FedEx employee terminated for using discount to sell on eBay loses USERRA termination challenge but can seek higher pension benefits
Kenneth Savage was terminated by FedEx about a month after a military leave and after complaining about the calculation of his pension benefits due to his military service. That proximity was not enough to establish a discrimination or retaliation claim under the Uniformed Services Employment and Reemployment Rights Act (USERRA). Savage’s case was remanded because FedEx may have miscalculated his pension benefits by failing to account for potential overtime hours he might have worked during periods of military service.
Kenneth Savage was employed by FedEx for eleven years as an aviation mechanic. During that same time, he served as an officer in the Navy Reserve. Throughout his employment, FedEx allowed Savage leave for military duties and permitted him to complete military computer training while at work. In 2012, Savage began complaining about the calculation of his pension benefits as it related to breaks in service for military leave.
FedEx prohibits its employees from using their discounted shipping rate for any commercial purpose, including the sale of personal items on eBay. Savage used his employee discount 90 times in a six-month period, triggering an automatic audit. He was suspended and later terminated for violating the discount shipping policy. The suspension came only 34 days after a military leave and less than a month after a complaint about the calculation of his pension benefits.
Savage first challenged FedEx’s actions through the Department of Labor Veterans’ Training Service (DOL-VETS), which determined that his pension benefits were incorrectly calculated for periods of military leave. Then, FedEx recalculated his benefits.
In Savage v. Fed. Express Corp., Sixth Circuit No. 16-5244, Savage challenged his termination under USERRA’s discrimination and retaliation provisions, which protect members of the military from adverse employment decisions based on interruptions to their employment from military service. Savage also asserted that, even after the recalculation of his benefits, they did not account for potential overtime hours he might have worked during periods of military leave. A federal district court dismissed all claims.
USERRA retaliation claim
A three-judge panel of the Sixth Circuit held that FedEx did not discriminate against Savage for his military service and did not retaliate against him for complaining about his pension benefit calculation. The court held that, even with the close proximity between (a) his last military leave and his complaints about his pension benefits and (b) his termination (33-41 days), FedEx showed that it would have taken the same employment action even without the military service because Savage was investigated as a result of a neutral computer-generated audit conducted by investigators who were unaware of Savage’s military service or pension complaints. Notably, the court reached this holding despite the fact that Savage was able to point to employees without military service who were issued warning letters and not terminated for violating the shipping discount policy.
USERRA pension claim
Section 4318 of USERRA requires employers to make pension contributions to employees to ensure that they receive the same benefits that they would have if they had been continuously employed. When the rate is uncertain, USERRA requires employers to use a 12 month look back period to determine the average rate of compensation to apply to the leave period for making pension contributions.
After the DOL investigation, FedEx applied a complicated formula to calculate Savage’s pension contributions. First, FedEx calculated his average rate of pay during the 12 months prior to each period of service, which included shift differential pay, overtime pay and premium license pay. Second, it used that rate to calculate imputed earnings based on his scheduled hours. Savage claimed that FedEx should have based his pension contributions on the average compensation earned for all hours worked in the twelve months prior to the leave, which he argued would have accounted for potential additional shifts and overtime that he might have worked beyond his scheduled hours.
Although FedEx designed the formula to more reliably evaluate when Savage would have been assigned to work had he not been on military leave, the court rejected the calculations. Instead, the court agreed with Savage, holding that, where compensation for pension purposes is not certain, employers must look back and determine the average pay rate and hours over the prior 12 months and apply it to the military leave period. One judge dissented in this part of the opinion, reasoning that FedEx had no obligation to calculate overtime hours that an employee might have worked because the average rate of pay built in differential pay, overtime pay and other increases that might not have been applicable for the periods that Savage missed while out on military leave.
Employers in the Sixth Circuit should review their methods of calculating employer-provided retirement contributions for employees to ensure that their calculation method complies with the method approved in Savage. Employers also should exercise caution whenever terminating (or taking other adverse action against) an employee within approximately a few months of a military leave because it is likely to be viewed as sufficient temporal proximity to set forth a prima facie case of retaliation. Employers should ensure that the legitimate non-discriminatory reason for the termination is supported by comparable terminations or other objective evidence to rebut a potential showing of pretext.