Military Veteran Entitled to Longevity Pay as Seniority-based Benefit: Seventh Circuit | Practical Law

Military Veteran Entitled to Longevity Pay as Seniority-based Benefit: Seventh Circuit | Practical Law

In DeLee v. City of Plymouth, the US Court of Appeals for the Seventh Circuit reversed a district court's grant of summary judgment to the employer in a Uniformed Services Employment and Reemployment Rights Act (USERRA) matter and held that the longevity benefit offered by the employer was a reward for an employee's lengthy service, rather than compensation for work performed the previous year. An employee who was on military leave for eight months was entitled to a longevity payment for his full year of employment, rather than only his months of active employment.

Military Veteran Entitled to Longevity Pay as Seniority-based Benefit: Seventh Circuit

by Practical Law Labor & Employment
Published on 16 Dec 2014 • USA (National/Federal)
In DeLee v. City of Plymouth, the US Court of Appeals for the Seventh Circuit reversed a district court's grant of summary judgment to the employer in a Uniformed Services Employment and Reemployment Rights Act (USERRA) matter and held that the longevity benefit offered by the employer was a reward for an employee's lengthy service, rather than compensation for work performed the previous year. An employee who was on military leave for eight months was entitled to a longevity payment for his full year of employment, rather than only his months of active employment.
On December 9, 2014, in DeLee v. City of Plymouth, the US Court of Appeals for the Seventh Circuit reversed a district court's grant of summary judgment to the employer in a Uniformed Services Employment and Reemployment Rights Act (USERRA) matter and held that the longevity benefit offered by the employer was a reward for an employee's lengthy service rather than compensation for work performed the previous year. An employee who was on military leave for eight months was entitled to a longevity payment for his full year of employment, rather than only his months of active employment. (No. 14-1970, (7th Cir. Dec. 9, 2014).)

Background

The city of Plymouth, Indiana (Plymouth) pays its police officers "longevity pay" each year calculated by multiplying $225 by the officer's number of years on the force. In 1989, the city enacted an ordinance prorating the longevity pay of officers who take a leave of absence, including for military service.
Robert DeLee served in the US Air Force Reserves for eight months during his twelfth year on the force. Plymouth paid DeLee a longevity payment of $900 rather than his expected $2700, covering his four months of active employment but not his eight months of military service time. DeLee sued Plymouth, arguing that his longevity pay was a seniority-based benefit and that USERRA entitled him to longevity pay based on a full year of employment.
USERRA protects the rights of eligible employees to their "seniority" and "other rights and benefits" (38 U.S.C. § 4316(a)).
The district court granted summary judgment to Plymouth. DeLee appealed to the Seventh Circuit.

Outcome

The Seventh Circuit reversed the decision by the district court and determined that:
  • Plymouth's longevity benefit was a reward for lengthy service rather than compensation for work performed the previous year.
  • USERRA guaranteed DeLee longevity pay for his full twelfth year of employment.
In reaching this conclusion, the Seventh Circuit noted that:
  • USERRA seeks to minimize disruption to the lives of individuals who serve in the military by:
    • prohibiting employers from discriminating against employees because of their military service;
    • requiring reemployment of returning service members; and
    • adhering to the escalator principle of placing a returning service member at the place he would have been had he continued working rather than serving in the military.
In reaching the decision that Plymouth's longevity benefit was a reward based on seniority, the Seventh Circuit considered several previous Supreme Court decisions addressing similar circumstances under other laws:
  • In Accardi v. Pennsylvania R.R. Co., the Supreme Court found that service members' severance payments were seniority-based benefits designed to compensate employees for the loss of a job after a long period of service, not deferred compensation for services rendered (383 U.S. 225 (1966)).
  • In Foster v. Dravo Corp., the Supreme Court concluded that vacation days are characterized as short-term compensation for work performed by the employee (420 U.S. 92 (1975)).
  • In Alabama Power Co. v. Davis, the Supreme Court concluded that a pension payment is a reward for lengthy service, which is evidenced by the considerable length of time required for the vesting of pension rights. The Court emphasized the importance of a payment's "real nature" and noted that any seniority benefit can be linked to work performed (so such an observation does not help to determine whether a benefit is a reward for seniority or service rendered). The Supreme Court put forth "two axes of analysis" to determine whether a particular benefit is a veteran's right of seniority:
    • whether it is reasonably certain that the benefit would have accrued had the veteran been continuously employed rather than performing military service (often easily determined); and
    • whether the benefit is a prerequisite for seniority.
    (431 U.S. 581 (1977).)
  • In Coffy v. Republic Steel Corp., the Supreme Court determined that supplemental unemployment benefits (SUB) were seniority-based benefits for reasons that favored DeLee in the present case:
    • the SUB credits were earned for all weeks in which an employee worked any hours, rather than compensation based on the exact time worked;
    • some employees earned SUB credits for time that they did not actually work; and
    • employees received no benefits if they quit before being with the company for two years.
    (447 U.S. 191 (1980).)
The preamble of Plymouth's proration ordinance:
  • Acknowledged the longevity benefit as a reward for long-term service.
  • Highlighted the questions concerning how to distribute longevity pay to inactive employees.
  • Identified itself as a compromise of paying a longevity payment while still cutting costs.
Applying Alabama Power's two axes of analysis, the Seventh Circuit noted that:
  • A full longevity payment would have accrued if not for DeLee's absence for military service.
  • All prerequisites of seniority favored DeLee and the original purpose of Plymouth's longevity pay was to reward officers for their lengthy service.

Practical Implications

Employers should be aware of the specificity the Seventh Circuit provided in differentiating between benefits based on services rendered and benefits based on seniority. The Seventh Circuit noted that longevity payments, as well as severance benefits, pension benefits and supplemental employment benefits can constitute seniority-based benefits, while vacation benefits do not. When drafting any policies concerning these types of payments, employers should consider the distinctions between the two benefit areas and avoid liability by providing employees (including military veterans as in this case) the pay to which they are properly entitled.