Military Leave

Two pieces of federal legislation affect employers and creditors of individuals who undertake military service, either through call-up or through volunteering. One sets forth how military service affects the employee/employer relationship, while the other legislation describes how the debtor/creditor relationship is affected. This article will address each separately below.

A. Employment Relationship

The civilian employment of individuals who join the United States military, either through call-up or by volunteering, is protected by the federal Uniform Services Employment and Reemployment Rights Act of 1994 ("Act"). The Act contains a number of important protections for members of the military, including protections from employment discrimination because of their military service and protection of their civilian job seniority while on military duty. The Act also requires that an employer offer an employee the same "leave of absence" benefits while engaged in military service that it offers to all other employees.

Below is an overview of how the protections offered by the Act affect employers. Note that although federal law pre-empts any state law when the military service is for the United States military, many states have similar laws that apply if an employee serves for the state's National Guard. In that situation, state law will need to be consulted.

1. Notification Provisions

The Act states that an employee must give an employer advance notice of any impending military service, unless for reasons of military necessity or impossibility notification is impractical.

2. Reemployment Rights

The Act protects a member of the military's civilian job while on active duty for up to five years, so long as the individual receives an honorable discharge from military service. The five years is cumulative for a single employer, but there are exceptions to the five year limit in times of national emergencies.

The Act contains an "escalator" provision for individuals returning from active duty. An employer is required to offer individuals returning from active service the position they would have obtained had they remained employed continuously. If the individual is not qualified to perform the duties in the higher-level position, then the individual must be offered their original position or, if it has been more than 90 days and the original position is not available, a position of similar status and pay as the individual's old position. There are also other provisions in the Act which mandate that an employer cannot deny the employee any "incident or advantage" of employment due to military service.

The Act's notification requirements vary for individuals returning from active military service, depending on the amount of time spent away from the employer. An individual whose military service lasts from one to 30 days must report back to work on the first work day falling within eight hours of the individual's return; 31 to 180 days of service, within 14 days after the completion of service; more than 180 days of service, within 90 days after the individual returns from service. Also, if an individual is injured or becomes ill while on duty, the application deadlines are extended for up to two years following the individual's return from service.

3. Compensation and Benefits

An employer is not required to pay compensation to an employee while the employee is employed in the active service of the military. Although an employee can use accrued vacation during the time of military service, an employer cannot require an employee to use accrued vacation time.

An employer is required to count service time towards an employee's pension plan, subject to ERISA's requirements. Similarly, upon reemployment, an employer is required to make-up contributions to an ERISA-defined contribution plan, like a 401(k), that were missed while the employee was engaged in military service. Matching contributions are not required, unless employee has made the necessary contribution. The IRS has rules pertaining to make-up contributions.

An employee who leaves for active military service can continue, or reinstate, employer-provided health coverage for up to 18 months or until the period allowed for the employee to apply for reemployment, whichever is less. The entire cost can be passed along to the employee, unless the employee's military service lasts for less than 31 days - in that case, the employee must only pay the normal share of the cost.

4. Other Provisions

The Act provides varying time periods during which a returning employee is protected from termination without cause following reemployment, except for an employee who served less than 31 days, for whom there is no protection. An employee who serves 30 to 181 days is protected for six months, and an employee who serves more than 180 days is protected for one year.

The Act also contains provisions protecting individuals from discrimination based on the individual's relationship with the military in the hiring, reemployment, retention, promotion or other benefits. These protections apply in all cases, whether it involves a veteran, a current member of the military, or someone seeking to join the military.

B. Debtor/Creditor Laws

The Soldiers' and Sailors' Civil Relief Act ("SSCRA") is federal legislation which was primarily created to give individuals who enter military service temporary relief from payment obligations for debts assumed prior to their entrance into the military, on the assumption that these individuals will experience a shortfall in their earnings upon entering military service. SSCRA accomplishes this by giving individuals in the service tools to delay making or to modify payments on debts. Below is a brief summary of SSCRA's provisions.

A section of the SSCRA specifically relates to real estate leasing transactions. The SSCRA gives tenants who are called to military service the power to terminate pre-service leases. It does not matter if the lease was for residential or commercial use. The termination may occur at any time following the entry of military service and must be in writing. The following example demonstrates how this provision works: where rent is due monthly, the termination would become effective in the month following the termination (so, if rent is due on the first of the month and tenant sends the termination notice on July 10th, termination occurs on August 31st.) The rules vary for leases when other time periods for rental payments are involved.

The SSCRA gives the individual entering the military the power to suspend both civil as well as tax payment obligations that arose prior to, or during, the individual's military service. The individual obtains this relief by making a motion demonstrating to a judge that military service makes it impossible for the individual to make the required payments. If the judge decides to impose the stay, then enforcement of all payment obligations is suspended until the end of the individual's service, at which time another section of the SSCRA allows the individual to apply for further relief by postponing payments until the individual has recovered financially. The post-service extension can last for a time period equal to the individual's military service.

The SSCRA also gives an individual engaged in military service protections from a creditor enforcing obligations in secured transactions, such as for real estate or an installment contract. For this section to take effect, the contract must have been entered prior to military service and one payment or a downpayment must have been made prior to the entry into military service. If these requirements are met, then the SSCRA requires a creditor enforcing the secured transaction to bring a judicial proceeding, instead of simply foreclosing or repossessing the property. During the judicial proceeding, the judge has the power to modify the agreement, such as altering the payment schedule or ordering the property sold and a division of the proceeds.

Other sections of the SSCRA allow a court to stay judicial proceedings that involve an individual who is serving in the military. There is no requirement that the lawsuit involve pre-service obligations. Another section allows a court to stay a judgement entered against an individual in the military. Another section gives an individuals the power to vacate any default judgment entered them by demonstrating to a court that they were prejudiced by military service from raising a valid defense to the action. Another section of the SSCRA limits the amount of interest payments an individual in the military is required to pay on a debt arising prior to military service to six percent. One of the more important sections of the SSCRA states that the period of military service does not count towards the running of any