The Uniformed Services Employment and Reemployment Rights Act (USERRA) grants reemployment rights to individuals who are returning from active military service.  Among other things, persons eligible for reemployment are entitled to accrue pension benefits they would have received had they not gone on military leave.

USERERA provides that if an employee’s pay tends to vary — for example, because he or she regularly earns overtime pay — the employer must “look back” to determine the employee’s average rate of compensation over the 12 months leading up to his or her military service, and use that figure to calculate its pension contribution.  The term “average rate of compensation” is not defined by the law.

In a recent ruling that delves into how these requirements apply, the U.S. Court of Appeals for the Sixth Circuit in Savage v. Federal Express, No. 16-5244 (6th Cir. May 10, 2017), found that the term “average rate of compensation” refers to both pay rate and hours worked.  Therefore, for reemployed individuals whose pay fluctuates because of varying work hours, the USERRA “look back” provision requires an employer to calculate its pension contributions by looking back 12 months to determine both average pay and the average number of hours worked.

A copy of the Sixth Circuit’s decision in Savage v. Federal Express is available here.

Members of the Equal Employment Advisory Council (EEAC) can read more here.