Richard S. Cleary, Editor
Greenebaum Doll & McDonald PLLC

Vol. 18, No. 8
May 2008

MILITARY SERVICE

Willful USERRA violation costs company $83,000

A company's willful disregard of the Uniformed Services Employment and Reemployment Rights Act (USERRA) recently resulted in liquidated and punitive damages.

Facts

Kevin Koehler worked for PepsiAmericas, Inc., as a Cincinnati-based route salesman. He enlisted in the Army Reserves in January 2002 for an eight-year contract and served on active duty from March to August 2002. When he returned from active duty, the company charged him with attendance infractions related to his military absences. After he met with the HR manager and his commanding officer, the company agreed that the attendance points shouldn't have been assessed, but the parties disagreed about whether he was entitled to pay coordination while on active duty.

The company's pay coordination policy was designed to pay the difference between an employee's customary civilian pay and his army active-duty compensation. The HR manager committed that the company would make the payment, and more than $16,000 was deposited into Koehler's bank account. Four days later, however, the same amount was withdrawn. When Koehler complained, an HR official told him, "We changed our minds, you don't deserve anything, you can let your attorney speak to our attorney."

The claim

Koehler filed a lawsuit in U.S. federal court alleging a violation of USERRA for the denial of pay coordination. He also filed claims for breach of contract and the unauthorized withdrawal from his bank account under state law.

The court found that the company's failure to provide Koehler pay coordination after its oral commitment to do so (along with its policy providing such) was a violation of USERRA. Pepsi was ordered to pay $16,962.86 in back pay. Because the violation was found willful, the company was ordered to pay an equal amount in liquidated damages. The court also agreed that the company breached its contract when it broke its promise to provide pay coordination and that the unauthorized withdrawal from Koehler's bank account was an improper conversion of his property. That conversion cost Pepsi an additional $50,000 in punitive damages. Pepsi appealed to the Sixth Circuit, which affirmed the trial court's decision in its entirety.

Liquidated damages under USERRA

The court noted that USERRA provides that liquidated damages equal to actual damages may be awarded for a willful violation of USERRA. Willfulness isn't defined in the Act, but the court held that other decisions have found that liquidated damages are appropriate "where an employer's conduct showed a willful disregard for the question of whether its conduct was unlawful." The Sixth Circuit agreed with the trial court that Pepsi's conduct met that standard. Koehler v. PepsiAmericas, Inc., 2008 WL 628925 (6th Cir., 2008).

Bottom line

You should be particularly cautious whenever an employee is on leave for military duty. To ensure your compliance with USERRA, start by making sure you're in compliance with your own company policies.

Copyright 2008 M. Lee Smith Publishers LLC

KENTUCKY EMPLOYMENT LAW LETTER does not attempt to offer solutions to individual problems but rather to provide information about current developments in Kentucky employment law. Questions about individual problems should be addressed to the employment law attorney of your choice.