Military Leave Treated Differently for Purposes of COBRA and USERRA

From the September 20, 2012 EBIA Weekly

After returning from a 15-month period of active military duty, an employee in the National Guard sued his former employer for discrimination under the Uniformed Services Employment and Reemployment Rights Act (USERRA). USERRA prohibits discrimination against employees because of their military service and provides certain reemployment rights to those returning from active duty unless the employer’s changed circumstances make reemployment impossible or unreasonable. While this employee was away on active duty, the employer sold its assets to another company and—as part of the sale—provided a list of current employees to the buyer, which agreed to make reasonable efforts to hire them. Because his name was not on the list, the employee contended that the employer had fired him due to his military service. He cited as evidence, among other things, the COBRA election notice that he received shortly after his deployment. The notice offered him the opportunity to continue coverage under COBRA due to his “termination of employment.”

The employer argued that employees on military leave—or any kind of leave—were not included on the list provided to the buyer during the asset sale because they were not considered active employees. The court agreed, citing DOL regulations under USERRA stating that an employee on active duty is “deemed to be on furlough or leave of absence.” The court also considered the use of the term “termination of employment” on the employee’s COBRA election notice and noted that “termination” for purposes of COBRA may refer to either a voluntary or involuntary separation from service and did not necessarily indicate that the employee was fired or involuntarily dismissed. The court therefore concluded that the employee had not presented sufficient evidence that he had been fired because of his military service and ruled in favor of the employer without a trial.

EBIA Comment: While this case does not directly involve health benefits, the court’s discussion of the interplay between USERRA and COBRA is interesting. Both COBRA and USERRA provide that employees on active duty must be allowed to continue their health plan coverage for a period of time (generally 18 months for COBRA and 24 months for USERRA). In addition, USERRA requires employers to reinstate health coverage that terminates during military service upon the employee’s return. This case demonstrates one of the inconsistencies between the two laws. While employees on active duty are treated for USERRA purposes as if they are on furlough or leave, the same employees may be treated as terminated for COBRA purposes. Plan sponsors and administrators, who may be experienced in COBRA administration, must also understand the additional continuation coverage obligations imposed by USERRA and how these obligations may differ from those imposed by COBRA. For more information, see EBIA’s COBRA manual at Section XXXVI (“Uniformed Services Employment and Reemployment Rights Act (USERRA)”); see also EBIA’s Group Health Plan Mandates manual at Section XVIII (“Uniformed Services Employment and Reemployment Rights Act (USERRA)”).

Contributing Editors: EBIA Staff.