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FedEx Must Face Pension Estimate Case, 6th Circ. Says

May 10, 2017 / Media Coverage / Law360 — Vin Gurrieri

The Sixth Circuit on Wednesday revived a FedEx aviation mechanic’s claim that his pension contributions were miscalculated for periods he was on military leave, but the court left intact the dismissal of his claim that the company fired him for complaining about the error.

In a published ruling, a three-judge panel partially vacated a ruling by U.S. District Judge S. Thomas Anderson of the Western District of Tennessee that awarded summary judgment to FedEx over claims that it violated the Uniformed Services Employment and Reemployment Rights Act when it miscalculated pension contributions for employee Kenneth Savage.

The panel held that the method used by FedEx to calculate Savage’s pension contributions while he as on military leave didn’t comport with the method outlined in USERRA. But the appellate court upheld Judge Anderson’s conclusion that FedEx would have fired Savage anyway, absent his complaint about his pension, for violating a company policy regarding the use of reduced shipping rates for employees and their families.

“Because we find that Savage has provided evidence to show that there is a genuine dispute of material fact as to whether FedEx correctly calculated his pension contributions under [USERRA], we reverse the district court’s grant of summary judgment on this claim, and remand for further proceedings,” the panel said.

Savage worked as an aviation mechanic at FedEx’s Memphis, Tennessee, hub for about 11 years, beginning in 2001, while simultaneously serving as a lieutenant in the U.S. Naval Reserve. While at FedEx, Savage participated in the FedEx Corporation Employees’ Pension Plan, a defined benefit plan that covered all eligible and participating employees.

In mid-2012, Savage claimed that he notified his manager, a human resources adviser and other individuals in FedEx’s benefit department and a third party that administered the plan about a discrepancy in his pension calculations.

Later that year, Savage was suspended with pay for purportedly violating a FedEx policy that gave employees and their spouses reduced-rate shipping for personal use but prohibited the discount for merchandise sold on eBay. Savage acknowledged he and his wife used the reduced the rate to ship goods they sold on the online auction site, court papers say. 

That disciplinary action occurred just over a month after Savage had completed a period of military service and less than a month after he complained to the FedEx Retirement Center about the calculation of his retirement benefits. He was fired shortly thereafter, according to court documents.

Following his termination, Savage filed a complaint with the U.S. Department of Labor’s Veterans’ Employment and Training Service, which conducted an investigation. Amid that probe, a lawyer in FedEx’s tax and employee benefits legal department discovered Savage’s imputed earnings for his military leaves were not captured for pension purposes and recalculated Savage’s earnings for each period of time he was on military leave.

The ousted employee sued FedEx in January 2014 alleging that the company didn’t correctly calculate his retirement benefits under USERRA because it didn’t accurately capture his potential overtime hours during his periods of military leave.

Savage also alleged that by terminating him for violating the reduced-rate shipping policy, FedEx discriminated against him for performing his military service and retaliated against him for complaining about the calculation of his pension benefits in violation of USERRA.

The district court, however, concluded that Savage couldn’t establish a prima facie case of discrimination or retaliation under USERRA, and that even if he had, FedEx proved it would have fired him absent any discrimination or retaliation.

In its ruling, the Sixth Circuit said that Savage had in fact presented enough evidence to meet the prima facie requirement.

Although it said some of the circumstantial evidence was a close call, the panel determined that the proximity between Savage’s pension contribution complaint and his firing, the company’s previous errors in making pension contributions for pilots who served in the military, and evidence that Savage was dealt with differently from others who violated the shipping policy were enough to clear the prima facie bar.

But where Savage’s discrimination and retaliation claims failed, according to the Sixth Circuit, was in showing that FedEx wouldn’t have fired him absent his military service or complaints about the calculation of his benefits. 

The evidence in the case, the panel said, showed that FedEx’s stated reason for firing Savage — his violation of the shipping discount policy — by itself would have led to take the same adverse action against him.

As to Savage's pension denial claim, the panel noted that the USERRA establishes a 12-month “look-back rule” to estimate employees' compensation for pension purposes during a period of military service in instances when their pay-rate isn’t clear, such as for workers who earn overtime pay or receive commissions.

Under the USERRA, employers must make pension contributions to workers serving in the military to ensure they receive the same benefits as if they had been continuously employed.

That rule requires an employer to calculate the worker’s compensation during military leave based on the average rate of compensation he or she received during the 12-month period immediately preceding military service.

In Savage’s case, FedEx used a calculation method that took into account an estimate for the number of hours he would have worked during the military leave period, which the panel said stood “at odds” with the USERRA’s look-back rule.

The panel agreed with Savage’s contention that it would be permissible to apply rates and hours during a period of military leave only if those rates or hours were known and fixed for the period of leave, but noted that “the record is clear” that Savage’s hours were not fixed and instead varied week to week since he frequently worked overtime.

“By basing part of the calculation on its estimate of the hours Savage would have worked during his periods of military leave, FedEx’s calculations may be inconsistent with the terms of USERRA,” the panel said. “While we have not previously interpreted the 12-month look-back rule … we find support for Savage’s position in other cases that have examined the statute.”

In a partial dissent, Circuit Judge Alice M. Batchelder said she would have ruled that Savage didn’t demonstrate that FedEx’s method of calculating his average rate of compensation for the purpose determining how much FedEx should contribute to his pension violated USERRA, but agreed that the court could consider Savage’s claim.

“FedEx engaged in a sensible, and statutorily permissible, method of calculating Savage’s average rate of compensation,” Judge Batchelder said. “Simply because FedEx might have used a method of calculation more favorable to Savage, does not mean that it failed to comply with USERRA.”

Savage's counsel during his appeal, Peter Romer-Friedman of Outten & Golden LLP, told Law360 Wednesday that he was glad the court reached the USERRA issue and "offered some guidance about what type of pension formulas are inappropriate" under the statute.

“We are heartened that the Sixth Circuit agreed with us that FedEx violated [Savage’s] pension rights under the USERRA law,” he said. “The overall narrative that the court portrayed shows that my client did the right thing to protect other workers under USERRA and was penalized as a result.”
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Circuit Judges Alice M. Batchelder, Jane Branstetter Stranch and Bernice B. Donald sat on the panel for the Sixth Circuit.

Savage was represented at the Sixth Circuit by Peter Romer-Friedman of Outten & Golden LLP and Kathryn Piscitelli.
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The case is Kenneth Savage v. Federal Express Corp. et al, case number 16-5244, before the U.S. Court of Appeals for the Sixth Circuit.

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