by Jane Pfeifle
An employer’s failure to include a deployed servicemember on a list of employees when it sold its assets may be a violation of the benefit provisions of the Uniformed Services Employment and Reemployment Rights Act (USERRA).
Facts
Jonathan Dorris, a floor hand for TXD Services and a member of the Arkansas National Guard, received orders that he was being mobilized in September 2007. His last day of employment at TXD was September 11. He reported for training at Fort Chaffee on October 1.
Dorris received a letter from TXD in October 2007 informing him that he was eligible for COBRA coverage. The triggering event was identified as “termination of employment.” Understandably alarmed, he called the HR department and was told that he had been terminated for not showing up for work. He asked that Joe Poe, the managing partner of TXD, contact him, but Poe never returned his call.
In February 2008, while Dorris was on active duty in Iraq, TXD sold all of its assets to Foxxe Energy Holdings, LLC. As part of the purchase contract, Foxxe agreed to make reasonable efforts to offer employment to the individuals TXD listed as employees on an addendum to the contract. TXD didn’t place Dorris’ name on the list.
Foxxe took over the company without interruption, including hiring all the workers TXD had employed. After the sale, TXD went out of business.
While Dorris was in the United States on temporary leave in August 2008, he learned that all of his friends at TXD had been hired by Foxxe and no one had made unemployment claims against TXD after the sale. The army wrote Foxxe a letter on behalf of Dorris to make it aware of his “unsettling situation” and noting that he would have been entitled to reemployment due to wrongful termination but for the company’s change in hands.
After Dorris’ deployment ended, he was ready to return to work on December 15, 2008. He contacted both TXD and Foxxe seeking employment. In April 2009, Foxxe hired him for the same position he had filled at TXD.
Dorris sued TXD, claiming (1) he didn’t quit his job but was fired while he was on active military duty and (2) TXD violated the antidiscrimination provisions of USERRA. TXD responded that it didn’t think that whether Dorris quit or was fired was relevant because it didn’t consider any employees serving a long-term military commitment to be current or active employees. As a result, it didn’t place such employees on the list of active employees when it sold its assets to Foxxe. TXD asked the court to dismiss Dorris’ claims.
Circumstances so changed?
The trial court found that TXD didn’t violate its reemployment obligation under USERRA because the company’s circumstances had so changed that reemployment was impossible or unreasonable, which is a recognized exception under the Act. However, the court initially denied TXD’s request for dismissal, finding that its failure to include Dorris’ name on the list of employees accompanying the asset sale to Foxxe could be considered discriminatory.
The trial court ultimately determined that TXD didn’t treat Dorris differently than it treated any similarly situated servicemembers and its conduct therefore wasn’t discriminatory. The court dismissed his claim, and Dorris appealed to the U.S. 8th Circuit Court of Appeals (whose rulings apply to employers in Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota).
Obligations under USERRA
The court of appeals agreed that TXD didn’t violate its duty to reemploy Dorris because it went out of business and couldn’t reemploy him. The issue then became whether TXD violated its obligations to Dorris while he was on leave by not including him on the list of employees it provided to Foxxe.
USERRA provides that “a person who is absent from a position of employment by reason of service in [the] uniformed services shall be deemed to be on leave of absence and is entitled to the rights and benefits as are generally provided by the employer to other employees who are on a leave of absence.” Accordingly, it doesn’t matter how an employer normally treats servicemembers who are deployed on active duty. USERRA requires the employer not to discriminate against employees on military leave but to treat them like other employees who take comparable nonmilitary leaves of absence.
Equal treatment standard
The next question the court considered was whether being placed on the assets list was a benefit of employment. USERRA defines “benefits” much more broadly than just vacation time or health insurance. Under the law, benefits are any advantage, profit, privilege, gain, status, account, or interest that occurs by reason of employment or is part of an employer policy, plan, or practice.
The court ruled that a reasonable jury could find that being able to seamlessly transfer from one employer to another was an advantage or benefit of employment at TXD. There was evidence that most, if not all, TXD employees were hired by Foxxe, so being on the list of assets was an advantage or benefit of employment at TXD.
The next issue was whether TXD could show that all employees on comparable nonmilitary leaves (e.g., medical or short-term disability leave) were also left off the assets list. The court reversed the dismissal of Dorris’ claim and sent it back to the trial court to allow the parties to present evidence of whether employees on nonmilitary leave were also omitted from the list. Dorris v. TXD Services, LP, Civ. No. 12-3096 (E.D. Ark., 2/27/14).
Bottom line
It isn’t every day that an employer sells all of its assets to another company, but a business may nevertheless undergo significant changes while a military servicemember is deployed. As a result, it pays to make sure you understand your USERRA obligations before you take any employment actions against an employee who’s serving in the military. Employees on active military duty are entitled to significant protections under USERRA. For example, this case makes it clear that deployed servicemembers are considered to be on leave from their jobs, not terminated.
As it happens, Dorris was only out of a job for four months. If he’s awarded any damages on his USERRA claim, they’ll be fairly low. However, if he prevails, he’ll have a significant bill for attorneys’ fees that will be the responsibility of the employer.
Jane Pfeifle is an attorney with Lynn, Jackson, Shultz & Lebrun, P.C., practicing in the firm’s Rapid City, South Dakota, office. She may be contacted at jpfeifle@lynnjackson.com.