The Uniformed Services Employment and Reemployment Rights Act (USERRA) mandates that employers reinstate returning reservists to where they would have been had they not departed on military leave. In most cases, this means placing the employee in a position and at a salary level to which they likely would have progressed during the period of absence. What happens, however, when the reservist worked in a commission-only position, and lost much of his or her book of business due to the military leave?
In a case of first impression, last week, the Second Circuit Court of Appeals concluded that USERRA requires the employer to pay the returning employee a salary equivalent to prior commission earnings until he can rebuild his book of business. In Serricchio v. Wachovia Securities, LLC, the plaintiff was a financial advisor who was paid on a commission-only basis. He was called to active duty in the Reserves for a more than two-year period. During his absence, another advisor left the employer taking a number of the plaintiff's clients with him. Other accounts were assigned to other advisors during his absence, and structural changes within the company resulted in small clients being assigned to a call center
When he notified the employer of his upcoming return to work, the plaintiff was told that he would be reinstated to his prior position under a similar commission pay plan. The employer offered to provide a small draw against commissions during the initial period of employment. The plaintiff sued, alleging that he had been constructively discharged based on the employer's failure to return him to an equivalent level of income compared to what he made in commissions prior to activation. He claimed that it would take substantial time to rebuild his book of business, and that he should be paid a salary approximating his prior income during this transitional period.
The Second Circuit agreed, awarding the plaintiff back pay, and ordering the employer to reinstate the employee with a fixed salary for one year to allow him to reestablish his business base. The court interpreted USERRA's reinstatement requirement beyond merely returning the employee to the job and commission plan that he would have experienced had he not left on active duty. Instead, the law requires the employer to return the employee to the total pay prior to departure, and not just the same commission rate. In addition, this pay rate must be preserved for a period of time reasonably sufficient to allow the returning service member to reestablish his prior commission-based earnings.
Employers must understand that courts interpret USERRA to provide service members with maximum legal protections. In essence, USERRA requires employers to place employees returning from military leave in the same position they would have been had they never left, regardless of pay plans, work rules, or other aspects of the employee's pre-leave working arrangement.