employer 
discrimination by USERRA?

    An employer must not deny initial employment, reemployment, 
retention in employment, promotion, or any benefit of employment to an 
individual on the basis of his or her membership, application for 
membership, performance of service, application for service, or 
obligation for service in the uniformed services.


Sec.  1002.19  What activity is protected from employer retaliation by 
USERRA?

    An employer must not retaliate against an individual by taking any 
adverse employment action against him or her because the individual has 
taken an action to enforce a protection afforded any person under 
USERRA; testified or otherwise made a statement in or in connection 
with a proceeding under USERRA; assisted or participated in a USERRA 
investigation: or, exercised a right provided for by USERRA.


Sec.  1002.20  Does USERRA protect an individual who does not actually 
perform service in the uniformed services?

    Yes. Employers are prohibited from taking actions against an 
individual for any of the activities protected by the Act, whether or 
not he or she has performed service in the uniformed services.


Sec.  1002.21  Do the Act's prohibitions against discrimination and 
retaliation apply to all employment positions?

    The prohibitions against discrimination and retaliation apply to 
all covered employers (including hiring halls and potential employers, 
see sections 1002.36 and .38) and employment positions, including those 
that are for a brief, nonrecurrent period, and for which there is no 
reasonable expectation that the employment position will continue 
indefinitely or for a significant period. However, USERRA's 
reemployment rights and benefits do not apply to such brief, 
nonrecurrent positions of employment.


Sec.  1002.22  Who has the burden of proving discrimination or 
retaliation in violation of USERRA?

    The individual has the burden of proving that a status or activity 
protected by USERRA was one of the reasons that the employer took 
action against him or her, in order to establish that the action was 
discrimination or retaliation in violation of USERRA. If the individual 
succeeds in proving that the status or activity protected by USERRA was 
one of the reasons the employer took action against him or her, the 
employer has the burden to prove the affirmative defense that it would 
have taken the action anyway.


Sec.  1002.23  What must the individual show to carry the burden of 
proving that the employer discriminated or retaliated against him or 
her?

    (a) In order to prove that the employer discriminated or retaliated 
against the individual, he or she must first show that the employer's 
action was motivated by one or more of the following:
    (1) Membership or application for membership in a uniformed 
service;
    (2) Performance of service, application for service, or obligation 
for service in a uniformed service;
    (3) Action taken to enforce a protection afforded any person under 
USERRA;
    (4) Testimony or statement made in or in connection with a USERRA 
proceeding;
    (5) Assistance or participation in a USERRA investigation; or,
    (6) Exercise of a right provided for by USERRA.
    (b) If the individual proves that the employer's action was based 
on one of the prohibited motives listed in paragraph (a) of this 
section, the employer has the burden to prove the affirmative defense 
that the action would have been taken anyway absent the USERRA-
protected status or activity.

Subpart C--Eligibility For Reemployment

General Eligibility Requirements for Reemployment


Sec.  1002.32  What criteria must the employee meet to be eligible 
under USERRA for reemployment after service in the uniformed services?

    (a) In general, if the employee has been absent from a position of 
civilian employment by reason of service in the uniformed services, he 
or she will be eligible for reemployment under USERRA by meeting the 
following criteria:
    (1) The employer had advance notice of the employee's service;
    (2) The employee has five years or less of cumulative service in 
the uniformed services in his or her employment relationship with a 
particular employer;
    (3) The employee timely returns to work or applies for 
reemployment; and,
    (4) The employee has not been separated from service with a 
disqualifying discharge or under other than honorable conditions.
    (b) These general eligibility requirements have important 
qualifications and exceptions, which are described in detail in 
Sec. Sec.  1002.73 through 1002.138. If the employee meets these 
eligibility criteria, then he or she is eligible for reemployment 
unless the employer establishes one of the defenses described in Sec.  
1002.139. The employment position to which the employee is entitled is 
described in Sec. Sec.  1002.191 through 1002.199.

[[Page 75298]]

Sec.  1002.33  Does the employee have to prove that the employer 
discriminated against him or her in order to be eligible for 
reemployment?

    No. The employee is not required to prove that the employer 
discriminated against him or her because of the employee's uniformed 
service in order to be eligible for reemployment.

Coverage of Employers and Positions


Sec.  1002.34  Which employers are covered by USERRA?

    (a) USERRA applies to all public and private employers in the 
United States, regardless of size. For example, an employer with only 
one employee is covered for purposes of the Act.
    (b) USERRA applies to foreign employers doing business in the 
United States. A foreign employer that has a physical location or 
branch in the United States (including U.S. territories and 
possessions) must comply with USERRA for any of its employees who are 
employed in the United States.
    (c) An American company operating either directly or through an 
entity under its control in a foreign country must also comply with 
USERRA for all its foreign operations, unless compliance would violate 
the law of the foreign country in which the workplace is located.


Sec.  1002.35  Is a successor in interest an employer covered by 
USERRA?

    USERRA's definition of ``employer'' includes a successor in 
interest. In general, an employer is a successor in interest where 
there is a substantial continuity in operations, facilities, and 
workforce from the former employer. The determination whether an 
employer is a successor in interest must be made on a case-by-case 
basis using a multi-factor test that considers the following:
    (a) Whether there has been a substantial continuity of business 
operations from the former to the current employer;
    (b) Whether the current employer uses the same or similar 
facilities, machinery, equipment, and methods of production;
    (c) Whether there has been a substantial continuity of employees;
    (d) Whether there is a similarity of jobs and working conditions;
    (e) Whether there is a similarity of supervisors or managers; and,
    (f) Whether there is a similarity of products or services.


Sec.  1002.36  Can an employer be liable as a successor in interest if 
it was unaware that an employee may claim reemployment rights when the 
employer acquired the business?

    Yes. In order to be a successor in interest, it is not necessary 
for an employer to have notice of a potential reemployment claim at the 
time of merger, acquisition, or other form of succession.


Sec.  1002.37  Can one employee be employed in one job by more than one 
employer?

    Yes. Under USERRA, an employer includes not only the person or 
entity that pays an employee's salary or wages, but also includes a 
person or entity that has control over his or her employment 
opportunities, including a person or entity to whom an employer has 
delegated the performance of employment-related responsibilities. For 
example, if the employee is a security guard hired by a security 
company and he or she is assigned to a work site, the employee may 
report both to the security company and to the site owner. In such an 
instance, both employers share responsibility for compliance with 
USERRA. If the security company declines to assign the employee to a 
job because of a uniformed service obligation (for example, National 
Guard duties), then the security company could be in violation of the 
reemployment requirements and the anti-discrimination provisions of 
USERRA. Similarly, if the employer at the work site causes the 
employee's removal from the job position because of his or her 
uniformed service obligations, then the work site employer could be in 
violation of the reemployment requirements and the anti-discrimination 
provisions of USERRA.


Sec.  1002.38  Can a hiring hall be an employer?

    Yes. In certain occupations (for example, longshoreman, stagehand, 
construction worker), the employee may frequently work for many 
different employers. A hiring hall operated by a union or an employer 
association typically assigns the employee to the jobs. In these 
industries, it may not be unusual for the employee to work his or her 
entire career in a series of short-term job assignments. The definition 
of ``employer'' includes a person, institution, organization, or other 
entity to which the employer has delegated the performance of 
employment-related responsibilities. A hiring hall therefore is 
considered the employee's employer if the hiring and job assignment 
functions have been delegated by an employer to the hiring hall. As the 
employer, a hiring hall has reemployment responsibilities to its 
employees. USERRA's anti-discrimination and anti-retaliation provisions 
also apply to the hiring hall.


Sec.  1002.39  Are States (and their political subdivisions), the 
District of Columbia, the Commonwealth of Puerto Rico, and United 
States territories, considered employers?

    Yes. States and their political subdivisions, such as counties, 
parishes, cities, towns, villages, and school districts, are considered 
employers under USERRA. The District of Columbia, the Commonwealth of 
Puerto Rico, Guam, the Virgin Islands, and territories of the United 
States, are also considered employers under the Act.


Sec.  1002.40  Does USERRA protect against discrimination in initial 
hiring decisions?

    Yes. The Act's definition of employer includes a person, 
institution, organization, or other entity that has denied initial 
employment to an individual in violation of USERRA's anti-
discrimination provisions. An employer need not actually employ an 
individual to be his or her ``employer'' under the Act, if it has 
denied initial employment on the basis of the individual's membership, 
application for membership, performance of service, application for 
service, or obligation for service in the uniformed services. 
Similarly, the employer would be liable if it denied initial employment 
on the basis of the individual's action taken to enforce a protection 
afforded to any person under USERRA, his or her testimony or statement 
in connection with any USERRA proceeding, assistance or other 
participation in a USERRA investigation, or the exercise of any other 
right provided by the Act. For example, if the individual has been 
denied initial employment because of his or her obligations as a member 
of the National Guard or Reserves, the company or entity denying 
employment is an employer for purposes of USERRA. Similarly, if an 
entity withdraws an offer of employment because the individual is 
called upon to fulfill an obligation in the uniformed services, the 
entity withdrawing the employment offer is an employer for purposes of 
USERRA.


Sec.  1002.41  Does an employee have rights under USERRA even though he 
or she holds a temporary, part-time, probationary, or seasonal 
employment position?

    USERRA rights are not diminished because an employee holds a 
temporary, part-time, probationary, or seasonal employment position. 
However, an employer is not required to reemploy an employee if the 
employment he or she

[[Page 75299]]

left to serve in the uniformed services was for a brief, nonrecurrent 
period and there is no reasonable expectation that the employment would 
have continued indefinitely or for a significant period. The employer 
bears the burden of proving this affirmative defense.


Sec.  1002.42  What rights does an employee have under USERRA if he or 
she is on layoff, on strike, or on a leave of absence?

    (a) If an employee is laid off with recall rights, on strike, or on 
a leave of absence, he or she is an employee for purposes of USERRA. If 
the employee is on layoff and begins service in the uniformed services, 
or is laid off while performing service, he or she may be entitled to 
reemployment on return if the employer would have recalled the employee 
to employment during the period of service. Similar principles apply if 
the employee is on strike or on a leave of absence from work when he or 
she begins a period of service in the uniformed services.
    (b) If the employee is sent a recall notice during a period of 
service in the uniformed services and cannot resume the position of 
employment because of the service, he or she still remains an employee 
for purposes of the Act. Therefore, if the employee is otherwise 
eligible, he or she is entitled to reemployment following the 
conclusion of the period of service even if he or she did not respond 
to the recall notice.
    (c) If the employee is laid off before or during service in the 
uniformed services, and the employer would not have recalled him or her 
during that period of service, the employee is not entitled to 
reemployment following the period of service simply because he or she 
is a covered employee. Reemployment rights under USERRA cannot put the 
employee in a better position than if he or she had remained in the 
civilian employment position.


Sec.  1002.43  Does an individual have rights under USERRA even if he 
or she is an executive, managerial, or professional employee?

    Yes. USERRA applies to all employees. There is no exclusion for 
executive, managerial, or professional employees.


Sec.  1002.44  Does USERRA cover an independent contractor?

    (a) No. USERRA does not provide protections for an independent 
contractor.
    (b) In deciding whether an individual is an independent contractor, 
the following factors need to be considered:
    (1) The extent of the employer's right to control the manner in 
which the individual's work is to be performed;
    (2) The opportunity for profit or loss that depends upon the 
individual's managerial skill;
    (3) Any investment in equipment or materials required for the 
individual's tasks, or his or her employment of helpers;
    (4) Whether the service the individual performs requires a special 
skill;
    (5) The degree of permanence of the individual's working 
relationship; and,
    (6) Whether the service the individual performs is an integral part 
of the employer's business.
    (c) No single one of these factors is controlling, but all are 
relevant to determining whether an individual is an employee or an 
independent contractor.

Coverage of Service in the Uniformed Services


Sec.  1002.54  Are all military fitness examinations considered 
``service in the uniformed services?''

    Yes. USERRA's definition of ``service in the uniformed services'' 
includes a period for which an employee is absent from a position of 
employment for the purpose of an examination to determine his or her 
fitness to perform duty in the uniformed services. Military fitness 
examinations can address more than physical or medical fitness, and 
include evaluations for mental, educational, and other types of 
fitness. Any examination to determine an employee's fitness for service 
is covered, whether it is an initial or recurring examination. For 
example, a periodic medical examination required of a Reserve component 
member to determine fitness for continued service is covered.


Sec.  1002.55  Is all funeral honors duty considered ``service in the 
uniformed services?''

    (a) USERRA's definition of ``service in the uniformed services'' 
includes a period for which an employee is absent from employment for 
the purpose of performing authorized funeral honors duty under 10 
U.S.C. 12503 (members of Reserve ordered to perform funeral honors 
duty) or 32 U.S.C. 115 (Member of Air or Army National Guard ordered to 
perform funeral honors duty).
    (b) Funeral honors duty performed by persons who are not members of 
the uniformed services, such as members of veterans' service 
organizations, is not ``service in the uniformed services.''


Sec.  1002.56  What types of service in the National Disaster Medical 
System are considered ``service in the uniformed services?''

    Under a provision of the Public Health Security and Bioterrorism 
Preparedness and Response Act of 2002, 42 U.S.C. 300hh 11(e)(3), 
``service in the uniformed services'' includes service performed as an 
intermittent disaster-response appointee upon activation of the 
National Disaster Medical System or participation in an authorized 
training program, even if the individual is not a member of the 
uniformed services.


Sec.  1002.57  Is all service as a member of the National Guard 
considered ``service in the uniformed services?''

    The National Guard has a dual status. It is a Reserve component of 
the Army, or, in the case of the Air National Guard, of the Air Force. 
Simultaneously, it is 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.
    (a) National Guard service under Federal authority is protected by 
USERRA. Service under Federal authority includes active duty performed 
under Title 10 of the United States Code. Service under Federal 
authority also includes duty under Title 32 of the United States Code, 
such as active duty for training, inactive duty training, or full-time 
National Guard duty.
    (b) National Guard service under authority of State law is not 
protected by USERRA. However, many States have laws protecting the 
civilian job rights of National Guard members who serve under State 
orders. Enforcement of those State laws is not covered by USERRA or 
these regulations.


Sec.  1002.58  Is service in the commissioned corps of the Public 
Health Service considered ``service in the uniformed services?''

    Yes. Service in the commissioned corps of the Public Health Service 
(PHS) is ``service in the uniformed services'' under USERRA.


Sec.  1002.59  Are there any circumstances in which special categories 
of persons are considered to perform ``service in the uniformed 
services?''

    Yes. In time of war or national emergency the President has 
authority to designate any category of persons as a ``uniformed 
service'' for purposes of USERRA. If the President exercises this 
authority, service as a member of that category of persons would be 
``service in the uniformed services'' under USERRA.

[[Page 75300]]

Sec.  1002.60  Does USERRA cover an individual attending a military 
service academy?

    Yes. Attending a military service academy is considered uniformed 
service for purposes of USERRA. There are four service academies: The 
United States Military Academy (West Point, New York), the United 
States Naval Academy (Annapolis, Maryland), the United States Air Force 
Academy (Colorado Springs, Colorado), and the United States Coast Guard 
Academy (New London, Connecticut).


Sec.  1002.61  Does USERRA cover a member of the Reserve Officers 
Training Corps?

    Yes, under certain conditions.
    (a) Membership in the Reserve Officers Training Corps (ROTC) or the 
Junior ROTC is not ``service in the uniformed services.'' However, some 
Reserve and National Guard enlisted members use a college ROTC program 
as a means of qualifying for commissioned officer status. National 
Guard and Reserve members in an ROTC program may at times, while 
participating in that program, be receiving active duty and inactive 
duty training service credit with their unit. In these cases, 
participating in ROTC training sessions is considered ``service in the 
uniformed services,'' and qualifies a person for protection under 
USERRA's reemployment and anti-discrimination provisions.
    (b) Typically, an individual in a College ROTC program enters into 
an agreement with a particular military service that obligates such 
individual to either complete the ROTC program and accept a commission 
or, in case he or she does not successfully complete the ROTC program, 
to serve as an enlisted member. Although an individual does not qualify 
for reemployment protection, except as specified in (a) above, he or 
she is protected under USERRA's anti-discrimination provisions because, 
as a result of the agreement, he or she has applied to become a member 
of the uniformed services and has incurred an obligation to perform 
future service.


Sec.  1002.62  Does USERRA cover a member of the Commissioned Corps of 
the National Oceanic and Atmospheric Administration, the Civil Air 
Patrol, or the Coast Guard Auxiliary?

    No. Although the Commissioned Corps of the National Oceanic and 
Atmospheric Administration (NOAA) is a ``uniformed service'' for some 
purposes, it is not included in USERRA's definition of this term. 
Service in the Civil Air Patrol and the Coast Guard Auxiliary similarly 
is not considered ``service in the uniformed services'' for purposes of 
USERRA. Consequently, service performed in the Commissioned Corps of 
the National Oceanic and Atmospheric Administration (NOAA), the Civil 
Air Patrol, and the Coast Guard Auxiliary is not protected by USERRA.

Absence From a Position of Employment Necessitated by Reason of Service 
in the Uniformed Services


Sec.  1002.73  Does service in the uniformed services have to be an 
employee's sole reason for leaving an employment position in order to 
have USERRA reemployment rights?

    No. If absence from a position of employment is necessitated by 
service in the uniformed services, and the employee otherwise meets the 
Act's eligibility requirements, he or she has reemployment rights under 
USERRA, even if the employee uses the absence for other purposes as 
well. An employee is not required to leave the employment position for 
the sole purpose of performing service in the uniformed services. For 
example, if the employee is required to report to an out of State 
location for military training and he or she spends off-duty time 
during that assignment moonlighting as a security guard or visiting 
relatives who live in that State, the employee will not lose 
reemployment rights simply because he or she used some of the time away 
from the job to do something other than attend the military training. 
Also, if an employee receives advance notification of a mobilization 
order, and leaves his or her employment position in order to prepare 
for duty, but the mobilization is cancelled, the employee will not lose 
any reemployment rights.


Sec.  1002.74  Must the employee begin service in the uniformed 
services immediately after leaving his or her employment position in 
order to have USERRA reemployment rights?

    No. At a minimum, an employee must have enough time after leaving 
the employment position 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, additional time to rest, or 
to arrange affairs and report to duty, may be necessitated by reason of 
service in the uniformed services. The following examples help to 
explain the issue of the period of time between leaving civilian 
employment and beginning of service in the uniformed services:
    (a) If the employee performs a full overnight shift for the 
civilian employer and travels directly from the work site to perform a 
full day of uniformed service, the employee would not be considered fit 
to perform the uniformed service. An absence from that work shift is 
necessitated so that the employee can report for uniformed service fit 
for duty.
    (b) If the employee is ordered to perform an extended period of 
service in the uniformed services, he or she may require a reasonable 
period of time off from the civilian job to put his or her personal 
affairs in order, before beginning the service. Taking such time off is 
also necessitated by the uniformed service.
    (c) If the employee leaves a position of employment in order to 
enlist or otherwise perform service in the uniformed services and, 
through no fault of his or her own, the beginning date of the service 
is delayed, this delay does not terminate any reemployment rights.

Requirement of Notice


Sec.  1002.85  Must the employee give advance notice to the employer of 
his or her service in the uniformed services?

    (a) Yes. The employee, or an appropriate officer of the uniformed 
service in which his or her service is to be performed, must notify the 
employer that the employee intends to leave the employment position to 
perform service in the uniformed services, with certain exceptions 
described below. In cases in which an employee is employed by more than 
one employer, the employee, or an appropriate office of the uniformed 
service in which his or her service is to be performed, must notify 
each employer that the employee intends to leave the employment 
position to perform service in the uniformed services, with certain 
exceptions described below.
    (b) The Department of Defense USERRA regulations at 32 CFR 104.3 
provide that an ``appropriate officer'' can give notice on the 
employee's behalf. An ``appropriate officer'' is a commissioned, 
warrant, or non-commissioned officer authorized to give such notice by 
the military service concerned.
    (c) The employee's notice to the employer may be either verbal or 
written. The notice may be informal and does not need to follow any 
particular format.
    (d) 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. In regulations 
promulgated by the Department of Defense under USERRA, 32 CFR 
104.6(a)(2)(i)(B), the Defense

[[Page 75301]]

Department ``strongly recommends that advance notice to civilian 
employers be provided at least 30 days prior to departure for uniformed 
service when it is feasible to do so.''


Sec.  1002.86  When is the employee excused from giving advance notice 
of service in the uniformed services?

    The employee is required to give advance notice of pending service 
unless giving such notice is prevented by military necessity, or is 
otherwise impossible or unreasonable under all the circumstances.
    (a) Only a designated authority can make a determination of 
``military necessity,'' and such a determination is not subject to 
judicial review. Guidelines for defining ``military necessity'' appear 
in regulations issued by the Department of Defense at 32 CFR 104.3. In 
general, these regulations cover situations where a mission, operation, 
exercise or requirement is classified, or could be compromised or 
otherwise adversely affected by public knowledge. In certain cases, the 
Secretary of Homeland Security, in consultation with the Secretary of 
Defense, can make a determination that giving of notice by intermittent 
disaster-response appointees of the National Disaster Medical System is 
precluded by ``military necessity.'' See 42 U.S.C. 300hh-11(e)(3)(B).
    (b) It may be impossible or unreasonable to give advance notice 
under certain circumstances. Such circumstances may include the 
unavailability of the employee's employer or the employer's 
representative, or a requirement that the employee report for uniformed 
service in an extremely short period of time.


Sec.  1002.87  Is the employee required to get permission from his or 
her employer before leaving to perform service in the uniformed 
services?

    No. The employee is not required to ask for or get his or her 
employer's permission to leave to perform service in the uniformed 
services. The employee is only required to give the employer notice of 
pending service.


Sec.  1002.88  Is the employee required to tell his or her civilian 
employer that he or she intends to seek reemployment after completing 
uniformed service before the employee leaves to perform service in the 
uniformed services?

    No. When the employee leaves the employment position to begin a 
period of service, he or she is not required to tell the civilian 
employer that he or she intends to seek reemployment after completing 
uniformed service. Even if the employee tells the employer before 
entering or completing uniformed service that he or she does not intend 
to seek reemployment after completing the uniformed service, 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 he or she will seek 
reemployment after completing uniformed service.

Period of Service


Sec.  1002.99  Is there a limit on the total amount of service in the 
uniformed services that an employee may perform and still retain 
reemployment rights with the employer?

    Yes. In general, the employee may perform service in the uniformed 
services for a cumulative period of up to five (5) years and retain 
reemployment rights with the employer. The exceptions to this rule are 
described below.


Sec.  1002.100  Does the five-year service limit include all absences 
from an employment position that are related to service in the 
uniformed services?

    No. The five-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 five-year limit. For 
example, after the employee completes a period of service in the 
uniformed services, he or she is provided a certain amount of time, 
depending upon the length of service, to report back to work or submit 
an application for reemployment. The period between completing the 
uniformed service and reporting back to work or seeking reemployment 
does not count against the five-year limit.


Sec.  1002.101  Does the five-year service limit include periods of 
service that the employee performed when he or she worked for a 
previous employer?

    No. An employee is entitled to a leave of absence for uniformed 
service for up to five years with each employer for whom he or she 
works. When the employee takes a position with a new employer, the 
five-year period begins again regardless of how much service he or she 
performed while working in any previous employment relationship. If an 
employee is employed by more than one employer, a separate five-year 
period runs as to each employer independently, even if those employers 
share or co-determine the employee's terms and conditions of 
employment.


Sec.  1002.102  Does the five-year service limit include periods of 
service that the employee performed before USERRA was enacted?

    It depends. USERRA provides reemployment rights to which an 
employee may become entitled beginning on or after December 12, 1994, 
but any uniformed service performed before December 12, 1994, that was 
counted against the service limitations of the previous law (the 
Veterans Reemployment Rights Act), also counts against USERRA's five-
year limit.


Sec.  1002.103  Are there any types of service in the uniformed 
services that an employee can perform that do not count against 
USERRA's five-year service limit?

    (a) USERRA creates the following exceptions to the five-year limit 
on service in the uniformed services:
    (1) Service that is required beyond five years to complete an 
initial period of obligated service. Some military specialties require 
an individual to serve more than five years because of the amount of 
time or expense involved in training. If the employee works in one of 
those specialties, he or she has reemployment rights when the initial 
period of obligated service is completed;
    (2) If the employee was unable to obtain orders releasing him or 
her from service in the uniformed services before the expiration of the 
five-year period, and the inability was not the employee's fault;
    (3)(i) Service performed to fulfill periodic National Guard and 
Reserve training requirements as prescribed by 10 U.S.C. 10147 and 32 
U.S.C. 502(a) and 503; and,
    (ii) Service performed to fulfill additional training requirements 
determined and certified by a proper military authority as necessary 
for the employee's professional development, or to complete skill 
training or retraining;
    (4) Service performed in a uniformed service if he or she was 
ordered to or retained on active duty under:
    (i) 10 U.S.C. 688 (involuntary active duty by a military retiree);
    (ii) 10 U.S.C. 12301(a) (involuntary active duty in wartime);
    (iii) 10 U.S.C. 12301(g) (retention on active duty while in captive 
status);
    (iv) 10 U.S.C. 12302 (involuntary active duty during a national 
emergency for up to 24 months);
    (v) 10 U.S.C. 12304 (involuntary active duty for an operational 
mission for up to 270 days);
    (vi) 10 U.S.C. 12305 (involuntary retention on active duty of a 
critical person during time of crisis or other specific conditions);

[[Page 75302]]

    (vii) 14 U.S.C. 331 (involuntary active duty by retired Coast Guard 
officer);
    (viii) 14 U.S.C. 332 (voluntary active duty by retired Coast Guard 
officer);
    (ix) 14 U.S.C. 359 (involuntary active duty by retired Coast Guard 
enlisted member);
    (x) 14 U.S.C. 360 (voluntary active duty by retired Coast Guard 
enlisted member);
    (xi) 14 U.S.C. 367 (involuntary retention of Coast Guard enlisted 
member on active duty); and
    (xii) 14 U.S.C. 712 (involuntary active duty by Coast Guard Reserve 
member for natural or man-made disasters).
    (5) Service performed in a uniformed service if the employee was 
ordered to or retained on active duty (other than for training) under 
any provision of law because of a war or national emergency declared by 
the President or the Congress, as determined by the Secretary 
concerned;
    (6) Service performed in a uniformed service if the employee was 
ordered to active duty (other than for training) in support of an 
operational mission for which personnel have been ordered to active 
duty under 10 U.S.C. 12304, as determined by a proper military 
authority;
    (7) Service performed in a uniformed service if the employee was 
ordered to active duty in support of a critical mission or requirement 
of the uniformed services as determined by the Secretary concerned; 
and,
    (8) Service performed as a member of the National Guard if the 
employee was called to respond to an invasion, danger of invasion, 
rebellion, danger of rebellion, insurrection, or the inability of the 
President with regular forces to execute the laws of the United States.
    (b) Service performed to mitigate economic harm where the 
employee's employer is in violation of its employment or reemployment 
obligations to him or her.


Sec.  1002.104  Is the employee required to accommodate his or her 
employer's needs as to the timing, frequency or duration of service?

    No. The employee is not required to accommodate his or her 
employer's interests or concerns regarding the timing, frequency, or 
duration of uniformed service. The employer cannot refuse to reemploy 
the employee because it believes that the timing, frequency or duration 
of the service is unreasonable. However, the employer is permitted to 
bring its concerns over the timing, frequency, or duration of the 
employee's service to the attention of the appropriate military 
authority. Regulations issued by the Department of Defense at 32 CFR 
104.4 direct military authorities to provide assistance to an employer 
in addressing these types of employment issues. 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.

Application for Reemployment


Sec.  1002.115  Is the employee required to report to or submit a 
timely application for reemployment to his or her pre-service employer 
upon completing the period of service in the uniformed services?

    Yes. Upon completing service in the uniformed services, the 
employee must notify the pre-service employer of his or her intent to 
return to the employment position by either reporting to work or 
submitting a timely application for reemployment. Whether the employee 
is required to report to work or submit a timely application for 
reemployment depends upon the length of service, as follows:
    (a) Period of service less than 31 days or for a period of any 
length for the purpose of a fitness examination. If the period of 
service in the uniformed services was less than 31 days, or the 
employee was absent from a position of employment for a period of any 
length for the purpose of an examination to determine his or her 
fitness to perform service, the employee must report back to the 
employer not later than the beginning of the first full regularly-
scheduled work period on the first full calendar day following the 
completion of the period of service, and the expiration of eight hours 
after a period allowing for safe transportation from the place of that 
service to the employee's residence. For example, if the employee 
completes a period of service and travel home, arriving at ten o'clock 
in the evening, he or she cannot be required to report to the employer 
until the beginning of the next full regularly-scheduled work period 
that begins at least eight hours after arriving home, i.e., no earlier 
than six o'clock the next morning. If it is impossible or unreasonable 
for the employee to report within such time period through no fault of 
his or her own, he or she must report to the employer as soon as 
possible after the expiration of the eight-hour period.
    (b) Period of service more than 30 days but less than 181 days. If 
the employee's period of service in the uniformed services was for more 
than 30 days but less than 181 days, he or she must submit an 
application for reemployment (written or verbal) with the employer not 
later than 14 days after completing service. If it is impossible or 
unreasonable for the employee to apply within 14 days through no fault 
of his or her own, he or she must submit the application not later than 
the next full calendar day after it becomes possible to do so.
    (c) Period of service more than 180 days. If the employee's period 
of service in the uniformed services was for more than 180 days, he or 
she must submit an application for reemployment (written or verbal) not 
later than 90 days after completing service.


Sec.  1002.116  Is the time period for reporting back to an employer 
extended if the employee is hospitalized for, or convalescing from, an 
illness or injury incurred in, or aggravated during, the performance of 
service?

    Yes. If the employee is hospitalized for, or convalescing from, an 
illness or injury incurred in, or aggravated during, the performance of 
service, he or she must report to or submit an application for 
reemployment to the employer at the end of the period necessary for 
recovering from the illness or injury. This period may not exceed two 
years from the date of the completion of service, except that it must 
be extended by the minimum time necessary to accommodate circumstances 
beyond the employee's control that make reporting within the period 
impossible or unreasonable. 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.


Sec.  1002.117  Are there any consequences if the employee fails to 
report for or submit a timely application for reemployment?

    (a) If the employee fails to timely report for or apply for 
reemployment, he or she does 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.
    (b) If reporting or submitting an employment application to the 
employer is impossible or unreasonable through no fault of the 
employee, he or she 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.

[[Page 75303]]

Sec.  1002.118  Is an application for reemployment required to be in 
any particular form?

    An application for reemployment need not follow any particular 
format. The employee may apply orally or in writing. The application 
should indicate that the employee is a former employee returning from 
service in the uniformed services and that he or she seeks reemployment 
with the pre-service employer. The employee is permitted but not 
required to identify a particular reemployment position in which he or 
she is interested.


Sec.  1002.119  To whom must the employee submit the application for 
reemployment?

    The application must be submitted to the pre-service employer or to 
an agent or representative of the employer who has apparent 
responsibility for receiving employment applications. Depending upon 
the circumstances, such a person could be a personnel or human 
resources officer, or a first-line supervisor. If there has been a 
change in ownership of the employer, the application should be 
submitted to the employer's successor-in-interest.


Sec.  1002.120  If the employee seeks or obtains employment with an 
employer other than the pre-service employer before the end of the 
period within which a reemployment application must be filed, will that 
jeopardize reemployment rights with the pre-service employer?

    No. The employee has reemployment rights with the pre-service 
employer provided that he or she makes a timely reemployment 
application to that employer. The employee may seek or obtain 
employment with an employer other than the pre-service employer during 
the period of time within which a reemployment application must be 
made, without giving up reemployment rights with the pre-service 
employer. However, such alternative employment during the application 
period should not be of a type that would constitute cause for the 
employer to discipline or terminate the employee following 
reemployment. For instance, if the employer forbids employees from 
working concurrently for a direct competitor during employment, 
violation of such a policy may constitute cause for discipline or even 
termination.


Sec.  1002.121  Is the employee required to submit documentation to the 
employer in connection with the application for reemployment?

    Yes, if the period of service exceeded 30 days and if requested by 
the employer to do so. If the employee submits an application for 
reemployment after a period of service of more than 30 days, he or she 
must, upon the request of the employer, provide documentation to 
establish that:
    (a) The reemployment application is timely;
    (b) The employee has not exceeded the five-year limit on the 
duration of service (subject to the exceptions listed at Sec.  
1002.103); and,
    (c) The employee's separation or dismissal from service was not 
disqualifying.


Sec.  1002.122  Is the employer required to reemploy the employee if 
documentation establishing the employee's eligibility does not exist or 
is not readily available?

    Yes. The employer is not permitted to delay or deny reemployment by 
demanding documentation that does not exist or is not readily 
available. The employee is not liable for administrative delays in the 
issuance of military documentation. If the employee is reemployed after 
an absence from employment for more than 90 days, the employer may 
require that he or she submit the documentation establishing 
entitlement to reemployment before treating the employee as not having 
had a break in service for pension purposes. If the documentation is 
received after reemployment and it shows that the employee is not 
entitled to reemployment, the employer may terminate employment and any 
rights or benefits that the employee may have been granted.


Sec.  1002.123  What documents satisfy the requirement that the 
employee establish eligibility for reemployment after a period of 
service of more than thirty days?

    (a) Documents that satisfy the requirements of USERRA include the 
following:
    (1) DD (Department of Defense) 214 Certificate of Release or 
Discharge from Active Duty;
    (2) Copy of duty orders prepared by the facility where the orders 
were fulfilled carrying an endorsement indicating completion of the 
described service;
    (3) Letter from the commanding officer of a Personnel Support 
Activity or someone of comparable authority;
    (4) Certificate of completion from military training school;
    (5) Discharge certificate showing character of service; and,
    (6) Copy of extracts from payroll documents showing periods of 
service;
    (7) Letter from National Disaster Medical System (NDMS) Team Leader 
or Administrative Officer verifying dates and times of NDMS training or 
Federal activation.
    (b) The types of documents that are necessary to establish 
eligibility for reemployment will vary from case to case. Not all of 
these documents are available or necessary in every instance to 
establish reemployment eligibility.

Character of Service


Sec.  1002.134  What type of discharge or separation from service is 
required for an employee to be entitled to reemployment under USERRA?

    USERRA does not require any particular form of discharge or 
separation from service. However, even if the employee is otherwise 
eligible for reemployment, he or she will be disqualified if the 
characterization of service falls within one of four categories. USERRA 
requires that the employee not have received one of these types of 
discharge.


Sec.  1002.135  What types of discharge or separation from uniformed 
service will make the employee ineligible for reemployment under 
USERRA?

    Reemployment rights are terminated if the employee is:
    (a) Separated from uniformed service with a dishonorable or bad 
conduct discharge;
    (b) Separated from uniformed service under other than honorable 
conditions, as characterized by regulations of the uniformed service;
    (c) A commissioned officer dismissed as permitted under 10 U.S.C. 
1161(a) by sentence of a general court-martial; in commutation of a 
sentence of a general court-martial; or, in time of war, by order of 
the President; or,
    (d) A commissioned officer dropped from the rolls under 10 U.S.C. 
1161(b) due to absence without authority for at least three months; 
separation by reason of a sentence to confinement adjudged by a court-
martial; or, a sentence to confinement in a Federal or State 
penitentiary or correctional institution.


Sec.  1002.136  Who determines the characterization of service?

    The branch of service in which the employee performs the tour of 
duty determines the characterization of service.


Sec.  1002.137  If the employee receives a disqualifying discharge or 
release from uniformed service and it is later upgraded, will 
reemployment rights be restored?

    Yes. A military review board has the authority to prospectively or 
retroactively upgrade a disqualifying discharge or release. A 
retroactive upgrade would restore reemployment rights providing the 
employee otherwise meets the Act's eligibility criteria.

[[Page 75304]]

Sec.  1002.138  If the employee receives a retroactive upgrade in the 
characterization of service, will that entitle him or her to claim back 
wages and benefits lost as of the date of separation from service?

    No. A retroactive upgrade allows the employee to obtain 
reinstatement with the former employer, provided the employee otherwise 
meets the Act's eligibility criteria. Back pay and other benefits such 
as pension plan credits attributable to the time period between 
discharge and the retroactive upgrade are not required to be restored 
by the employer in this situation.

Employer Statutory Defenses


Sec.  1002.139  Are there any circumstances in which the pre-service 
employer is excused from its obligation to reemploy the employee 
following a period of uniformed service? What statutory defenses are 
available to the employer in an action or proceeding for reemployment 
benefits?

    (a) Even if the employee is otherwise eligible for reemployment 
benefits, the employer is not required to reemploy him or her if the 
employer establishes that its circumstances have so changed as to make 
reemployment impossible or unreasonable. For example, an employer may 
be excused from reemploying the employee where there has been an 
intervening reduction in force that would have included that employee. 
The employer may not, however, refuse to reemploy the employee on the 
basis that another employee was hired to fill the reemployment position 
during the employee's absence, even if reemployment might require the 
termination of that replacement employee;
    (b) Even if the employee is otherwise eligible for reemployment 
benefits, the employer is not required to reemploy him or her if it 
establishes that assisting the employee in becoming qualified for 
reemployment would impose an undue hardship, as defined in Sec.  
1002.5(n) and discussed in Sec.  1002.198, on the employer; or,
    (c) Even if the employee is otherwise eligible for reemployment 
benefits, the employer is not required to reemploy him or her if it 
establishes that the employment position vacated by the employee in 
order to perform service in the uniformed services was for a brief, 
nonrecurrent period and there was no reasonable expectation that the 
employment would continue indefinitely or for a significant period.
    (d) The employer defenses included in this section are affirmative 
ones, and the employer carries the burden to prove by a preponderance 
of the evidence that any one or more of these defenses is applicable.

Subpart D--Rights, Benefits, and Obligations of Persons Absent from 
Employment Due to Service in the Uniformed Services

Furlough and Leave of Absence


Sec.  1002.149  What is the employee's status with his or her civilian 
employer while performing service in the uniformed services?

    During a period of service in the uniformed services, the employee 
is deemed to be on furlough or leave of absence from the civilian 
employer. In this status, the employee is entitled to the non-seniority 
rights and benefits generally provided by the employer to other 
employees with similar seniority, status, and pay that are on furlough 
or leave of absence. Entitlement to these non-seniority rights and 
benefits is not dependent on how the employer characterizes the 
employee's status during a period of service. For example, if the 
employer characterizes the employee as ``terminated'' during the period 
of uniformed service, this characterization cannot be used to avoid 
USERRA's requirement that the employee be deemed on furlough or leave 
of absence, and therefore entitled to the non-seniority rights and 
benefits generally provided to employees on furlough or leave of 
absence.


Sec.  1002.150  Which non-seniority rights and benefits is the employee 
entitled to during a period of service?

    (a) The non-seniority rights and benefits to which an employee is 
entitled during a period of service are those 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 furlough or leave of 
absence.
    (b) If the non-seniority benefits to which employees on furlough or 
leave of absence are entitled vary according to the type of leave, the 
employee must be given the most favorable treatment accorded to any 
comparable form of leave when he or she performs service in the 
uniformed services. In order to determine whether any two types of 
leave are comparable, the duration of the leave may be the most 
significant factor to compare. For instance, a two-day funeral leave 
will not be ``comparable'' to an extended leave for service in the 
uniformed service. In addition to comparing the duration of the 
absences, other factors such as the purpose of the leave and the 
ability of the employee to choose when to take the leave should also be 
considered.
    (c) As a general matter, accrual of vacation leave is considered to 
be a non-seniority benefit that must be provided by an employer 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.


Sec.  1002.151  If the employer provides full or partial pay to the 
employee while he or she is on military leave, is the employer required 
to also provide the non-seniority rights and benefits ordinarily 
granted to similarly situated employees on furlough or leave of 
absence?

    Yes. If the employer provides additional benefits such as full or 
partial pay when the employee performs service, the employer is not 
excused from providing other rights and benefits to which the employee 
is entitled under the Act.


Sec.  1002.152  If employment is interrupted by a period of service in 
the uniformed services, are there any circumstances under which the 
employee is not entitled to the non-seniority rights and benefits 
ordinarily granted to similarly situated employees on furlough or leave 
of absence?

    If employment is interrupted by a period of service in the 
uniformed services and the employee knowingly provides written notice 
of intent not to return to the position of employment after service in 
the uniformed services, he or she is not entitled to those non-
seniority rights and benefits. The employee's written notice does not 
waive entitlement to any other rights to which he or she is entitled 
under the Act, including the right to reemployment after service.


Sec.  1002.153  If employment is interrupted by a period of service in 
the uniformed services, is the employee permitted upon request to use 
accrued vacation, annual or similar leave with pay during the service? 
Can the employer require the employee to use accrued leave during a 
period of service?

    (a) If employment is interrupted by a period of service, the 
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 his or her civilian pay. However, the employee is not 
entitled to use sick leave that accrued with the civilian employer 
during a period of service in the uniformed services, unless the 
employer

[[Page 75305]]

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.
    (b) The employer may not require the employee to use accrued 
vacation, annual, or similar leave during a period of service in the 
uniformed services.

Health Plan Coverage


Sec.  1002.163  What types of health plans are covered by USERRA?

    (a) USERRA defines a health plan to include an insurance policy or 
contract, medical or hospital service agreement, membership or 
subscription contract, or arrangement under which the employee's health 
services are provided or the expenses of those services are paid.
    (b) USERRA covers group health plans as defined in the Employee 
Retirement Income Security Act of 1974 (ERISA) at 29 U.S.C. 1191b(a). 
USERRA applies to group health plans that are subject to ERISA, and 
plans that are not subject to ERISA, such as those sponsored by State 
or local governments or religious organizations for their employees.
    (c) USERRA covers multiemployer plans maintained pursuant to one or 
more collective bargaining agreements between employers and employee 
organizations. USERRA applies to multiemployer plans as they are 
defined in ERISA at 29 U.S.C. 1002(37). USERRA contains provisions that 
apply specifically to multiemployer plans in certain situations.


Sec.  1002.164  What health plan coverage must the employer provide for 
the employee under USERRA?

    If the employee has coverage under a health plan in connection with 
his or her employment, the plan must permit the employee to elect to 
continue the coverage for a certain period of time as described below:
    (a) When the employee is performing service in the uniformed 
services, he or she is entitled to continuing coverage for himself or 
herself (and dependents if the plan offers dependent coverage) under a 
health plan provided in connection with the employment. The plan must 
allow the employee to elect to continue coverage for a period of time 
that is the lesser of:
    (1) The 24-month period beginning on the date on which the 
employee's absence for the purpose of performing service begins; or,
    (2) The period beginning on the date on which the employee's 
absence for the purpose of performing service begins, and ending on the 
date on which he or she fails to return from service or apply for a 
position of employment as provided under sections 1002.115-123 of these 
regulations.
    (b) USERRA does not require the employer to establish a health plan 
if there is no health plan coverage in connection with the employment, 
or, where there is a plan, to provide any particular type of coverage.
    (c) USERRA does not require the employer to permit the employee to 
initiate new health plan coverage at the beginning of a period of 
service if he or she did not previously have such coverage.


Sec.  1002.165  How does the employee elect continuing health plan 
coverage?

    USERRA does not specify requirements for electing continuing 
coverage. Health plan administrators may develop reasonable 
requirements addressing how continuing coverage may be elected, 
consistent with the terms of the plan and the Act's exceptions to the 
requirement that the employee give advance notice of service in the 
uniformed services. For example, the employee cannot be precluded from 
electing continuing health plan coverage under circumstances where it 
is impossible or unreasonable for him or her to make a timely election 
of coverage.


Sec.  1002.166  How much must the employee pay in order to continue 
health plan coverage?

    (a) If the employee performs service in the uniformed service for 
fewer than 31 days, he or she cannot be required to pay more than the 
regular employee share, if any, for health plan coverage.
    (b) If the employee performs service in the uniformed service for 
31 or more days, he or she may be required to pay no more than 102% of 
the full premium under the plan, which represents the employer's share 
plus the employee's share, plus 2% for administrative costs.
    (c) USERRA does not specify requirements for methods of paying for 
continuing coverage. Health plan administrators may develop reasonable 
procedures for payment, consistent with the terms of the plan.


Sec.  1002.167  What actions may a plan administrator take if the 
employee does not elect or pay for continuing coverage in a timely 
manner?

    The actions a plan administrator may take regarding the provision 
or cancellation of an employee's continuing coverage depend on whether 
the employee is excused from the requirement to give advance notice, 
whether the plan has established reasonable rules for election of 
continuation coverage, and whether the plan has established reasonable 
rules for the payment for continuation coverage.
    (a) No notice of service and no election of continuation coverage: 
If an employer provides employment-based health coverage to an employee 
who leaves employment for uniformed service without giving advance 
notice of service, the plan administrator may cancel the employee's 
health plan coverage upon the employee's departure from employment for 
uniformed service. However, in cases in which an employee's failure to 
give advance notice of service was excused under the statute because it 
was impossible, unreasonable, or precluded by military necessity, the 
plan administrator must reinstate the employee's health coverage 
retroactively upon his or her election to continue coverage and payment 
of all unpaid amounts due, and the employee must incur no 
administrative reinstatement costs. In order to qualify for an 
exception to the requirement of timely election of continuing health 
care, an employee must first be excused from giving notice of service 
under the statute.
    (b) Notice of service but no election of continuing coverage: Plan 
administrators may develop reasonable requirements addressing how 
continuing coverage may be elected. Where health plans are also covered 
under the Consolidated Omnibus Budget Reconciliation Act of 1985, 26 
U.S.C. 4980B (COBRA), it may be reasonable for a health plan 
administrator to adopt COBRA-compliant rules regarding election of 
continuing coverage, as long as those rules do not conflict with any 
provision of USERRA or this rule. If an employer provides employment-
based health coverage to an employee who leaves employment for 
uniformed service for a period of service in excess of 30 days after 
having given advance notice of service but without making an election 
regarding continuing coverage, the plan administrator may cancel the 
employee's health plan coverage upon the employee's departure from 
employment for uniformed service, but must reinstate coverage without 
the imposition of administrative reinstatement costs under the 
following conditions:
    (1) Plan administrators who have developed reasonable rules 
regarding the period within which an employee

[[Page 75306]]

may elect continuing coverage must permit retroactive reinstatement of 
uninterrupted coverage to the date of departure if the employee elects 
continuing coverage and pays all unpaid amounts due within the periods 
established by the plan;
    (2) In cases in which plan administrators have not developed rules 
regarding the period within which an employee may elect continuing 
coverage, the plan must permit retroactive reinstatement of 
uninterrupted coverage to the date of departure upon the employee's 
election and payment of all unpaid amounts at any time during the 
period established in section 1002.164(a).
    (c) Election of continuation coverage without timely payment: 
Health plan administrators may adopt reasonable rules allowing 
cancellation of coverage if timely payment is not made. Where health 
plans are covered under COBRA, it may be reasonable for a health plan 
administrator to adopt COBRA-compliant rules regarding payment for 
continuing coverage, as long as those rules do not conflict with any 
provision of USERRA or this rule.


Sec.  1002.168  If the employee's coverage was terminated at the 
beginning of or during service, does his or her coverage have to be 
reinstated upon reemployment?

    (a) If health plan coverage for the employee or a dependent was 
terminated by reason of service in the uniformed services, that 
coverage must be reinstated upon reemployment. An exclusion or waiting 
period may not be imposed in connection with the reinstatement of 
coverage upon reemployment, if an exclusion or waiting period would not 
have been imposed had coverage not been terminated by reason of such 
service.
    (b) USERRA permits a health plan to impose an exclusion or waiting 
period as to illnesses or injuries determined by the Secretary of 
Veterans Affairs to have been incurred in, or aggravated during, 
performance of service in the uniformed services. The determination 
that the employee's illness or injury was incurred in, or aggravated 
during, the performance of service may only be made by the Secretary of 
Veterans Affairs or his or her representative. Other coverage, for 
injuries or illnesses that are not service-related (or for the 
employee's dependents, if he or she has dependent coverage), must be 
reinstated subject to paragraph (a) of this section.


Sec.  1002.169  Can the employee elect to delay reinstatement of health 
plan coverage until a date after the date he or she is reemployed?

    USERRA requires the employer to reinstate health plan coverage upon 
request at reemployment. USERRA permits but does not require the 
employer to allow the employee to delay reinstatement of health plan 
coverage until a date that is later than the date of reemployment.


Sec.  1002.170  In a multiemployer health plan, how is liability 
allocated for employer contributions and benefits arising under 
USERRA's health plan provisions?

    Liability under a multiemployer plan for employer contributions and 
benefits in connection with USERRA's health plan provisions must be 
allocated either as the plan sponsor provides, or, if the sponsor does 
not provide, to the employee's last employer before his or her service. 
If the last employer is no longer functional, liability for continuing 
coverage is allocated to the health plan.


Sec.  1002.171  How does the continuation of health plan benefits apply 
to a multiemployer plan that provides health plan coverage through a 
health benefits account system?

    (a) Some employees receive health plan benefits provided pursuant 
to a multiemployer plan that utilizes a health benefits account system 
in which an employee accumulates prospective health benefit 
eligibility, also commonly referred to as ``dollar bank,'' ``credit 
bank,'' and ``hour bank'' plans. In such cases, where an employee with 
a positive health benefits account balance elects to continue the 
coverage, the employee may further elect either option below:
    (1) The employee may expend his or her health account balance 
during an absence from employment due to service in the uniformed 
services in lieu of paying for the continuation of coverage as set out 
in Sec.  1002.166. If an employee's health account balance becomes 
depleted during the applicable period provided for in Sec.  
1002.164(a), the employee must be permitted, at his or her option, to 
continue coverage pursuant to Sec.  1002.166. Upon reemployment, the 
plan must provide for immediate reinstatement of the employee as 
required by Sec.  1002.168, but may require the employee to pay the 
cost of the coverage until the employee earns the credits necessary to 
sustain continued coverage in the plan.
    (2) The employee may pay for continuation coverage as set out in 
Sec.  1002.166, in order to maintain intact his or her account balance 
as of the beginning date of the absence from employment due to service 
in the uniformed services. This option permits the employee to resume 
usage of the account balance upon reemployment.
    (b) Employers or plan administrators providing such plans should 
counsel employees of their options set out in this subsection.

Subpart E--Reemployment Rights and Benefits

Prompt Reemployment


Sec.  1002.180  When is an employee entitled to be reemployed by his or 
her civilian employer?

    The employer must promptly reemploy the employee when he or she 
returns from a period of service if the employee meets the Act's 
eligibility criteria as described in Subpart C of these regulations.


Sec.  1002.181  How is ``prompt reemployment'' defined?

    ``Prompt reemployment'' means as soon as practicable under the 
circumstances of each case. Absent unusual circumstances, reemployment 
must occur within two weeks of the employee's application for 
reemployment. For example, prompt reinstatement after a weekend 
National Guard duty generally means the next regularly scheduled 
working day. On the other hand, prompt reinstatement following several 
years of active duty may require more time, because the employer may 
have to reassign or give notice to another employee who occupied the 
returning employee's position.

Reemployment Position


Sec.  1002.191  What position is the employee entitled to upon 
reemployment?

    As a general rule, the employee is entitled to reemployment in the 
job position that he or she would have attained with reasonable 
certainty if not for the absence due to uniformed service. This 
position 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 he or she would have attained if not for 
the period of service. Depending upon the specific circumstances, the 
employer may have the option, or be required, to reemploy

[[Page 75307]]

the employee in a position other than the escalator position.


Sec.  1002.192  How is the specific reemployment position determined?

    In all cases, the starting point for determining the proper 
reemployment position is the escalator position, which is the job 
position that the employee would have attained if his or her continuous 
employment had not been interrupted due to uniformed service. Once this 
position is determined, the employer may have to consider several 
factors before determining the appropriate reemployment position in any 
particular case. Such factors may include the employee's length of 
service, qualifications, and disability, if any. The reemployment 
position may be either the escalator position; the pre-service 
position; a position comparable to the escalator or pre-service 
position; or, the nearest approximation to one of these positions.


Sec.  1002.193  Does the reemployment position include elements such as 
seniority, status, and rate of pay?

    (a) Yes. The reemployment position includes the seniority, status, 
and rate of pay that an employee would ordinarily have attained in that 
position given his or her job history, including prospects for future 
earnings and advancement. The employer must determine the seniority 
rights, status, and rate of pay as though the employee had been 
continuously employed during the period of service. The seniority 
rights, status, and pay of an employment position include those 
established (or changed) by a collective bargaining agreement, employer 
policy, or employment practice. The sources of seniority rights, 
status, and pay include agreements, policies, and practices in effect 
at the beginning of the employee's service, and any changes that may 
have occurred during the period of service. In particular, the 
employee's status in the reemployment position could include 
opportunities for advancement, general working conditions, job 
location, shift assignment, rank, responsibility, and geographical 
location.
    (b) If an opportunity for promotion, or eligibility for promotion, 
that the employee missed during service is based on a skills test or 
examination, then the employer should give him or her a reasonable 
amount of time to adjust to the employment position and then give a 
skills test or examination. No fixed amount of time for permitting 
adjustment to reemployment will be deemed reasonable in all cases. 
However, in determining a reasonable amount of time to permit an 
employee to adjust to reemployment before scheduling a makeup test or 
examination, an employer may take into account a variety of factors, 
including but not limited to the length of time the returning employee 
was absent from work, the level of difficulty of the test itself, the 
typical time necessary to prepare or study for the test, the duties and 
responsibilities of the reemployment position and the promotional 
position, and the nature and responsibilities of the service member 
while serving in the uniformed service. If the employee is successful 
on the makeup exam and, based on the results of that exam, there is a 
reasonable certainty that he or she would have been promoted, or made 
eligible for promotion, during the time that the employee served in the 
uniformed service, then 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.


Sec.  1002.194  Can the application of the escalator principle result 
in adverse consequences when the employee is reemployed?

    Yes. The Act does not prohibit lawful adverse job consequences that 
result from the employee's restoration on the seniority ladder. 
Depending on the circumstances, the escalator principle may cause an 
employee to be reemployed in a higher or lower position, laid off, or 
even terminated. For example, if an employee's seniority or job 
classification would have resulted in the employee being laid off 
during the period of service, and the layoff continued after the date 
of reemployment, reemployment would reinstate the employee to layoff 
status. Similarly, the status of the reemployment position requires the 
employer to assess what would have happened to such factors as the 
employee's opportunities for advancement, working conditions, job 
location, shift assignment, rank, responsibility, and geographical 
location, if he or she had remained continuously employed. The 
reemployment position may involve transfer to another shift or 
location, more or less strenuous working conditions, or changed 
opportunities for advancement, depending upon the application of the 
escalator principle.


Sec.  1002.195  What other factors can determine the reemployment 
position?

    Once the employee's escalator position is determined, other factors 
may allow, or require, the employer to reemploy the employee in a 
position other than the escalator position. These factors, which are 
explained in Sec. Sec.  1002.196 through 1002.199, are:
    (a) The length of the employee's most recent period of uniformed 
service;
    (b) The employee's qualifications; and,
    (c) Whether the employee has a disability incurred or aggravated 
during uniformed service.


Sec.  1002.196  What is the employee's reemployment position if the 
period of service was less than 91 days?

    Following a period of service in the uniformed services of less 
than 91 days, the employee must be reemployed according to the 
following priority:
    (a) The employee must be reemployed in the escalator position. He 
or she 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 this position.
    (b) 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 he or she was 
employed on the date that the period of service began. 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 this position.
    (c) 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, he or she 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 this position.


Sec.  1002.197  What is the reemployment position if the employee's 
period of service in the uniformed services was more than 90 days?

    Following a period of service of more than 90 days, the employee 
must be reemployed according to the following priority:
    (a) The employee must be reemployed in the escalator position or a 
position of like seniority, status, and pay. He or she 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 this position.
    (b) If the employee is not qualified to perform the duties of the 
escalator

[[Page 75308]]

position or a like position after reasonable efforts by the employer, 
the employee must be reemployed in the position in which he or she was 
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. The employer must make reasonable 
efforts to help the employee become qualified to perform the duties of 
this position.
    (c) 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, he or she 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 this position.


Sec.  1002.198  What efforts must the employer make to help the 
employee become qualified for the reemployment position?

    The employee must be qualified for the reemployment position. The 
employer must make reasonable efforts to help the employee become 
qualified to perform the duties of this position. The employer is not 
required to reemploy the employee on his or her return from service if 
he or she cannot, after reasonable efforts by the employer, qualify for 
the appropriate reemployment position.
    (a)(1) ``Qualified'' means that the employee has the ability to 
perform the essential tasks of the position. The employee's inability 
to perform one or more non-essential tasks of a position does not make 
him or her unqualified.
    (2) Whether a task is essential depends on several factors, and 
these factors include but are not limited to:
    (i) The employer's judgment as to which functions are essential;
    (ii) Written job descriptions developed before the hiring process 
begins;
    (iii) The amount of time on the job spent performing the function;
    (iv) The consequences of not requiring the individual to perform 
the function;
    (v) The terms of a collective bargaining agreement;
    (vi) The work experience of past incumbents in the job; and/or
    (vii) The current work experience of incumbents in similar jobs.
    (b) Only after the employer makes reasonable efforts, as defined in 
Sec.  1002.5(i), may it determine that the employee is not qualified 
for the reemployment position. These reasonable efforts must be made at 
no cost to the employee.


Sec.  1002.199  What priority must the employer follow if two or more 
returning employees are entitled to reemployment in the same position?

    If two or more employees are entitled to reemployment in the same 
position and more than one employee has reported or applied for 
employment in that position, the employee who first left the position 
for uniformed service has the first priority on reemployment in that 
position. The remaining employee (or employees) is entitled to be 
reemployed in a position similar to that in which the employee would 
have been reemployed according to the rules that normally determine a 
reemployment position, as set out in Sec. Sec.  1002.196 and 1002.197.

Seniority Rights and Benefits


Sec.  1002.210  What seniority rights does an employee have when 
reemployed following a period of uniformed service?

    The employee is entitled to the seniority and seniority-based 
rights and benefits that he or she had on the date the uniformed 
service began, plus any seniority and seniority-based rights and 
benefits that the employee would have attained if he or she had 
remained continuously employed. In determining entitlement to seniority 
and seniority-based rights and benefits, the period of absence from 
employment due to or necessitated by uniformed service is not 
considered a break in employment. The rights and benefits protected by 
USERRA upon reemployment include those provided by the employer and 
those required by statute. For example, under USERRA, a reemployed 
service member would be eligible for leave under the Family and Medical 
Leave Act of 1993, 29 U.S.C. 2601-2654 (FMLA), if the number of months 
and the number of hours of work for which the service member was 
employed by the civilian employer, together with the number of months 
and the number of hours of work for which the service member would have 
been employed by the civilian employer during the period of uniformed 
service, meet FMLA's eligibility requirements. In the event that a 
service member is denied FMLA leave for failing to satisfy the FMLA's 
hours of work requirement due to absence from employment necessitated 
by uniformed service, the service member may have a cause of action 
under USERRA but not under the FMLA.


Sec.  1002.211  Does USERRA require the employer to use a seniority 
system?

    No. USERRA does not require the employer to adopt a formal 
seniority system. USERRA defines seniority as longevity in employment 
together with any employment benefits that accrue with, or are 
determined by, longevity in employment. In the absence of a formal 
seniority system, such as one established through collective 
bargaining, USERRA looks to the custom and practice in the place of 
employment to determine the employee's entitlement to any employment 
benefits that accrue with, or are determined by, longevity in 
employment.


Sec.  1002.212  How does a person know whether a particular right or 
benefit is a seniority-based right or benefit?

    A seniority-based right or benefit is one that accrues with, or is 
determined by, longevity in employment. Generally, whether a right or 
benefit is seniority-based depends on three factors:
    (a) Whether the right or benefit is a reward for length of service 
rather than a form of short-term compensation for work performed;
    (b) Whether it is reasonably certain that the employee would have 
received the right or benefit if he or she had remained continuously 
employed during the period of service; and,
    (c) Whether it is the employer's actual custom or practice to 
provide or withhold the right or benefit as a reward for length of 
service. Provisions of an employment contract or policies in the 
employee handbook are not controlling if the employer's actual custom 
or practice is different from what is written in the contract or 
handbook.


Sec.  1002.213  How can the employee demonstrate a reasonable certainty 
that he or she would have received the seniority right or benefit if he 
or she had remained continuously employed during the period of service?

    A reasonable certainty is a high probability that the employee 
would have received the seniority or seniority-based right or benefit 
if he or she had been continuously employed. The employee does not have 
to establish that he or she would have received the benefit as an 
absolute certainty. The employee can demonstrate a reasonable certainty 
that he or she would have received the seniority right or benefit by 
showing that other employees with seniority similar to that which the 
employee would have had if he or she had remained continuously employed 
received the right or benefit. The employer cannot withhold the right 
or benefit based on an assumption that a

[[Page 75309]]

series of unlikely events could have prevented the employee from 
gaining the right or benefit.

Disabled Employees


Sec.  1002.225  Is the employee entitled to any specific reemployment 
benefits if he or she has a disability that was incurred in, or 
aggravated during, the period of service?

    Yes. A disabled service member is entitled, to the same extent as 
any other individual, to the escalator position he or she would have 
attained but for uniformed service. If the employee has a disability 
incurred in, or aggravated during, the period of service in the 
uniformed services, the employer must make reasonable efforts to 
accommodate that disability and to help the employee become qualified 
to perform the duties of his or her reemployment position. If the 
employee is not qualified for reemployment in the escalator position 
because of a disability after reasonable efforts by the employer to 
accommodate the disability and to help the employee to become 
qualified, the employee must be reemployed in a position according to 
the following priority. The employer must make reasonable efforts to 
accommodate the employee's disability and to help him or her to become 
qualified to perform the duties of one of these positions:
    (a) A position that is equivalent in seniority, status, and pay to 
the escalator position; or,
    (b) 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.


Sec.  1002.226  If the employee has a disability that was incurred in, 
or aggravated during, the period of service, what efforts must the 
employer make to help him or her become qualified for the reemployment 
position?

    (a) USERRA requires that the employee be qualified for the 
reemployment position regardless of any disability. The employer must 
make reasonable efforts to help the employee to become qualified to 
perform the duties of this position. The employer is not required to 
reemploy the employee on his or her return from service if he or she 
cannot, after reasonable efforts by the employer, qualify for the 
appropriate reemployment position.
    (b) ``Qualified'' has the same meaning here as in Sec.  1002.198.

Rate of Pay


Sec.  1002.236  How is the employee's rate of pay determined when he or 
she returns from a period of service?

    The employee's rate of pay is determined by applying the same 
escalator principles that are used to determine the reemployment 
position, as follows:
    (a) If the employee is reemployed in the escalator position, the 
employer must compensate him or her 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 he or she remained continuously employed 
during the period of service. In addition, 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, his or her history of merit increases, and the work and pay 
history of employees in the same or similar position. For example, if 
the employee missed a merit pay increase while performing service, but 
qualified for previous merit pay increases, then the rate of pay should 
include the merit pay increase that was missed. If the merit pay 
increase that the employee missed during service is based on a skills 
test or examination, then the employer should give the employee a 
reasonable amount of time to adjust to the reemployment position and 
then give him or her the skills test or examination. No fixed amount of 
time for permitting adjustment to reemployment will be deemed 
reasonable in all cases. However, in determining a reasonable amount of 
time to permit an employee to adjust to reemployment before scheduling 
a makeup test or examination, an employer may take into account a 
variety of factors, including but not limited to the length of time the 
returning employee was absent from work, the level of difficulty of the 
test itself, the typical time necessary to prepare or study for the 
test, the duties and responsibilities of the reemployment position and 
the promotional position, and the nature and responsibilities of the 
service member while serving in the uniformed service. 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.
    (b) If the employee is reemployed in the pre-service position or 
another position, the employer must compensate him or her at the rate 
of pay associated with the position in which he or she is reemployed. 
As 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 he or she remained continuously 
employed during the period of service.

Protection Against Discharge


Sec.  1002.247  Does USERRA provide the employee with protection 
against discharge?

    Yes. If the employee's most recent period of service in the 
uniformed services was more than 30 days, he or she must not be 
discharged except for cause--
    (a) For 180 days after the employee's date of reemployment if his 
or her most recent period of uniformed service was more than 30 days 
but less than 181 days; or,
    (b) For one year after the date of reemployment if the employee's 
most recent period of uniformed service was more than 180 days.


Sec.  1002.248  What constitutes cause for discharge under USERRA?

    The employee may be discharged for cause based either on conduct 
or, in some circumstances, because of the application of other 
legitimate nondiscriminatory reasons.
    (a) In a discharge action based on conduct, the employer bears the 
burden of proving that it is reasonable to discharge the employee for 
the conduct in question, and that he or she had notice, which was 
express or can be fairly implied, that the conduct would constitute 
cause for discharge.
    (b) If, based on the application of other legitimate 
nondiscriminatory reasons, the employee's job position is eliminated, 
or the employee is placed on layoff status, either of these situations 
would constitute cause for purposes of USERRA. The employer bears the 
burden of proving that the employee's job would have been eliminated or 
that he or she would have been laid off.

Pension Plan Benefits


Sec.  1002.259  How does USERRA protect an employee's pension benefits?

    On reemployment, the employee is treated as not having a break in 
service with the employer or employers

[[Page 75310]]

maintaining a pension plan, for purposes of participation, vesting and 
accrual of benefits, by reason of the period of absence from employment 
due to or necessitated by service in the uniformed services.
    (a) Depending on the length of the employee's period of service, he 
or she is entitled to take from one to ninety days following service 
before reporting back to work or applying for reemployment (See Sec.  
1002.115). This period of time must be treated as continuous service 
with the employer for purposes of determining participation, vesting 
and accrual of pension benefits under the plan.
    (b) If the employee is hospitalized for, or convalescing from, an 
illness or injury incurred in, or aggravated during, service, he or she 
is entitled to report to or submit an application for reemployment at 
the end of the time period necessary for him or her to recover from the 
illness or injury. This period, which may not exceed two years from the 
date the employee completed service, except in circumstances beyond his 
or her control, must be treated as continuous service with the employer 
for purposes of determining the participation, vesting and accrual of 
pension benefits under the plan.


Sec.  1002.260  What pension benefit plans are covered under USERRA?

    (a) The Employee Retirement Income Security Act of 1974 (ERISA) 
defines an employee pension benefit plan as a plan that provides 
retirement income to employees, or defers employee income to a period 
extending to or beyond the termination of employment. Any such plan 
maintained by the employer or employers is covered under USERRA. USERRA 
also covers certain pension plans not covered by ERISA, such as those 
sponsored by a State, government entity, or church for its employees.
    (b) USERRA does not cover pension benefits under the Federal Thrift 
Savings Plan; those benefits are covered under 5 U.S.C. 8432b.


Sec.  1002.261  Who is responsible for funding any plan obligation to 
provide the employee with pension benefits?

    With the exception of multiemployer plans, which have separate 
rules discussed below, the employer is liable to the pension benefit 
plan to fund any obligation of the plan to provide benefits that are 
attributable to the employee's period of service. In the case of a 
defined contribution plan, once the employee is reemployed, the 
employer must allocate the amount of its make-up contribution for the 
employee, if any; his or her make-up employee contributions, if any; 
and his or her elective deferrals, if any; in the same manner and to 
the same extent that it allocates the amounts for other employees 
during the period of service. In the case of a defined benefit plan, 
the employee's accrued benefit will be increased for the period of 
service once he or she is reemployed and, if applicable, has repaid any 
amounts previously paid to him or her from the plan and made any 
employee contributions that may be required to be made under the plan.


Sec.  1002.262  When is the employer required to make the plan 
contribution that is attributable to the employee's period of uniformed 
service?

    (a) The employer is not required to make its contribution until the 
employee is reemployed. For employer contributions to a plan in which 
the employee is not required or permitted to contribute, the employer 
must make the contribution attributable to the employee's period of 
service no later than ninety days after the date of reemployment, or 
when plan contributions are normally due for the year in which the 
service in the uniformed services was performed, whichever is later. If 
it is impossible or unreasonable for the employer to make the 
contribution within this time period, the employer must make the 
contribution as soon as practicable.
    (b) If the employee is enrolled in a contributory plan he or she is 
allowed (but not required) to make up his or her missed contributions 
or elective deferrals. These makeup contributions or elective deferrals 
must be made during a time period starting with the date of 
reemployment and continuing for up to three times the length of the 
employee's immediate past period of uniformed service, with the 
repayment period not to exceed five years. Makeup contributions or 
elective deferrals may only be made during this period and while the 
employee is employed with the post-service employer.
    (c) If the employee's plan is contributory and he or she does not 
make up his or her contributions or elective deferrals, he or she will 
not receive the employer match or the accrued benefit attributable to 
his or her contribution because the employer is required to make 
contributions that are contingent on or attributable to the employee's 
contributions or elective deferrals only to the extent that the 
employee makes up his or her payments to the plan. Any employer 
contributions that are contingent on or attributable to the employee's 
make-up contributions or elective deferrals must be made according to 
the plan's requirements for employer matching contributions.
    (d) The employee is not required to make up the full amount of 
employee contributions or elective deferrals that he or she missed 
making during the period of service. If the employee does not make up 
all of the missed contributions or elective deferrals, his or her 
pension may be less than if he or she had done so.
    (e) Any vested accrued benefit in the pension plan that the 
employee was entitled to prior to the period of uniformed service 
remains intact whether or not he or she chooses to be reemployed under 
the Act after leaving the uniformed service.
    (f) An adjustment will be made to the amount of employee 
contributions or elective deferrals the employee will be able to make 
to the pension plan for any employee contributions or elective 
deferrals he or she actually made to the plan during the period of 
service.


Sec.  1002.263  Does the employee pay interest when he or she makes up 
missed contributions or elective deferrals?

    No. The employee is not required or permitted to make up a missed 
contribution in an amount that exceeds the amount he or she would have 
been permitted or required to contribute had he or she remained 
continuously employed during the period of service.


Sec.  1002.264  Is the employee allowed to repay a previous 
distribution from a pension benefits plan upon being reemployed?

    Yes, provided the plan is a defined benefit plan. If the employee 
received a distribution of all or part of the accrued benefit from a 
defined benefit plan in connection with his or her service in the 
uniformed services before he or she became reemployed, he or she must 
be allowed to repay the withdrawn amounts when he or she is reemployed. 
The amount the employee must repay includes any interest that would 
have accrued had the monies not been withdrawn. The employee must be 
allowed to repay these amounts during a time period starting with the 
date of reemployment and continuing for up to three times the length of 
the employee's immediate past period of uniformed service, with the 
repayment period not to exceed five years (or such longer time as may 
be agreed to between the employer and the employee), provided the 
employee is employed with the post-service employer during this period.

[[Page 75311]]

Sec.  1002.265  If the employee is reemployed with his or her pre-
service employer, is the employee's pension benefit the same as if he 
or she had remained continuously employed?

    The amount of the employee's pension benefit depends on the type of 
pension plan.
    (a) In a non-contributory defined benefit plan, where the amount of 
the pension benefit is determined according to a specific formula, the 
employee's benefit will be the same as though he or she had remained 
continuously employed during the period of service.
    (b) In a contributory defined benefit plan, the employee will need 
to make up contributions in order to have the same benefit as if he or 
she had remained continuously employed during the period of service.
    (c) In a defined contribution plan, the benefit may not be the same 
as if the employee had remained continuously employed, even though the 
employee and the employer make up any contributions or elective 
deferrals attributable to the period of service, because the employee 
is not entitled to forfeitures and earnings or required to experience 
losses that accrued during the period or periods of service.


Sec.  1002.266  What are the obligations of a multiemployer pension 
benefit plan under USERRA?

    A multiemployer pension benefit plan is one to which more than one 
employer is required to contribute, and which is maintained pursuant to 
one or more collective bargaining agreements between one or more 
employee organizations and more than one employer. The Act uses ERISA's 
definition of a multiemployer plan. In addition to the provisions of 
USERRA that apply to all pension benefit plans, there are provisions 
that apply specifically to multiemployer plans, as follows:
    (a) The last employer that employed the employee before the period 
of service is responsible for making the employer contribution to the 
multiemployer plan, if the plan sponsor does not provide otherwise. If 
the last employer is no longer functional, the plan must nevertheless 
provide coverage to the employee.
    (b) An employer that contributes to a multiemployer plan and that 
reemploys the employee pursuant to USERRA must provide written notice 
of reemployment to the plan administrator within 30 days after the date 
of reemployment. The returning service member should notify the 
reemploying employer that he or she has been reemployed pursuant to 
USERRA. The 30-day period within which the reemploying employer must 
provide written notice to the multiemployer plan pursuant to this 
subsection does not begin until the employer has knowledge that the 
employee was reemployed pursuant to USERRA.
    (c) The employee is entitled to the same employer contribution 
whether he or she is reemployed by the pre-service employer or by a 
different employer contributing to the same multiemployer plan, 
provided that the pre-service employer and the post-service employer 
share a common means or practice of hiring the employee, such as common 
participation in a union hiring hall.


Sec.  1002.267  How is compensation during the period of service 
calculated in order to determine the employee's pension benefits, if 
benefits are based on compensation?

    In many pension benefit plans, the employee's compensation 
determines the amount of his or her contribution or the retirement 
benefit to which he or she is entitled.
    (a) Where the employee's rate of compensation must be calculated to 
determine pension entitlement, the calculation must be made using the 
rate of pay that the employee would have received but for the period of 
uniformed service.
    (b)(1) Where the rate of pay the employee would have received is 
not reasonably certain, such as where compensation is based on 
commissions earned, the average rate of compensation during the 12-
month period prior to the period of uniformed service must be used.
    (2) Where the rate of pay the employee would have received is not 
reasonably certain and he or she was employed for less than 12 months 
prior to the period of uniformed service, the average rate of 
compensation must be derived from this shorter period of employment 
that preceded service.

Subpart F--Compliance Assistance, Enforcement and Remedies

Compliance Assistance


Sec.  1002.277  What assistance does the Department of Labor provide to 
employees and employers concerning employment, reemployment, or other 
rights and benefits under USERRA?

    The Secretary, through the Veterans' Employment and Training 
Service (VETS), provides assistance to any person or entity with 
respect to employment and reemployment rights and benefits under 
USERRA. This assistance includes a wide range of compliance assistance 
outreach activities, such as responding to inquiries; conducting USERRA 
briefings and Webcasts; issuing news releases; and, maintaining the 
elaws USERRA Advisor (located at http://www.dol.gov/elaws/userra.htm), 

the e-VETS Resource Advisor and other web-based materials (located at 
http://www.dol.gov/vets), which are designed to increase awareness of 

the Act among affected persons, the media, and the general public. In 
providing such assistance, VETS may request the assistance of other 
Federal and State agencies, and utilize the assistance of volunteers.

Investigation and Referral


Sec.  1002.288  How does an individual file a USERRA complaint?

    If an individual is claiming entitlement to employment rights or 
benefits or reemployment rights or benefits and alleges that an 
employer has failed or refused, or is about to fail or refuse, to 
comply with the Act, the individual may file a complaint with VETS or 
initiate a private legal action in a court of law (see Sec.  1002.303). 
A complaint may be filed with VETS either in writing, using VETS Form 
1010, or electronically, using VETS Form e1010 (instructions and the 
forms can be accessed at http://www.dol.gov/elaws/vets/userra/1010.asp
). A complaint must include the name and address of the 

employer, a summary of the basis for the complaint, and a request for 
relief.


Sec.  1002.289  How will VETS investigate a USERRA complaint?

    (a) In carrying out any investigation, VETS has, at all reasonable 
times, reasonable access to and the right to interview persons with 
information relevant to the investigation. VETS also has reasonable 
access to, for purposes of examination, the right to copy and receive 
any documents of any person or employer that VETS considers relevant to 
the investigation.
    (b) VETS may require by subpoena the attendance and testimony of 
witnesses and the production of documents relating to any matter under 
investigation. In case of disobedience of or resistance to the 
subpoena, the Attorney General may, at VETS' request, apply to any 
district court of the United States in whose jurisdiction such 
disobedience or resistance occurs for an order enforcing the subpoena. 
The district courts of the United States have jurisdiction to order 
compliance with the subpoena, and to punish failure to obey a subpoena 
as a contempt of court. This paragraph does not authorize VETS to seek 
issuance of a subpoena to the legislative or judicial branches of the 
United States.

[[Page 75312]]

Sec.  1002.290  Does VETS have the authority to order compliance with 
USERRA?

    No. If VETS determines as a result of an investigation that the 
complaint is meritorious, VETS attempts to resolve the complaint by 
making reasonable efforts to ensure that any persons or entities named 
in the complaint comply with the Act.
    If VETS' efforts do not resolve the complaint, VETS notifies the 
person who submitted the complaint of:
    (a) The results of the investigation; and,
    (b) The person's right to proceed under the enforcement of rights 
provisions in 38 U.S.C. 4323 (against a State or private employer), or 
38 U.S.C. 4324 (against a Federal executive agency or the Office of 
Personnel Management (OPM)).


Sec.  1002.291  What actions may an individual take if the complaint is 
not resolved by VETS?

    If an individual receives a notification from VETS of an 
unsuccessful effort to resolve his or her complaint relating to a State 
or private employer, the individual may request that VETS refer the 
complaint to the Attorney General.


Sec.  1002.292  What can the Attorney General do about the complaint?

    (a) If the Attorney General is reasonably satisfied that an 
individual's complaint is meritorious, meaning that he or she is 
entitled to the rights or benefits sought, the Attorney General may 
appear on his or her behalf and act as the individual's attorney, and 
initiate a legal action to obtain appropriate relief.
    (b) If the Attorney General determines that the individual's 
complaint does not have merit, the Attorney General may decline to 
represent him or her.

Enforcement of Rights and Benefits Against a State or Private Employer


Sec.  1002.303  Is an individual required to file his or her complaint 
with VETS?

    No. The individual may initiate a private action for relief against 
a State or private employer if he or she decides not to apply to VETS 
for assistance.


Sec.  1002.304  If an individual files a complaint with VETS and VETS' 
efforts do not resolve the complaint, can the individual pursue the 
claim on his or her own?

    Yes. If VETS notifies an individual that it is unable to resolve 
the complaint, the individual may pursue the claim on his or her own. 
The individual may choose to be represented by private counsel whether 
or not the Attorney General decides to represent him or her as to the 
complaint.


Sec.  1002.305  What court has jurisdiction in an action against a 
State or private employer?

    (a) If an action is brought against a State or private employer by 
the Attorney General, the district courts of the United States have 
jurisdiction over the action. If the action is brought against a State 
by the Attorney General, it must be brought in the name of the United 
States as the plaintiff in the action.
    (b) If an action is brought against a State by a person, the action 
may be brought in a State court of competent jurisdiction according to 
the laws of the State.
    (c) If an action is brought against a private employer or a 
political subdivision of a State by a person, the district courts of 
the United States have jurisdiction over the action.
    (d) An action brought against a State Adjutant General, as an 
employer of a civilian National Guard technician, is considered an 
action against a State for purposes of determining which court has 
jurisdiction.


Sec.  1002.306  Is a National Guard civilian technician considered a 
State or Federal employee for purposes of USERRA?

    A National Guard civilian technician is considered a State employee 
for USERRA purposes, although he or she is considered a Federal 
employee for most other purposes.


Sec.  1002.307  What is the proper venue in an action against a State 
or private employer?

    (a) If an action is brought by the Attorney General against a 
State, the action may proceed in the United States district court for 
any district in which the State exercises any authority or carries out 
any function.
    (b) If an action is brought against a private employer, or a 
political subdivision of a State, the action may proceed in the United 
States district court for any district in which the employer maintains 
a place of business.


Sec.  1002.308  Who has legal standing to bring an action under USERRA?

    An action may be brought only by the United States or by the 
person, or representative of a person, claiming rights or benefits 
under the Act. An employer, prospective employer or other similar 
entity may not bring an action under the Act.


Sec.  1002.309  Who is a necessary party in an action under USERRA?

    In an action under USERRA only an employer or a potential employer, 
as the case may be, is a necessary party respondent. In some 
circumstances, such as where terms in a collective bargaining agreement 
need to be interpreted, the court may allow an interested party to 
intervene in the action.


Sec.  1002.310  How are fees and court costs charged or taxed in an 
action under USERRA?

    No fees or court costs may be charged or taxed against an 
individual if he or she is claiming rights under the Act. If the 
individual obtains private counsel for any action or proceeding to 
enforce a provision of the Act, and prevails, the court may award 
reasonable attorney fees, expert witness fees, and other litigation 
expenses.


Sec.  1002.311  Is there a statute of limitations in an action under 
USERRA?

    USERRA does not have a statute of limitations, and it expressly 
precludes the application of any State statute of limitations. At least 
one court, however, has held that the four-year general Federal statute 
of limitations, 28 U.S.C. 1658, applies to actions under USERRA. Rogers 
v. City of San Antonio, 2003 WL 1566502 (W.D. Texas), reversed on other 
grounds, 392 F.3d 758 (5th Cir. 2004). But see Akhdary v. City of 
Chattanooga, 2002 WL 32060140 (E.D. Tenn.). In addition, if an 
individual unreasonably delays asserting his or her rights, and that 
unreasonable delay causes prejudice to the employer, the courts have 
recognized the availability of the equitable doctrine of laches to bar 
a claim under USERRA. Accordingly, individuals asserting rights under 
USERRA should determine whether the issue of the applicability of the 
Federal statute of limitations has been resolved and, in any event, act 
promptly to preserve their rights under USERRA.


Sec.  1002.312  What remedies may be awarded for a violation of USERRA?

    In any action or proceeding the court may award relief as follows:
    (a) The court may require the employer to comply with the 
provisions of the Act;
    (b) The court may require the employer to compensate the individual 
for any loss of wages or benefits suffered by reason of the employer's 
failure to comply with the Act;
    (c) The court may require the employer to pay the individual an 
amount equal to the amount of lost wages and benefits as liquidated 
damages, if the court determines that the employer's failure to comply 
with the Act was willful. A violation shall be considered to be willful 
if the employer either knew or showed reckless disregard for whether 
its conduct was prohibited by the Act.

[[Page 75313]]

    (d) Any wages, benefits, or liquidated damages awarded under 
paragraphs (b) and (c) of this section are in addition to, and must not 
diminish, any of the other rights and benefits provided by USERRA (such 
as, for example, the right to be employed or reemployed by the 
employer).


Sec.  1002.313  Are there special damages provisions that apply to 
actions initiated in the name of the United States?

    Yes. In an action brought in the name of the United States, for 
which the relief includes compensation for lost wages, benefits, or 
liquidated damages, the compensation must be held in a special deposit 
account and must be paid, on order of the Attorney General, directly to 
the person. If the compensation is not paid to the individual because 
of the Federal Government's inability to do so within a period of three 
years, the compensation must be converted into the Treasury of the 
United States as miscellaneous receipts.


Sec.  1002.314  May a court use its equity powers in an action or 
proceeding under the Act?

    Yes. A court may use its full equity powers, including the issuance 
of temporary or permanent injunctions, temporary restraining orders, 
and contempt orders, to vindicate the rights or benefits guaranteed 
under the Act.

    Signed at Washington, DC, this 8th day of December, 2005.
Charles S. Ciccolella,
Assistant Secretary for Veterans' Employment and Training.
[FR Doc. 05-23961 Filed 12-16-05; 8:45 am]

BILLING CODE 4510-79-P