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Employers Bear Brunt of Proof in USERRA Cases

The First U.S. Circuit Court of Appeals recently developed a new two-part test for determining discrimination based on military service under the Uniformed Services Employment and Reemployment Rights Act (USERRA). This newly created test may prove problematic for employers. To find out why, read on.

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The lineup
In 1999, Horizon Lines of Puerto Rico hired Carlos Velazquez-Garcia as a shift supervisor. In 2002, he enlisted as a reservist in the U.S. Marine Corps and spent the next six months in basic training. Velazquez-Garcia returned to his supervisory position at Horizon after completing basic training but continued to report to the Marines for monthly weekend training sessions as well as annual two-week intensive training sessions.

Horizon continued to pay Velazquez-Garcia his regular salary during his military service. When he returned from service, it made deductions from his paycheck to offset his military income for the time he had been receiving paychecks from both Horizon and the Marines.

At one time, Horizon had paid its employees in cash, but it later changed that practice and began paying them by check instead. Seeing a business opportunity, in February 2004, Velazquez-Garcia began operating a side business in which he cashed employees’ paychecks for a fee. He performed that service in Horizon’s parking lot.

In September 2004, Horizon finished recovering the portion of Velazquez-Garcia’s salary that it had overpaid while he was performing his military service. Coincidentally, the same month, one of Velazquez-Garcia’s supervisors, Roberto Batista, saw him cashing other employees’ paychecks. Batista reported it to other members of management, and Velazquez-Garcia was fired for violating the company’s code of business conduct.

Velazquez-Garcia sued, claiming he was discriminated against because of his military status in violation of USERRA. The trial court dismissed the case, but he appealed to the First Circuit.

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Defining the line
USERRA is a federal law that safeguards the employment rights and benefits of military service members. One of the Act’s purposes is to prohibit discrimination against individuals because of their military service.

On appeal, the First Circuit reversed the trial court’s decision and dismissed the case. In doing so, it found that the trial court had put too much of the burden of proof on Velazquez-Garcia. The court then created a two-pronged test for USERRA discrimination cases. The first part of the test requires an employee to make an initial showing that his military service was a motivating factor in his termination. The second part of the test requires the employer to prove that the employee’s termination would have occurred despite his military service.

The two-pronged test is clearly very different from and more difficult for employers than the familiar three-pronged McDonnell Douglas test used in other discrimination cases. In the McDonnell Douglas test, an employee must make a threshold showing of discrimination. Then, the employer must show a legitimate, nondiscriminatory reason for taking the action it did. If it can do that, then the burden shifts back to the employee, who must show that the employer’s stated reason was a pretext for discrimination.

Under the new USERRA test, however, the employee doesn’t have the burden of showing that the employer’s stated reason was a pretext. Instead, the employer now must show that its stated reason wasn’t a pretext and the termination would have occurred even if the employee hadn’t served in the military.

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The line was crossed
In applying the first part of the new two-part USERRA test, the First Circuit found that Velazquez-Garcia could show evidence that his military service was a motivating factor in his termination. The court noted that the timing of his firing was close in time to when Horizon finished recovering the salary differential he owed. In addition, his supervisors had complained about the difficulty of rescheduling his weekend shifts on the weekends he had to report for military duty, and his coworkers made jokes about him and referred to him as “G.I. Joe,” “little lead soldier,” and “Girl Scout.”

The First Circuit concluded that evidence could show that his military status was at least a motivating factor in his termination and that it was a determination for a jury to make.

In applying the second part of the USERRA test, the First Circuit found that Horizon couldn’t definitively establish that it would have fired Velazquez-Garcia regardless of his military status. Although the company claimed that he was terminated for violating its code of business conduct, the court noted that before his termination, he never received any warnings that his conduct was in violation of the code and in fact had never even received a copy of the code. The court also pointed out that the code was quite ambiguous about whether the conduct Velazquez-Garcia engaged in was in fact a violation, and other employees who had similar code violations weren’t fired.

In addition, the court thought it unlikely that Horizon had “suddenly” discovered his check-cashing business since he had been operating it for seven months in the company’s parking lot. Velazquez-Garcia v. Horizon Lines of Puerto Rico, Inc. (First Circuit, 2007).

Bottom line
This decision makes it clear that in USERRA cases, employers will need to prove that they would have made the same adverse decision regardless of the employee’s military service. In other words, you must show that your decision wasn’t a mere pretext for discrimination.

What does this mean for employers? Before you base an employment decision on a violation of a particular company policy, be sure that (1) the policy has been distributed to your employees, (2) it’s clear that the specific conduct constitutes a violation, and (3) other employees who have violated the rule also have been disciplined.

Those were factors that stacked up against Horizon and contributed to the court’s ruling against it. And when dealing with an employee who is subject to USERRA, exercise special caution: This new, more difficult test could be hard for you to pass.

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