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Military Members Slap FedEx With Pension Class Action

May 12, 2017 / Media Coverage / Law360 — Braden Campbell

Two U.S. military veterans filed a class action in Tennessee federal court Friday alleging that FedEx underestimates the pension obligations it owes workers for their periods of military service, days after a Sixth Circuit panel found that the company's formula violated federal law in an individual suit.

The shipping giant violates the Uniformed Services Employment and Reemployment Rights Act by basing its 401(k) match during service on the amount a worker would have made without considering overtime, under-contributing to the accounts of workers who regularly work more than 40 hours a week, service members Clifton Cunningham and Don Teed alleged Friday.

“FedEx’s formula always — or nearly always — causes the employees to receive lower amounts of USERRA pension or retirement contributions or credits than the amounts that are required,” the workers alleged. “As a result, Cunningham, Teed, other FedEx mechanics and other FedEx employees who have regularly worked extra hours beyond their ordinary shifts and earn overtime pay have received smaller pension and retirement contributions or credits than they were entitled to receive.”

Under USERRA, a company that employs military service members must make pension contributions covering the periods in which these workers take leave to serve. An employer like FedEx that provides a 401(k) plan must let workers retroactively contribute when they return from service and, if its program includes a match, contribute based on the amount the worker would have been paid should the worker take advantage of this catch-up provision.

For workers whose pay fluctuates or is “not reasonably certain,” USERRA requires a company to calculate its contributions based on the employee’s average compensation during the 12 months immediately before they left work for military service.

But rather than follow this rule, known as a “12-month look-back,” FedEx calculates its contributions based on the amount workers would have taken home at their hourly wage if they worked a regular workweek, the workers alleged. This dramatically underestimates their pay and reduces the company’s matching obligation to workers who regularly work overtime, they said.

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Though the calculation doesn’t uniformly harm every FedEx worker covered by USERRA, it can only ever reduce the amount owed to workers, noted Peter Romer-Friedman of Outten & Golden LLP, attorney for the workers.

“By only using the straight time hours and multiplying that by an hourly wage rate, it always results, mathematically, in the worker doing worse off if the worker regularly performs overtime,” he said.

The workers seek to represent a class of all current and former FedEx employees who since January 2002 participated in the company’s retirement plan, worked a variable weekly schedule and received a pension contribution for a period of military service at a rate of compensation less than they earned over the 12 months prior to their service.
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The workers are represented by Joseph A. Napiltonia of the Law Office of Joe Napiltonia and Peter Romer-Friedman of Outten & Golden LLP.

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The case is Clifton Cunningham et al. v. Federal Express Corporation in the U.S. District Court for the Middle District of Tennessee.       

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