Samuel F. Wright

Captain, JAGC, USN (Ret.)
Director, Service Members Law Center
(800) 809-9448, ext. 730
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Law Review 1153


Is Income Replacement Insurance Covered by USERRA?

By Captain Samuel F. Wright, JAGC, USN (Ret.)

1.2—USERRA-Discrimination Prohibited—Continuous Accumulation of Seniority-Escalator Principle—Health Insurance Reinstatement and Continuation

1.4—USERRA Enforcement

Q:  I am a volunteer ombudsman for the National Committee for Employer Support of the Guard and Reserve (ESGR), in Guam.  For many years, I have used your “Law Review” articles in my ombudsman work, to help me understand the requirements of the Uniformed Services Employment and Reemployment Rights Act (USERRA) and to help me convince employers to comply.  I have a case that brings up some issues that I don’t think you have directly answered in your column.

Let’s call the claimant “Joe Smith.”  He has worked for the XYZ Corporation, here in Guam, since 2005.  Joe was called to active duty for two years, from April 2009 to April 2011.  Joe meets the USERRA eligibility criteria as to prior notice to XYZ, not having exceeded the five-year limit, not having received a disqualifying bad discharge from the Army, and timely application for reemployment at XYZ, after release from the period of service.  Joe returned to work at XYZ in late April, but he believes that XYZ has violated USERRA with respect to his health insurance coverage.

When Joe began his job in 2005, and when he was called to the colors in 2009, XYZ had two forms of health insurance for employees.  The first insurance policy pays for the cost of health care for an employee and his or her family members, and the second policy compensates an employee for lost income, if injury or illness prevents the employee from working for an extended time. I understand such income replacement insurance is very valuable.

In January 2010, while Joe was on active duty, XYZ terminated the income replacement insurance for new employees, but employees already on the payroll were allowed to keep their insurance.  When Joe returned to work at XYZ in April 2011, the company reinstated his health insurance but refused to reinstate the income replacement insurance.

I have discussed this matter at length with “Bob Jones”, the owner and manager of XYZ.  I told him that under USERRA’s “escalator principle” Joe is entitled to be treated as if he had been continuously employed by XYZ during the two years that he was away from work for military service.  If Joe had not been called to the colors, he would have been working in January 2010, when XYZ terminated the income replacement insurance for new employees, and as an employee already on the payroll he would have been exempted from the termination of his income replacement insurance.  I have argued that treating Joe as a new employee, as of his April 2011 return to work, is inconsistent with USERRA, and that XYZ is required to reinstate Joe’s income replacement insurance, as if he had been continuously employed.

Mr. Jones argues that USERRA does not apply in Guam and that even if it does apply it does not require XYZ to reinstate Joe’s income replacement insurance.  What do you think?

A:  First, let me say definitively that USERRA applies in Guam just as it applies in Kansas.  There is a United States District Court for Guam, where USERRA and other federal statutes are enforced every day.  Judge Frances M. Tydingco-Gatewood presides.  She was appointed by the President and confirmed by the United States Senate, just like all other United States District Judges.

Section 4317(b) of USERRA [38 U.S.C. 4317(b)] gives to the returning veteran, reemployed under USERRA, the right to immediate reinstatement of a “health plan” upon return to work, with no waiting period and no exclusion of “pre-existing conditions” except for injuries and illnesses determined by the Secretary of Veterans Affairs to have been incurred or aggravated during service.  When a statute defines terms, the statutory definitions control for purposes of that statute.  Section 4303 of USERRA defines 16 terms, including the term “health plan” which is defined as follows:  “The term ‘health plan’ means an insurance policy of contract, medical or hospital service agreement, membership or subscription contract, or other arrangement under which health services for individuals are provided or the expenses of such services are paid.”  38 U.S.C. 4303(7) (emphasis supplied).

This statutory definition is very specific and limited, and it is clear that the XYZ income replacement plan is not a “health plan” under this definition. I would argue, nonetheless, that Joe is entitled to reinstatement of the income replacement insurance coverage under other subsections of USERRA, including section 4316(a) and section 4311(a).

“A person who is reemployed under this chapter is entitled to the seniority and other rights and benefits determined by seniority that the person had on the date of commencement of service in the uniformed services plus the additional seniority and rights and benefits that such person would have attained if the person had remained continuously employed.”  38 U.S.C. 4316(a) (emphasis supplied).  USERRA defines the term “seniority” as follows:  “The term ‘seniority’ means longevity in employment together with any benefits of employment which accrue with, or are determined by, seniority.”  38 U.S.C. 4303(12).

Joe must be treated like other XYZ employees who have longevity with the company that dates back prior to January 2010.  Those employees were given the opportunity to retain their income replacement insurance when that insurance was terminated for new employees in January 2010.  Denying Joe this benefit, upon his return to work in April 2011, violates section 4316(a).

“A person who is a member of, applies to be a member of, performs, has performed, applies to perform, or has an obligation to perform service in a uniformed service shall not be denied initial employment, reemployment, retention in employment, promotion, or any benefit of employment by an employer on the basis of that membership, application for membership, performance of service, application for service, or obligation.”  38 U.S.C. 4311(a) (emphasis supplied).

USERRA defines “benefit of employment” very broadly, as follows:  “The term ‘benefit,’ ‘benefit of employment,’ or ‘rights and benefits’ means any advantage, profit, privilege, gain, status, account, or interest (including wages or salary for work performed) that accrues by reason of an employment contract or agreement or an employer policy, plan, or practice and includes rights and benefits under a pension plan, a health plan, an employee stock ownership plan, insurance coverage and awards, bonuses, severance pay, supplemental unemployment benefits, vacations, and the opportunity to select work hours or location of employment.”  38 U.S.C. 4303(2) (emphasis supplied).

The income replacement insurance coverage was clearly a “benefit of employment” for USERRA purposes.  Denying Joe that benefit because of his 2009-11 active duty violates section 4311(a).