Uniformed Services Employment and Reemployment Rights Act of 1994, As Amended, 75246-75313 [05-23961]

Agencies

• DEPARTMENT OF LABOR
• Veterans' Employment and Training Service
• Veterans Employment and Training Service

[Federal Register Volume 70, Number 242 (Monday, December 19, 2005)]
[Rules and Regulations]
[Pages 75246-75313]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-23961]



[[Page 75245]]

-----------------------------------------------------------------------

Part II





Department of Labor





-----------------------------------------------------------------------



Veterans' Employment and Training Service



-----------------------------------------------------------------------



20 CFR Part 1002



Uniformed Services Employment and Reemployment Rights Act of 1994; 
Final Rules

Federal Register / Vol. 70, No. 242 / Monday, December 19, 2005 / 
Rules and Regulations

[[Page 75246]]


-----------------------------------------------------------------------

DEPARTMENT OF LABOR

Veterans' Employment and Training Service

20 CFR Part 1002

[Docket No. VETS-U-04]
RIN 1293-AA09


Uniformed Services Employment and Reemployment Rights Act of 
1994, As Amended

AGENCY: Veterans' Employment and Training Service, Department of Labor.

ACTION: Final rules.

-----------------------------------------------------------------------

SUMMARY: The Veterans' Employment and Training Service (``VETS'' or 
``the Agency'') issued proposed rules implementing the Uniformed 
Services Employment and Reemployment Rights Act of 1994, as amended 
(USERRA). This document sets forth the Agency's review of and response 
to comments on the proposal and any changes made in response to those 
comments.
    Congress enacted USERRA to protect the rights of persons who 
voluntarily or involuntarily leave employment positions to undertake 
military service. USERRA authorizes the Secretary of Labor (in 
consultation with the Secretary of Defense) to prescribe rules 
implementing the law as it applies to States, local governments, and 
private employers. VETS proposed rules under that authority in order to 
provide guidance to employers and employees concerning their rights and 
obligations under USERRA. The Agency invited written comments on these 
proposed rules, and any specific issues related to the proposal, from 
members of the public.

DATES: Effective Date: This rule will be effective on January 18, 2006.

FOR FURTHER INFORMATION CONTACT: Robert Wilson, Chief, Investigations 
and Compliance Division, Veterans' Employment and Training Service, 
U.S. Department of Labor, 200 Constitution Avenue, NW., Room S-1312, 
Washington, DC 20210, Wilson.Robert@dol.gov, (202) 693-4719 (this is 
not a toll-free number).
    For press inquiries, contact Michael Biddle, Office of Public 
Affairs, U.S. Department of Labor, 200 Constitution Avenue, NW., Room 
S-1032, Washington, DC 20210, Biddle.Michael@dol.gov, (202) 693-5051 
(this is not a toll-free number).

SUPPLEMENTARY INFORMATION:

I. Background

    On September 20, 2004, the Department of Labor (``the Department'') 
issued proposed regulations to implement the Uniformed Services 
Employment and Reemployment Rights Act of 1994, as amended (USERRA), 38 
U.S.C. 4301-4334. The Department invited written comments on the 
proposed regulations from interested parties. The Department also 
invited public comment on specific issues. The written comment period 
closed on November 19, 2004, and the Department has considered all 
timely comments received in response to the proposed regulations.
    The Department received 80 timely comments from a wide variety of 
sources. Commenters included: a member of Congress; service members and 
veterans; organizations representing human resource professionals and 
employee benefits providers; law firms; individual employers and 
employer associations; individual employees and employee 
representatives; and members of the interested public. The comments 
were composed of well over 300 individual queries or concerns addressed 
to approximately 200 specific topics set out in the Department's notice 
of proposed rulemaking. While a few of the comments were generalized 
plaudits or individualized complaints, the great majority of comments 
specifically addressed issues contained in the Department's proposed 
rule. The Department recognizes and appreciates the value of comments, 
ideas, and suggestions from members of the uniformed services, 
employers, industry associations, labor organizations and other parties 
who have an interest in uniformed service members' and veterans' 
employment and reemployment rights and benefits.
    Following the publication of the NPRM, the Department issued an 
interim final rule, Notice of Rights and Duties Under the Uniformed 
Services Employment and Reemployment Act, 70 FR 12106 (March 10, 2005), 
to comply with an amendment made to USERRA by the Veterans Benefits 
Improvement Act of 2004 (VBIA), Public Law 108-454 (Dec. 10, 2004). In 
part, the VBIA imposed a new requirement that ``Each employer shall 
provide to persons entitled to rights and benefits under [USERRA] a 
notice of the rights, benefits, and obligations of such persons and 
such employers under [USERRA].'' 38 U.S.C. 4334(a). The VBIA required 
the Secretary of Labor to make available to employers the text of the 
required notice, 38 U.S.C. 4334(b), and the Department's publication of 
the interim final rule set forth such text as an appendix to these 
USERRA regulations.

II. Statutory Authority

    Section 4331 of USERRA authorizes the Secretary of Labor (in 
consultation with the Secretary of Defense) to prescribe regulations 
implementing the law as it applies to States, local governments, and 
private employers. 38 U.S.C. 4331(a). The Department has consulted with 
the Department of Defense, and issues these regulations under that 
authority in order to provide guidance to employers and employees 
concerning the rights and obligations of both under USERRA.

III. Prior Laws and Interpretation

    USERRA was enacted in part to clarify prior laws relating to the 
reemployment rights of service members, rights that were first 
contained in the Selective Training and Service Act of 1940, 54 Stat. 
885, 50 U.S.C. 301, et seq. USERRA's immediate predecessor was the 
Vietnam Era Veterans' Readjustment Assistance Act of 1974, 38 U.S.C. 
2021-2027 (later recodified at 38 U.S.C. 4301-4307 and commonly 
referred to as the Veterans' Reemployment Rights Act ``VRRA''), which 
was amended and recodified as USERRA.
    In construing USERRA and these prior laws, courts have followed the 
Supreme Court's admonition that:

    This legislation is to be liberally construed for the benefit of 
those who left private life to serve their country in its hour of 
great need. * * * And no practice of employers or agreements between 
employers and unions can cut down the service adjustment benefits 
which Congress has secured the veteran under the Act.

See Fishgold v. Sullivan Drydock and Repair Corp., 328 U.S. 275, 285 
(1946), cited in Alabama Power Co. v. Davis, 431 U.S. 581, 584-85 
(1977); King v. St. Vincent's Hosp., 502 U.S. 215, 221 n.9 (1991). The 
Department intends that this interpretive maxim apply with full force 
and effect in construing USERRA and these regulations.
    This preamble also selectively refers to many other cases decided 
under USERRA and its predecessor statutes, to explain and illustrate 
the rights and benefits established under the Act. The failure to cite 
or refer to a particular court decision in this preamble is not 
intended to indicate the Department's approval or disapproval of the 
reasoning or holding of that case.

IV. Plain Language

    The Department wrote the proposed rule in the more personal style 
advocated by the Presidential Memorandum on Plain Language. ``Plain 
language'' encourages the use of:

[[Page 75247]]

     Personal pronouns (we and you);
     Sentences in the active voice; and,
     A greater use of headings, lists, and questions.
    The Department received three comments regarding its use of 
``you,'' ``I,'' and ``my'' to refer to employees, whom the Department 
viewed as the primary beneficiaries of USERRA rights and benefits. 
These commenters appreciated the use of plain language and the use of 
question and answer format, but expressed a preference for the use of 
third person pronouns so that both employers and employees are included 
as the audience of the rule. In response, the Department has revised 
the pronoun usage in the final rule, and has employed third person 
pronouns to refer to the rights and obligations of both employers and 
employees.
    In addition, one of these commenters recommended the Department use 
a more formal style when addressing complex topics such as health and 
pension plan rights and obligations. In response, the Department has 
adopted the use of more technical guidance on these matters without 
unduly sacrificing clarity.

V. Section-by-Section Summary of the Final Rule and Discussion of 
Comments

    This preamble sets out the Department's interpretation of USERRA, 
section by section. The preamble generally follows the outline of the 
rule, which in turn follows the outline of USERRA. Within each section 
of the preamble, the Department has noted and responded to those 
comments that are addressed to that particular section of the rule. 
Before setting out the section-by-section analysis, however, the 
Department will first acknowledge and respond to comments that did not 
easily fit into this organizational scheme.

A. General Comments

    The Department received a number of general comments from members 
of the public expressing gratitude to the Department for the long-
awaited USERRA regulations. In particular, Rep. John Boehner, Chairman 
of the U.S. House of Representatives Committee on Education and the 
Workforce, commended the Department for ``undertaking this most 
important endeavor.''
    Conversely, the Department received a few comments from individuals 
complaining about their specific USERRA claims. The Department also 
received several comments offering assistance with grammar and 
punctuation. In all cases--the plaudits, the complaints, and the offers 
of assistance-- the Department acknowledges and appreciates the 
thorough and thoughtful comments.
    The Department also received several comments requesting that 
particular text cross-reference other text or make reference to related 
text elsewhere in the rule. As a general matter of style, the 
Department views such cross-references as cumbersome and ultimately 
detrimental to the clarity of the text and, with few exceptions, has 
declined to make such revisions.
    Finally, the Department received several comments asking about the 
application of these regulations to the Federal Government when it is 
acting as an employer. The Federal Office of Personnel Management has 
issued a separate body of regulations that govern the USERRA rights of 
Federal employees. See 5 CFR part 353.

B. Compliance With USERRA and Compliance With the Internal Revenue Code

    The Department received a number of comments from individuals and 
employers seeking guidance on compliance with USERRA in those cases in 
which the commenters perceived a conflict between USERRA's mandates and 
the mandates of the Internal Revenue Code (IRC). These comments arose 
primarily with regard to the health and pension plan provisions of the 
rule, and suggested that in some cases compliance with USERRA may cause 
the plan to be out of compliance with the IRC. See Subparts D and E. 
The Department can provide guidance only with regard to the 
requirements of USERRA. However, the Internal Revenue Service (IRS) and 
the Department of the Treasury have indicated that a health or pension 
plan will be deemed not to be in conflict with the applicable IRC 
requirements merely because of compliance with USERRA or its 
regulations.

C. Comments Addressing the National Disaster Medical System

    The Department received several comments from an attorney employed 
by the Federal Emergency Management Agency (FEMA) regarding the rule's 
treatment of the National Disaster Medical System (NDMS). The NDMS is a 
section within the U.S. Department of Homeland Security, and supports 
Federal agencies in the management and coordination of the Federal 
medical response to major emergencies and Federally declared disasters. 
The NDMS is composed primarily of teams of professional and para-
professional volunteers, who may be activated for training or in 
response to public health emergencies. NDMS volunteers who are 
activated are considered to be serving in the uniformed services for 
the purposes of USERRA. 42 U.S.C. 300hh-11(e)(3).
    The FEMA commenter suggests several instances in which the 
Department should clarify the coverage of members of the NDMS under 
USERRA. The Department agrees with a number of these suggestions, and 
rejects others, as follows:
    1. The commenter recommends that section 1002.2, which provides 
background and historical information on USERRA, include the statutory 
reference, 42 U.S.C. 300hh-11(e)(3), that provides USERRA coverage to 
members of the NDMS. The Department declines this suggestion, because 
this section of the rule is intended as a general discussion, and 
contains no mention of any statutory provisions that have directly or 
indirectly amended USERRA. However, the Department will take the 
opportunity to highlight the NDMS coverage issues elsewhere in this 
final rule.
    2. The commenter recommends that the Department include a 
description of the NDMS in section 1002.5, which contains a number of 
definitions that are considered helpful in understanding USERRA. The 
Department has adopted this proposal. See 1002.5(f).
    3. The commenter recommends a style change in NPRM section 
1002.5(k), which has been incorporated. See 1002.5(l).
    4. The commenter suggests that the Department include in NPRM 
section 1002.5 that NDMS appointees are considered members of the 
uniformed services when Federally activated or attending authorized 
training. The Department has revised section 1002.5(o) to reflect that, 
pursuant to the statute creating the NDMS, service in the NDMS is 
considered to be service in the uniformed services for the purposes of 
USERRA, although the appointee is not considered to be a member of the 
uniformed services. See 42 U.S.C. 300hh-11(e)(3).
    5. The commenter suggests that the Department clarify in section 
1002.6 that service in the NDMS is a type of service covered by USERRA. 
The Department agrees. See 1002.6.
    6. The commenter requests that the Department modify 1002.41 to 
include a reference to the intermittent nature of the service of the 
NDMS. The Department rejects this suggestion because the section in 
question refers to the brief or intermittent nature of civilian 
employment, not the service in the uniformed services.
    7. The commenter suggests that the Department clarify that, with 
regard to section 1002.56, not all NDMS service is

[[Page 75248]]

protected by USERRA, and that the Department remove the phrase ``even 
if you are not a member of the uniformed services'' from this section. 
While the Department did not adopt these suggestions, the Department 
reexamined the question set out in section 1002.56 and concluded it 
needed revision to accurately reflect the scope of the coverage of NDMS 
service.
    8. The commenter properly suggests that the Department modify 
section 1002.86 to indicate that the Secretary of Homeland Security 
may, in consultation with the Secretary of Defense, make a 
determination that giving of notice by intermittent disaster-response 
appointees of the National Disaster Medical System is precluded by 
``military necessity.'' The revision has been made. See 1002.86.
    9. The commenter requests that the Department correct a reference 
in section 1002.103(a)(5) and (a)(7), which addresses the types of 
service that do not count toward the general five-year limit on service 
after which a person is not entitled to reemployment rights. The 
correction has been made to follow precisely the corresponding sections 
of the statute. See 38 U.S.C. 4312(c)(4)(B) and 4312(c)(4)(D).
    10. The commenter requests that the Department include within 
section 1002.123 an additional type of document that establishes an 
employee's eligibility for reemployment following covered NDMS service. 
The Department agrees. See section 1002.123(a)(7).
    11. The commenter suggests that the Department modify section 
1002.35, which specifies the types of discharge following service that 
will cause a person to lose reemployment rights under USERRA. The 
commenter sought inclusion on this list the termination of an 
intermittent NDMS appointee for misconduct or cause. Because no 
statutory or regulatory guidance was provided as a basis for this 
suggestion, and the Department is aware of none, the suggestion is not 
adopted.

Subpart A--Introduction to the Regulations Under the Uniformed Services 
Employment and Reemployment Rights Act of 1994

General Provisions

    Sections 1002.1 through 1002.7 describe the regulation's purpose, 
scope, and background, as well as the sense of the Congress in enacting 
USERRA. Section 1002.1 sets out the purpose of these regulations. See 
38 U.S.C. 4301. Sections 1002.2 through 1002.4 provide additional 
background on USERRA, its effective date, and its purposes. Section 
1002.5 defines the important terms used in the regulation. See 38 
U.S.C. 4303. Sections 1002.6 and 1002.7 describe the general coverage 
of the rule, its applicability and its relationship to other laws, 
contracts, agreements, and workplace policies and practices. See 38 
U.S.C. 4302.
    The Department received one comment from the Equal Employment 
Advisory Council regarding the breadth of USERRA's definition of 
``employer.'' The proposed rule adopted, in Section 1002.5(d), USERRA's 
definition of ``employer,'' which includes ``any person, institution, 
organization or other entity that pays salary of wages for work 
performed or that has control over employment opportunities, including 
* * * a person, institution, organization, or entity to whom the 
employer has delegated the performance of employment-related 
responsibilities.'' 38 U.S.C. 4303(4). The EEAC proposed that the 
regulatory definition of employer explicitly exclude from liability for 
statutory violations individuals, such as managers or supervisors, who 
are not directly responsible for paying wages to employees. In support 
of this proposal, the EEAC cited case law under various civil rights 
statutes holding that individuals cannot be held personally liable for 
statutory violations if the individual does not independently meet the 
statute's definition of a covered ``employer.'' See, e.g., EEOC v. AIC 
Security Investigations, LTD, 55 F.3d 1276, 1281 (7th Cir. 1995), and 
cases cited therein. Under the statutory definitions of ``employer'' in 
the Americans with Disabilities Act (ADA), 42 U.S.C 12111(5), the Age 
Discrimination in Employment Act (ADEA), 29 U.S.C. 630(b), and Title 
VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e(b), which are 
essentially the same, the weight of authority is that Congress intended 
the doctrine of respondeat superior to apply, and to impose liability 
upon employers for acts of their agents. Id.
    The Department has considered this comment and disagrees with the 
conclusion reached by the commenter. In comparison to the ADA, the 
ADEA, and Title VII of the Civil Rights Act, USERRA's definition of 
``employer'' is quite different and much broader. USERRA imposes 
liability for violations upon ``any person * * * [who] * * * has 
control over employment opportunities'' including ``a person * * * to 
whom the employer has delegated the performance of employment-related 
responsibilities.'' 38 U.S.C. 4303(4)(A)(i). At least two courts have 
held that, based on this definition, individual supervisors may be 
liable under the Act. See Brandasse v. City of Suffolk, 72 F.Supp.2d 
608, 617-18 (E.D.Va. 1999) (both a city, as a police officer's direct 
employer, and its director of personnel, who had authority over hiring 
and firing for the city, were subject to liability as ``employers'' 
under USERRA); Jones v. Wolf Camera, Inc., 1997 WL 22678 (N.D.Tex. 
1997) (at Fed.R.Civ.P. 12(b)(6) stage, individual supervisors may be 
liable under USERRA as ``persons'' with control over hiring and firing 
and to whom the employer has delegated the performance of employment-
related responsibilities). But see Satterfield v. Borough of Schuykill 
Haven, 12 F.Supp.2d 423 (E.D.Pa. 1998) (plaintiff could not bring an 
action under USERRA against individual members of a borough council, 
alleging that the council terminated him because of his military 
status, because such members did not have any individual power over the 
plaintiff and the plaintiff was not required to report to them 
individually); Brooks v. Fiore, 2001 WL 1218448 (D. Del. 2001) 
(supervisor was not covered by USERRA because he did not have the power 
to hire and fire the plaintiff).
    Thus, courts have construed USERRA's definition of ``employer'' as 
including supervisors and managers in appropriate cases. Those courts 
that have found no individual liability have done so not because the 
language of the statute precludes it, but rather because the facts and 
circumstances of the case do not warrant the imposition of individual 
liability. Based on these considerations, the Department declines to 
adopt the position that individual supervisors and managers should be 
excluded from the regulatory definition of ``employer'' under USERRA.
    The Department received two additional comments, one from an 
association of third-party employee benefit administrators and one from 
a trade association of firms providing health insurance products to 
employers, regarding the statute's broad definition of ``employer'' and 
its implications in the employee benefits area. Each commenter was 
concerned that USERRA's definition of ``employer'' was so broad as to 
impute liability to third parties to whom employers had delegated only 
ministerial responsibilities for employee benefits plans.
    Congress intended that the definition of employer be broad enough 
to ``apply to insurance companies that administer employers' life, 
long-term disability, or health plans, so that such entities cannot 
refuse to modify their policies in order for employers to comply with

[[Page 75249]]

requirements under [USERRA].'' S. Rep. No. 158, 103d Cong., 2d Sess. 42 
(1993). However, the Department agrees with the commenters that 
entities to whom employers or plan sponsors have delegated purely 
ministerial functions regarding the administration of employee benefits 
plans are not intended to be covered by USERRA's definition of 
``employer.'' For instance, firms whose activities are strictly limited 
to the preparation and maintenance of plan benefit forms, without 
engaging in substantive decisions regarding plan benefits, would not be 
considered employers for the purposes of USERRA.
    The Department received comments on the rule's definitions 
regarding an employer's obligation to make reasonable efforts, without 
imposing an undue hardship on the employer, to qualify an employee 
returning from military service for reemployment. One commenter 
suggested that the definition of ``reasonable efforts'' in section 
1002.5(i) should explicitly include an employer's obligation to provide 
evaluative testing, assistance with obtaining licensing, and other 
similar employer efforts. The Department views the definition of 
``reasonable efforts,'' which requires actions by employers ``including 
training * * * that do not place undue hardship on the employer,'' as 
sufficiently broad so as to include other actions not specified in the 
definition. The same commenter requested that the Department delete 
from the definition of ``undue hardship'' in section 1002.5(n) any 
consideration based on ``the nature and cost of the action needed.'' 
The ``nature and the cost of the action'' is one of the factors 
expressly included in USERRA's definition of ``undue hardship,'' and 
the Department views consideration of all factors essential to 
evaluation of what constitutes ``undue hardship.'' 38 U.S.C. 
4303(15)(A)-(D).
    Additionally, another commenter requested that the Department 
exclude ``former employees'' from the definition of ``employee'' in 
section 1002.5(c). Congress intended ``that the term `employee' would 
include former employees of an employer.'' H.R. Rep. No. 65, 103d 
Cong., 2d Sess. 21 (1993); S. Rep. No. 103-158, at 41 (1993). 
Therefore, the Department will retain ``former employees'' within this 
definition.
    One comment suggests a revision to section 1002.6, which describes 
the various types of service that are covered under USERRA. USERRA's 
predecessor, the VRRA, provided reemployment protections that varied 
(in many instances) based on the type of service performed. One of the 
ways in which USERRA modified the old law was to base many of the 
reemployment rights on the length of the service performed rather than 
its type. The commenter requests the deletion of the sentence from 
section 1002.6 that erroneously indicates that the statute's 
reemployment provisions vary only according to the length of service. 
The Department agrees, and has made the deletion. See 1002.6.
    Finally, the Department received one comment regarding USERRA's 
relationship to the Internal Revenue Code. The commenter has requested 
the Department clarify how ``differential pay'' should be reported for 
tax purposes. The term ``differential pay'' refers to payments by 
employers to their employees absent to perform military service, and 
this pay is neither required by nor addressed in USERRA. In some cases, 
employers provide employees their full civilian pay, but more often 
they provide payments that represent the difference between the 
employee's military pay and civilian pay. Differential pay is a 
generous show of support by employers for their employees who are in 
service to the nation.
    The commenter correctly points out that USERRA requires that a 
person absent from a position of employment on account of service in 
the uniformed services is to be considered on a furlough or leave of 
absence, a provision that has been incorporated in the reemployment 
rights statute since its first enactment in 1940. 38 U.S.C. 
4316(b)(1)(A). On the other hand, the commenter notes that the Internal 
Revenue Service (IRS) has issued guidance that such person is 
considered to be ``terminated'' for certain tax purposes.
    The Department reiterates that for the purposes of determining the 
rights and obligations set out in USERRA, an employee absent to perform 
service in the uniformed services is to be considered as on furlough or 
leave of absence. 38 U.S.C. 4316(b). Therefore, for the purposes of 
compliance with USERRA, an employee should be treated as on furlough or 
leave of absence, and for the purposes of compliance with the Internal 
Revenue Code (IRC), the IRS guidance should be followed. See IRS 
Revenue Ruling 69-136 (1969).

Subpart B--Anti-Discrimination and Anti-Retaliation

Protection From Employer Discrimination and Retaliation

    USERRA prohibits an employer from engaging in acts of 
discrimination against past and present members of the uniformed 
services, as well as applicants to the uniformed services. 38 U.S.C. 
4311(a). The anti-discrimination prohibition applies to both employers 
and potential employers. No employer may deny a person initial 
employment, reemployment, retention in employment, promotion, or any 
benefit of employment based on the person's membership, application for 
membership, performance of service, application to perform service, or 
obligation for service in the uniformed services. USERRA also protects 
any person who participates in an action to protect past, present or 
future members of the uniformed services in the exercise of their 
rights under the Act. The Act prohibits any employer from 
discriminating or taking reprisals against any person who acts to 
enforce rights under the Act; testifies in any proceeding or assists a 
statutory investigation; or exercises any right under the statute 
pertaining to any person. 38 U.S.C. 4311(b). A person is protected 
against discrimination and reprisal regardless whether he or she has 
served in the military.
    Proposed sections 1002.18, 1002.19 and 1002.20 implement the 
protections of section 4311(a) and (b). Proposed section 1002.21 makes 
clear that the prohibition on discrimination applies to any employment 
position, regardless of its duration, including a position of 
employment that is for a brief, non-recurrent period, and for which 
there is no reasonable expectation that the employment position will 
continue indefinitely or for a significant period.
    The Department received two comments on proposed section 1002.21. 
The first commenter suggests that the application of USERRA's anti-
discrimination and anti-retaliation provisions to brief, non-recurrent 
positions is ``unduly burdensome for employers and contains unnecessary 
verbiage.'' Because the statute explicitly requires the application of 
the anti-discrimination and anti-retaliation provisions to such 
employment positions, see 38 U.S.C. 4311(d), the Department will retain 
the provision unchanged. A second commenter requests that 1002.21 
include a cross-reference to section 1002.41 to reflect that persons 
employed in brief, non-recurrent employment positions enjoy the 
protections of USERRA's anti-

[[Page 75250]]

discrimination and anti-retaliation provisions, while persons employed 
in temporary and seasonal employment positions are not protected by 
USERRA's reemployment provisions. The commenter mistakenly equates the 
terms ``brief, non-recurrent'' with ``temporary'' and ``seasonal'' when 
referring to employment positions. Some employment positions, such as a 
life guard at a swimming pool or a football coach, are temporary, 
seasonal positions, and such positions enjoy both the anti-
discrimination/anti-retaliation and the reemployment protections 
afforded under USERRA. See 38 U.S.C. 4311(d) and 4312(d)(1)(C); S. Rep. 
No. 103-158, at 46 (1993). By contrast, some, but not all, temporary, 
seasonal employment positions are brief and non-recurrent, and provide 
the employee no reasonable expectation of continued employment, such as 
an employment contract that covers a one-time-only, three-month-long 
position. Such brief, non-recurrent positions enjoy the protections 
afforded by USERRA's anti-discrimination/anti-retaliation provisions, 
but are not protected by the statute's reemployment provisions. See 38 
U.S.C. 4312(d)(1)(C); S. Rep. No. 103-158, at 46 (1993).
    Proposed section 1002.22 explains who has the burden of proving 
that a certain action violates the statute. Proposed section 1002.23 
sets out the evidentiary elements of a claimant's and an employer's 
case under USERRA. The Department received several comments regarding 
these two provisions. Two commenters, including the National Employment 
Lawyers Association (NELA), criticized the provisions for failing to 
state explicitly in the text of the rule that once an employee has met 
his or her burden to prove that the employee's USERRA-protected status 
or activity was a reason for an employer's adverse action against the 
employee, that the employer's rebuttal case is an affirmative defense, 
which places the burden of proof on the employer to show by a 
preponderance of evidence that it would have taken the adverse action 
in the absence of the protected status or activity. In addition, two 
commenters, including NELA, criticized the provisions for erroneously 
stating that the burden of proof shifts back to the employee if the 
employer successfully prevails on its affirmative defense.
    The Department agrees that the structures of proof set forth in 
proposed sections 1002.22 and 1002.23 are susceptible to confusion and 
should be clarified. Congress intended that the evidentiary scheme set 
forth by the United States Supreme Court in NLRB v. Transportation 
Management Corp., 462 U.S. 393, 401 (1983), apply to the analysis of 
violations under USERRA. See S. Rep. No. 103-158, at 45 (1993), and 
H.R. Rep. No. 103-65, Pt. I, at 18, 24 (1993). See also  Gummo v. 
Village of Depew, NY, 75 F.3d 98, 106 (2d Cir. 1996) (citing USERRA's 
legislative history); Sheehan v. Dept. of the Navy, 240 F.3d 1009, 
1013-1014 (Fed. Cir. 2001) (same).
    Under this structure, in order to establish a case of employer 
discrimination, the person's membership, application for membership, 
performance of service, application for service, or obligation for 
service in the uniformed services must be a ``motivating factor'' in 
the employer's actions or conduct. 38 U.S.C. 4311(c)(1). The initial 
burden of proving discrimination or retaliation rests with the person 
alleging discrimination (the claimant). A person alleging 
discrimination under USERRA must first establish that his or her 
protected activities or status as a past, present or future service 
member was a motivating factor in the adverse employment action. See 
Robinson v. Morris Moore Chevrolet-Buick, Inc., 974 F.Supp. 571 (E.D. 
Tex. 1997). The claimant alleging discrimination must prove the 
elements of a violation--i.e., membership in a protected class (such as 
past, present or future affiliation with the uniformed services); an 
adverse employment action by the employer or prospective employer; and 
a causal relationship between the claimant's protected status and the 
adverse employment action (the ``motivating factor''). To meet this 
burden, a claimant need not show that his or her protected activities 
or status was the sole cause of the employment action; the person's 
activities or status need be only one of the factors that ``a truthful 
employer would list if asked for the reasons for its decision.'' Kelley 
v. Maine Eye Care Associates, P.A, 37 F. Supp.2d 47, 54 (D. Me. 1999); 
see Robinson, 974 F. Supp. at 575 (citing Price Waterhouse v. Hopkins, 
490 U.S. 228, 250 (1989) (addressing Title VII gender discrimination 
claim and related defense)). ``Military status is a motivating factor 
if the defendant relied on, took into account, considered, or 
conditioned its decision on that consideration.'' Fink v. City of New 
York, 129 F.Supp.2d 511, 520 (E.D.N.Y. 2001), citing Robinson, 974 
F.Supp. at 576. The employee is not required to provide direct proof of 
employer animus at this stage of the proceeding; intent to discriminate 
or retaliate may be established through circumstantial evidence. See 
Desert Palace, Inc. v. Costa, 539 U.S. 90 (2003); United States Postal 
Service Bd. of Governors v. Aikens, 460 U.S. 711, 714 (1983); Sheehan, 
240 F.3d at 1014.
    After the employee establishes the elements of an alleged 
violation, the employer may avoid liability by proving by a 
preponderance of the evidence that the claimant's military activities 
or status was not a motivating factor in the adverse employment action. 
See Gummo, 75 F.3d at 106. At this stage, the employer carries the 
burden to prove as an affirmative defense that it would have taken the 
action anyway, without regard to the employee's protected status or 
activity. Sheehan, 240 F.3d at 1014. Because the employer's defenses 
are affirmative under USERRA, if the employer fails to counter the 
employee's evidence, the claimant's proof establishes that the adverse 
employment action was more likely than not motivated by unlawful 
reasons. This framework is set forth in sections 1002.22 and 1002.23, 
which have been revised in response to the comments noted above and to 
accurately reflect the nature of the evidentiary structure intended by 
Congress.
    Section 4311(c)(2) provides the same evidentiary framework for 
adjudicating allegations of reprisal against any person (including 
individuals unaffiliated with the military) for engaging in activities 
to enforce a protected right; providing testimony or statements in a 
USERRA proceeding; assisting or participating in a USERRA 
investigation; or exercising a right provided by the statute. 38 U.S.C. 
4311(c)(2). Section 1002.19 addresses the elements of a case of 
retaliation. One commenter highlighted an ambiguity in the question 
posed in section 1002.19, and the Department has narrowed the question 
to clarify that the section applies only to employer retaliation.
    The Department received responses to its request for comment on the 
application of the anti-discrimination provisions of the Act to 
potential employers. Because this issue is also addressed in section 
1002.40, which explains in some detail the obligations of potential 
employers, the Department will respond to those comments in its summary 
of Subpart C, below.
    The Department received one comment requesting clarification in the 
text of the final rule that USERRA protects not just a service member's 
activities, but also protects a service member's status in the 
uniformed services. For example, an employer may not discriminate 
against a person because of his or her status as a military veteran or 
member of a uniformed

[[Page 75251]]

service, regardless of whether that status results in the performance 
of military activities. The Department agrees with the comment, and has 
revised sections 1002.18, 1002.22 and 1002.23 to reflect that USERRA 
protects both military status and activities.
    The Department received numerous additional comments regarding this 
part of the rule. One comment criticized the rule for failing to state 
that the evidentiary scheme set forth in sections 1002.22 and 1002.23 
applies only to court proceedings and does not apply to the earlier 
administrative stage during which VETS investigates an employee's 
USERRA claim. While the evidentiary structure in the rule certainly 
pertains to the litigation of USERRA claims in court, the Department 
regards the analysis as one that should be taken into account during 
the investigative stage, so that adequate assessments can be made 
regarding the claims of any party to a USERRA dispute. An additional 
comment criticized the proposed rule for failing to explicitly state 
that an employee need only show that his or her protected status or 
activity was one of the factors motivating the adverse employment 
action. Section 1002.22 states that the employee's burden is to prove 
that the protected activity or status was ``one of the factors for the 
employer's adverse action,'' and therefore no revision is necessary. 
Another commenter faulted the proposed rule for failing to state that 
the employee's initial burden of proof includes showing by a 
preponderance of evidence that the protected activity or status was a 
``substantial and motivating'' factor. The Department has concluded 
that under Transportation Management, an employee must show that the 
protected status or activity was a ``substantial or motivating'' 
factor. 462 U.S. at 401. One commenter suggested the addition of the 
phrase ``or more'' to the first sentence of Section 1002.23(b) so that 
it states, ``If you prove that the employer's action against you was 
based on one or more of the prohibited motives listed in paragraph (a) 
of this Section * * *.'' The Department regards this suggestion as 
unnecessary to clarify the meaning of the provision. Finally, the 
Department received one comment suggesting that in a reinstatement case 
in which the employer has failed to reemploy a service member in a 
position of like pay, status and seniority, the burden of proof should 
be on the employer to show that its failure was not a result of 
protected activity or service, and that the burden should be on the 
employee only after reinstatement. Because the comment is ambiguous and 
does not offer clarification of any provision of the regulation, no 
revision has been made to respond to the comment.

Subpart C--Eligibility for Reemployment

General Eligibility Requirements for Reemployment

    USERRA requires that the service member meet five general criteria 
in order to establish eligibility for reemployment:
    (1) That the service member be absent from a position of civilian 
employment by reason of service in the uniformed services;
    (2) That the service member's employer be given advance notice of 
the service;
    (3) That the service member have five years or less of cumulative 
service in the uniformed services with respect to a position of 
employment with a particular employer;
    (4) That the service member return to work or apply for 
reemployment in a timely manner after conclusion of service; and
    (5) That the service member not have been separated from service 
with a disqualifying discharge or under other than honorable 
conditions.
    Section 1002.32 sets out these general eligibility requirements. 
Sections 1002.34-.74 explain the ``absent from a position of civilian 
service'' requirement, sections 1002.85-.88 explain the ``advance 
notice'' requirement, sections 1002.99-.104 explain the ``five years or 
less of cumulative service'' requirement, sections 1002.115-.123 
explain the ``return to work or apply for reemployment'' requirement, 
and sections 1002.134-.138 explain the ``no disqualifying discharge'' 
requirement.
    A person who meets these eligibility criteria, which are contained 
in 38 U.S.C. 4312(a)-(c) and 4304, is entitled to be reemployed in the 
position described in 38 U.S.C. 4313, unless the employer can establish 
one of the three affirmative defenses contained in 38 U.S.C. 4312(d).
    The Department received two comments on the general eligibility 
criteria set out in proposed section 1002.32. The first commenter 
recommended that the phrase ``in the uniformed services'' be inserted 
after the word ``service'' in section 1002.32(a)(2) so that the 
sentence more accurately states, ``You have five years or less of 
cumulative service in the uniformed services with respect to your 
position of employment.'' The Department agrees that this amendment 
improves the clarity of the text, and has made the revision. See 
1002.32(a)(2). The second commenter also requested a clarification to 
the same sentence. In order to reflect that the five-year service limit 
applies to an employee's entire employment relationship with a 
particular employer, including any changes in employment position with 
that particular employer, the Department has revised this sentence 
accordingly. See 1002.32(a)(2).
    There has been some disagreement in the courts over the appropriate 
burden of proof in cases brought under 38 U.S.C. 4312, the provision in 
USERRA establishing the reemployment rights of persons who serve in the 
uniformed services. One court has interpreted that provision to be ``a 
subsection of section 4311 [the anti-discrimination and anti-
retaliation provision].'' Curby v. Archon, 216 F.3d 549, 556 (6th Cir. 
2000). Other courts have interpreted section 4312 to establish a 
statutory protection distinct from section 4311, creating an 
entitlement to re-employment for qualifying service members rather than 
a protection against discrimination. Wrigglesworth v. Brumbaugh, 121 F. 
Supp.2d 1126, 1134 (W.D. Mich. 2000) (stating that requirements of 
section 4311 do not apply to section 4312). Brumbaugh relies in part on 
legislative history and the Department's interpretation of USERRA. Id. 
at 1137. Another district court supports the Brumbaugh decision and 
characterizes the contrary view in Curby as dicta. Jordan v. Air 
Products and Chem., 225 F. Supp.2d 1206, 1209 (C.D. Ca. 2002).
    In the proposed rule, the Department agreed with the district court 
decisions in Brumbaugh and Jordan that sections 4311 and 4312 of USERRA 
are separate and distinct. Accordingly, proposed section 1002.33 
provided that a person seeking relief under section 4312 need not meet 
the additional burden of proof requirements for discrimination cases 
brought under section 4311. The Department disagreed with the decision 
in Curby v. Archon discussed above, insofar as it interprets USERRA to 
the contrary, and the Department invited comment regarding the proper 
interpretation of the statute regarding the burden of proof for relief 
under section 4312.
    The Department received four comments regarding this issue, and all 
four agreed with the Department's interpretation that a person alleging 
a violation of section 4312 of USERRA need not prove the elements of an 
alleged violation of section 4311. In the absence of any negative 
comment to consider, the Department will incorporate this provision of 
the

[[Page 75252]]

proposed rule in the final rule. In addition, one of the four 
commenters on this topic requested that section 1002.33 contain much 
more detail about VETS' administrative procedures that follow the 
filing of a complaint stating a claim under section 4312. The 
Department declines this request, as it suggests the insertion of 
material that is covered below in Subpart F of this rule, Compliance 
Assistance, Enforcement and Remedies.

Coverage of Employers and Positions

    Sections 1002.34 through 1002.44 of the final rule list the 
employers and employment positions that are covered by USERRA. Section 
1002.34 provides that the Act's coverage extends to virtually all 
employers in the United States; the statute contains no threshold or 
minimum size to limit its reach. The Department received two comments 
regarding this coverage provision. First, the Department was asked 
whether USERRA applies to Native American tribes when they act as 
employers. Section 1002.34(a) reiterates USERRA's broad applicability 
to all employers, explicitly including the Federal government and the 
States. 38 U.S.C. 4303(4). While the face of the statute does not 
explicitly cover Native American tribal employers, USERRA's legislative 
history reflects the Act was intended to apply to ``Native American 
tribes and their business enterprises.'' S. Rep. No. 103-158, at 42 
(1993). Thus, although the Department concludes that USERRA likely 
applies to Native American tribal employers, the Department recognizes 
that there is a difference between the right to demand compliance with 
the law and the means to enforce it. Kiowa Tribe of Oklahoma v. 
Manufacturing Techs., Inc., 523 U.S. 751, 754 (1998). Native American 
tribes, like the States, possess sovereign immunity from suit except 
where ``Congress has authorized the suit or the tribe has waived its 
immunity.'' Kiowa Tribe of Oklahoma, 523 U.S. at 754. As a result, 
judicial enforcement of the Act against an Indian tribe depends on 
whether the tribe has waived its immunity, and such a waiver ``cannot 
be implied but must be unequivocally expressed.'' Santa Clara Pueblo v. 
Martinez, 436 U.S. 49, 58 (1978). Accordingly, the Department 
recognizes that the application of USERRA's provisions to Native 
American tribal employers is a complicated and heavily fact-dependent 
issue that, if raised in a USERRA proceeding, will ultimately be 
resolved by the courts on a case-by-case basis. See, e.g., C & L 
Enterprises, Inc. v. Citizen Band Potawatomi Tribe of Oklahoma, 532 
U.S. 411 (2001) (arbitration provisions in contract amounted to clear 
waiver of tribal immunity).
    An additional commenter suggests the elimination of section 
1002.34(c), which states that USERRA applies to American firms 
operating in a foreign country, because it ``attempts to create an 
extraterritorial application that is not established under the 
statute.'' To the contrary, the text set out in section 1002.34(c) is 
based on an unambiguous statutory provision establishing such 
applicability. See 38 U.S.C. 4319. Accordingly, the Department has 
retained this provision in the final rule. See 1002.34.
    Other provisions in this section address various aspects of the 
employment relationship subject to the Act. Section 1002.35 defines the 
term ``successor in interest,'' and section 1002.36 further addresses 
the issue. Section 1002.37 addresses the situation in which more than 
one employer may be responsible for one employee. The Department 
received two comments on this provision regarding multiple employers. 
The first commenter suggested that, as with regulations promulgated 
under the Family and Medical Leave Act, see, e.g. 29 CFR 825.106, the 
provision should allocate statutory responsibilities and liability 
between ``primary'' and ``secondary'' employers. Similarly, an 
additional commenter submitted that the statute's reemployment 
provisions should apply only to the ``primary'' employer and not the 
``secondary'' employer.
    In response to these two comments, the Department again notes 
USERRA's broad definition of ``employer'' as an entity ``that has 
control over employment opportunities.'' 38 U.S.C. 4303(4). In 
addition, USERRA's legislative history instructs that the term 
``employer'' is intended to be broadly construed to cover situations 
where more than one entity exercises control over different aspects of 
the employment relationship. S. Rep. No. 103-158, at 41 (1993); H.R. 
Rep. 103-65, Pt. I, at 21(1993), citing, e.g., Magnuson v. Peak 
Technical Services, Inc., 808 F.Supp. 500, 507-511 (E.D. Va. 1992) (the 
legal issue is whether one or more of the entities exercise requisite 
control over significant aspects of employment relationship so as to be 
deemed an ``employer'' under the statute). Thus, in cases in which more 
than one entity employs an individual, the entity's status, 
responsibility and liability as an employer under USERRA is assessed by 
determining whether the entity controls the employee's employment 
opportunities, not by reference to shorthand labels such as ``primary 
employer'' and ``secondary employer.'' Indeed, under this analytical 
framework, employers may share or co-determine certain aspects of the 
employment relationship, and in those cases there will not be a 
``primary'' and ``secondary'' employer. Accordingly, the Department 
will retain the provision unmodified. See 1002.37.
    The Department received a comment from the Building and 
Construction Trades Department of the AFL-CIO (``BCTD'') regarding the 
Department of Labor's treatment of hiring halls in proposed section 
1002.38, which provides that a hiring hall is an ``employer'' if ``the 
hiring and job assignment functions have been delegated by an employer 
to the hiring hall.'' The BCTD recommends that this provision be 
eliminated, arguing that hiring halls in the unionized construction 
industry represent an ``arrangement'' between the union and local 
employers to facilitate referral of available union members for work. 
According to the BCTD, hiring halls do not perform any hiring or 
assignment functions beyond referring the number and types of workers 
requested by the employer. The BCTD suggests that the multi-employer 
group using the hiring hall to obtain workers should be the 
``employer'' rather than the hiring hall. In order to effectuate this 
suggestion, the BCTD proposes, in addition to eliminating section 
1002.38, that the Department modify the regulatory definition of 
``employer'' (section 1002.5(d)) to state, ``In industries in which 
exclusive hiring halls are utilized, all employers who are required to 
obtain applicants through a given hiring hall arrangement, may 
constitute a single employer under the Act.''
    The Department's response to the BCTD's proposal lies again in the 
breadth of the statutory definition of ``employer,'' and in Congress's 
unambiguous intent that this definition be read broadly to include 
entities, such as hiring halls, to whom job referral responsibilities 
have been delegated. See S. Rep. No. 103-158, at 42 (1993); H.R. Rep. 
103-65, Pt. I, at 21(1993). In addition, the BCTD's proposed amendment 
to the definition of employer in section 1002.5, which seeks the 
permanent application of a ``single employer'' framework to multiple 
hiring hall employers, is misplaced. The term ``single employer'' 
applies to firms that operate as an integrated enterprise and ``exert [ 
] significant control over'' the employees in question. G. Heileman 
Brewing Co. v. NLRB, 879 F.2d 1526, 1530 (7th Cir. 1989). To determine 
whether firms are sufficiently integrated to constitute a single 
employer, courts

[[Page 75253]]

look to (1) common management; (2) centralized control of labor 
relations; (3) interrelation of operations; and (4) common ownership or 
financial control. See Radio and Television Broadcast Technicians Local 
Union 1264 v. Broadcast Service of Mobile, Inc., 380 U.S. 255, 256, 85 
S. Ct. 876, 13 L. Ed. 2d 789 (1965); see also Naperville Ready Mix, 
Inc. v. NLRB, 242 F.3d 744, 752 (7th Cir. 2001), cert. denied, 534 U.S. 
1040 (2001). While one or more employers utilizing the same hiring hall 
may or may not operate as an integrated enterprise so that they meet 
the criteria of the ``single employer'' test, such criteria are not 
essential to determine whether the entity is an employer for the 
purposes of USERRA. Accordingly, the Department rejects the BCTD's 
suggestions, and will retain the provision regarding hiring halls in 
unchanged form. See 1002.38.
    Proposed section 1002.39 covers States and other political 
subdivisions of the United States as employers, and the Department 
received one comment regarding this provision. The commenter noted 
USERRA's specific treatment for reemployment of employees of the 
Federal legislative and judicial branches and, seeing no similar 
provision for employees of State legislative and judicial branches, 
asked whether USERRA's protections applied to the latter group. In 
response, the Department again notes USERRA's broad applicability to 
all employers, explicitly including the States, 38 U.S.C. 4303(4), 
without regard to whether the State employer is the State's judicial or 
legislative branch.
    The Department received three favorable comments in response to 
proposed section 1002.40, which confirms that USERRA makes it unlawful 
for any employer to deny employment to a prospective employee on the 
basis of his or her membership, application for membership, performance 
of service, application to perform service, or obligation for service 
in the uniformed services, or on the basis of his or her exercise of 
any right guaranteed under the Act. In addition to these favorable 
comments, the Department received two comments regarding the 
application of this principle in specific circumstances. The first 
commenter submits a hypothetical in which a person is on extended 
active duty and cannot interview for a job or be present for the job's 
start date because of service in the uniformed services. In the 
scenario presented, the job advertisement states clearly that the 
``most qualified'' applicants must be interviewed and the selectee is 
desired to start work immediately upon selection. The person on active 
duty can do neither, but does apply for the job by mail and is among 
the most qualified based on the application. The employer eliminates 
all applicants who cannot for whatever reason appear for an interview 
or start work immediately upon selection. The commenter requests that 
the Department determine that such conduct on the part of an employer 
would not constitute a violation of USERRA. The second commenter 
suggests a scenario in which a prospective employer withdraws an offer 
of employment because of a person's military service or obligations, 
and urges the Department to state in the final rule that while such a 
withdrawal may constitute discrimination under USERRA, the prospective 
employee is not entitled to reemployment rights under section 4312 of 
the statute.
    The Department declines to include either of these hypothetical 
scenarios or their suggested outcomes in the final rule. Each 
individual case involving an issue under USERRA must be decided based 
on the specific facts of that case, with all the attendant and 
potentially influential details, together with the appropriate and 
applicable legal standards.
    In addition, the Department received three comments regarding 
whether employer inquiries about military service or obligations during 
the hiring process are permissible under USERRA. The Department 
concludes that it is not unlawful in itself for a prospective employer 
to ask an applicant about military service or obligations. Indeed, in 
many instances a prospective employee's military experience may enhance 
his or her potential value to the employer. However, if information 
elicited in response to such questions forms the basis of the 
employer's decision not to hire the applicant, or to take other adverse 
action against the person once hired, the inquiries may constitute 
evidence of unlawful discrimination.
    As stated earlier, temporary, part-time, probationary, and seasonal 
employment positions are also covered by USERRA. The Department 
received one comment on proposed section 1002.41, which establishes 
that an employer does not have reemployment obligations under USERRA if 
the temporary or seasonal position is for a brief, non-recurrent period 
and the employee has no reasonable expectation of continued employment 
indefinitely or for a significant period. The commenter submits that 
the Department should state in the final rule that in such cases, an 
employer need not provide employment benefits during the absence from 
employment due to military service.
    Section 4312(d)(1)(C) of USERRA clearly provides that an employer 
does not possess any reemployment obligations if an employee departing 
for military service is in a brief, non-recurrent position and has no 
reasonable expectation that such employment will continue indefinitely 
or for a significant period. However, an employee in a brief, non-
recurrent position may be entitled to non-seniority benefits under 
certain situations. Because section 4316(b)(1)(B) requiring employers 
to provide non-seniority benefits to employees is not limited by an 
exception regarding employees occupying brief, nonrecurrent employment 
positions, the Department interprets the mandate of section 
4316(b)(1)(B) to apply to all employees, including those in brief, 
nonrecurrent positions of employment. However, as discussed below in 
Subpart D and in section 1002.150 of this rule, the employer is 
obligated to provide non-seniority benefits to employees on military 
leave only to the extent that the employer provides such benefits to 
similarly situated employees on comparable non-military furlough or 
leave of absence. As a result, if an employer provides non-seniority 
benefits to similarly situated employees in brief, nonrecurrent 
employment positions on comparable, non-military leave, those benefits 
must also be provided to employees in brief, nonrecurrent employment 
positions on military leave.
    Section 1002.42 explains that USERRA covers employees on strike, 
layoff, or leave of absence, and section 1002.43 makes clear that 
persons occupying professional, executive and managerial positions also 
are entitled to USERRA rights and benefits. The Department received two 
comments on proposed section 1002.44, which addresses the distinction 
between an independent contractor and an employee under USERRA. This 
section provides that USERRA does not apply to individuals who act as 
independent contractors rather than as employees of an employer, and 
outlines six factors that must be considered in deciding whether a 
person is an independent contractor. One commenter suggested the 
Department eliminate as too limiting the word ``managerial'' from one 
of the six factors that addresses a ``person's opportunity for profit 
or loss that depends on his or her managerial skill.''
    The second commenter disputed the six-factor test entirely, and 
stated the appropriate legal standard for determining whether a person 
is an

[[Page 75254]]

employee or an independent contractor is found in Nationwide Mutual 
Insurance Co. v. Darden, 503 U.S. 318 (1992), a case decided under the 
Employee Retirement Income Security Act (ERISA). In Darden, the Supreme 
Court set forth a common-law-based ``degree of control'' test that 
focuses primarily on ``the hiring party's right to control the manner 
and means by which the product is accomplished.'' Id. The commenter 
sought the elimination of three of the six factors set out in 1002.44 
as inconsistent with the common law test and because ``they do not help 
to inform the decision.''
    The independent contractor provision in this rule is based on 
Congress's intent that USERRA's definition of ``employee'' be 
interpreted in the same expansive manner as the term is defined under 
the Fair Labor Standards Act (FLSA). H.R. Rep. No. 103-65, Pt. I, at 29 
(1993) (citing Brock v. Mr. W. Fireworks, Inc., 814 F.2d 1042 (5th 
Cir.), cert. denied, 484 U.S. 924 (1987)); S. Rep. No. 103-58, at 40 
(1993). In determining whether a person is a statutory employee or an 
independent contractor under the FLSA, the ``economic reality'' test is 
employed. See, e.g., Mr. W. Fireworks, 814 F.2d at 1043; see also Debra 
T. Landis, Determination of ``Independent Contractor'' and ``Employee'' 
Status for Purposes of the FLSA, 51 A.L.R. Fed. 702 (2005). The focal 
point of the test is whether the individual is economically dependent 
on the business to which he or she renders service or is, as a matter 
of economic fact, in business for him- or herself. Bartels v. 
Birmingham, 332 U.S. 126, 130 (1947). In applying the test, courts 
generally examine five or six factors. Landis, supra, section 2. No one 
of the factors is determinative. Rutherford Food Corp. v. McComb, 331 
U.S. 722 (1947). Moreover, the factors are ``simply analytical tools,'' 
thus, ``their weight, number and composition are variable.'' Dole v. 
Snell, 875 F.2d 802, 805 n. 2 (10th Cir. 1989). In Mr. W. Fireworks, 
the court examined five factors to use in determining independent 
contractor status: ``(1) The degree of control exercised by the alleged 
employer; (2) the extent of the relative investments of the putative 
employee and employer; (3) the degree to which the `employee's' 
opportunity for profit and loss is determined by the employer; (4) the 
skill and initiative required in performing the job; and (5) the 
permanency of the relationship.'' Id. (citing United States v. Silk, 
331 U.S. 704 (1947)). Many courts also examine a sixth factor: Whether 
the service rendered is an integral part of the employer's business. 
See, e.g., Henderson v. Interchem Coal Co., 41 F.3d 567, 570 (10th Cir. 
1994); Real v. Driscoll Strawberry Associates, Inc., 603 F.2d 748 (9th 
Cir. 1979).
    Consistent with USERRA's legislative history, the proposed section 
essentially restates the test used under the FLSA to determine 
independent contractor status. In addition, in FLSA cases, ``the courts 
have generally indicated that the common law degree of control test is 
not controlling.'' See Landis, supra, section 2. Indeed, even in 
Darden, the Supreme Court indicated that the common law test is 
inappropriate in FLSA cases. 503 U.S. at 326 (``While the FLSA, like 
ERISA, defines an `employee' to include `any individual employed by an 
employer,' it defines the verb `employ' expansively to mean `suffer or 
permit to work.' This latter definition [* * *] stretches the meaning 
of `employee' to cover some parties who might not qualify as such under 
a strict application of traditional agency law principles.'' (internal 
citations omitted)). USERRA's legislative history shows that Congress 
made a clear choice between the test employed under the FLSA and the 
degree-of-control test, and explicitly chose the former. In addition, 
with respect to the proposal to delete the word managerial from the 
second factor of the test set out in section 1002.44(b), the Department 
notes that most courts use that term when applying the test. See, e.g., 
Imars v. Contractors Manufacturing Services, Inc., 165 F.3d 27 (6th 
Cir. 1998). As a result, the Department will retain the test for 
independent contractor as set forth in section 1002.44.

Coverage of Service in the Uniformed Service

    Sections 1002.54 through 1002.62 explain the term ``service in the 
uniformed services,'' list the various types of uniformed services, and 
clarify that both voluntary and involuntary duty are covered under 
USERRA. Section 1002.54 provides that ``service in the uniformed 
services'' includes a period for which a person is absent from a 
position of employment for the purpose of an examination to determine 
his or her fitness to perform duty in the uniformed services. Sections 
1002.55 and 1002.56 provide that service under certain authorities for 
funeral honors duty or as a disaster-response appointee also constitute 
service in the uniformed services. Section 1002.