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FedEx may have violated USERRA 12-month look-back pension contribution calculation rule

By Lorene D. Park, J.D.

Because a FedEx employee’s hours varied from week to week and he often worked overtime, USERRA required FedEx to use a 12-month look-back rule to determine the proper pension contribution for his periods of military service. Finding a triable question on whether FedEx’s calculation was inconsistent with USERRA’s terms—it estimated the hours he would have worked during his leave, rather than the hours he actually worked in the prior 12 months—the Sixth Circuit reversed summary judgment on his pension benefits claim. Judge Batchelder dissented from this part of the opinion, but the panel unanimously found that the employee’s USERRA discrimination and retaliation claims failed because FedEx proved it would have fired him anyway for violating its shipping discount policy by using it in connection with his eBay sales (Savage v. Federal Express Corp. dba FedEx Express, May 10, 2017, Stranch, J.).

The employee was a Senior Aircraft Mechanic at FedEx’s Memphis hub from 2001 to September 2012. He had a strong record as an employee, earning top performance reviews and awards. He also served as a lieutenant in the U.S. Naval Reserve. FedEx, which had many service members as employees, allowed him to: take time off to fulfill his military duties; fly on cargo planes to military sites; and use FedEx computers to complete military training while at work.

Shipping discount. FedEx also let employees and their families use shipping services at a reduced rate, though the policy prohibited using it for commercial benefit unrelated to FedEx business. The policy, which was in FedEx manuals and handbooks, stated that violations could result in termination. The employee signed up for the discount, agreeing to the terms of the policy. In September 2012, FedEx revised its policy to explicitly prohibit using the discount to ship merchandise sold on eBay. The employee claimed he was not notified of the change and, on September 4, his wife used the discount for just that purpose (and they had done so in the past).

Used discount for eBay sales. FedEx routinely investigates potential abuse of shipping privileges and the employee appeared on its audit list due to his high volume of shipments (90 times between March and August). He was interviewed on September 12, 2012, and he explained that he and his wife bought saddles and other items at auctions, fixed them up, and sold them on eBay. He was suspended pending investigation.

Complaints about retirement calculation. At the time the employee suspended, it was 34 days after his most recent military service and less than a month after he had complained to the FedEx Retirement Center, to his manager, and to human resources that his retirement benefits were not properly calculated. Other service members had also complained that FedEx incorrectly credited retirement accounts due to their military service.

Termination. Ultimately, the investigator—who testified she did not know of the employee’s military service or complaints—reported to HR that the employee violated the shipping policy. He was fired on September 20 and his internal appeal was unsuccessful. He filed a complaint with the Department of Labor Veterans’ Training Service, and during the DOL’s investigation, FedEx discovered that due to the manner in which the employee’s information was entered into the system, “imputed earnings for certain short-term leaves were not captured for pension purposes.” FedEx recalculated his earnings, but because his rate of pay was not reasonably certain due to shift differentials, overtime, and premium license pay, FedEx used a “12-month look-back methodology” to estimate his compensation. According to the employee, FedEx still did not get it right because its method did not accurately capture potential overtime.

He sued under USERRA, alleging discrimination and retaliation, as well as a violation of the pension provision. The district court granted summary judgment for FedEx and he appealed.

USERRA discrimination and retaliation claims. Affirming summary judgment against the discrimination and retaliation claims, the Sixth Circuit found that while the employee made out a prima facie case, FedEx showed it would have fired him absent discrimination or retaliation. As to the prima facie case, the temporal proximity between the employee’s protected activity and his suspension (33 days) or termination (41 days) raised an inference of causation. There was also some evidence of hostility to service members based on a policy refusing to allow those on military service to bid on future shifts (that policy was changed after the employee complained), and based on the errors in making pension contributions. In addition, there was evidence the employee was punished more harshly than others who engaged in comparable conduct.

That said, the appeals court found that the employee’s evidence did not cast doubt on the actual investigation into his policy violation. His name appeared on an auto-generated list of high volume shippers and the investigator who interviewed him and concluded that he had repeatedly violated the shipping policy had no prior knowledge of his military service. While the HR advisor knew of his service and his pension calculation complaints, the evidence did not suggest a discriminatory motive on this individual’s part, nor any other individual at FedEx. Summary judgment was therefore appropriate on his discrimination and retaliation claims.

USERRA pension denial claim remanded. The employee also claimed that FedEx violated Section 4318 of USERRA, which requires employers to make pension contributions to employees serving in the military to ensure they receive the same benefits as if they had been continuously employed. When the rate of contribution is “not reasonably certain,” such as for employees who earn overtime or commissions, USERRA has a 12-month look-back rule to determine the proper pension contribution. The rule requires that the employer calculate compensation during military leave based on the “employee’s average rate of compensation during the 12-month period immediately preceding” military service.

Here, the employee’s hours varied from week to week and he frequently worked overtime so it was undisputed that his hours were not reasonably certain. According to the employee, FedEx did not use the correct look-back formula because its calculations relied on hours that FedEx estimated he would have worked during his leave, rather than the hours he actually worked during the 12 month look-back period preceding his military service. On these facts, the appeals court agreed that FedEx’s calculations may be inconsistent with the terms of USERRA. Because there was a genuine dispute of material fact, the claim was remanded for further proceedings.

Partial dissent. Judge Batchelder concurred with respect to the discrimination and retaliation claims but dissented as to the pension calculation claim, finding that the employee failed to demonstrate that FedEx’s method of calculating his “average rate of compensation” violated USERRA. While FedEx might have calculated the employee’s pension benefits in a way to provide him a larger gain, that did not mean FedEx failed to properly calculate his benefits.