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Failure to Follow Supplemental Pay Policy Violates USERRA

    Client Alerts
  • April 04, 2008

The Uniformed Services Employment and Reemployment Rights Act (USERRA) does not require employers to provide paid leave to employees serving in the armed forces.  However, a number of employers provide some supplement to make up the difference between military pay and the employee’s regular salary.  Last month, the Sixth Circuit Court of Appeals punished an employer that failed to follow its own policy regarding supplemental pay.

In Koehler v. PepsiAmericas, Inc. (unpublished), a route driver was called away for service in the Army Reserves.  Pepsi’s policy stated that the company would bridge the gap between Army pay and the driver’s regular wages.  However, the employee was later informed that the employer “changed its mind” about the supplemental pay, and actually withdrew the direct deposit from his bank account.  He sued, alleging violation of ERISA.

The Sixth Circuit agreed, finding a willful USERRA violation.  It affirmed double damages, attorneys fees, and liquidated damages under a state law conversion theory.  Even though the supplemental pay was voluntary, once the employer made the promise to pay through its policy, failure to live up to that promise violated USERRA’s antidiscrimination requirements.

The employer’s actions in this case appear to have been particularly egregious.  However, this decision may serve as a deterrent to employers who otherwise would be inclined to assist employees with financial hardships caused by military service.  Employers that adopt such supplemental pay policies should understand that they become legally binding obligations.  When putting the policy in place, employers may want to consider caps or other limits intended to make sure that the financial obligation does not exceed the employer’s expectations.