In a case of first impression, the Court of Appeals for the Second Circuit recently held that the Uniformed Services Employment and Reemployment Rights Act (“USERRA”) required a company to insure that a returning commission-based servicemember received earnings equal to his pre-deployment earnings, and that it was not sufficient to reemploy him at the same commission rate.

In Serricchio v. Wachovia Securities, LLC, 2011 WL 4035754 (C.A.2 (Conn.)), the plaintiff, who had been employed as a financial advisor, went on active duty with the US Air Force following the September 11, 2001 terrorist attacks. After being honorably discharged, the company reinstated him with the same commission rate, but did not give him a book of business equivalent to that which he had enjoyed before his military leave (many of his accounts had been assigned to other employees, some of whom had left the company). Instead, the company offered him a limited number of small accounts, a modest monthly draw of $2,000 per month which would be offset by any commissions earned, and the opportunity to make "cold calls" to rebuild his book of business.

The plaintiff filed suit, claiming that the company had violated USERRA by not paying him an amount equal to his pre-deployment earnings of at $75,000 per year. Under USERRA, the critical question with respect to reemployment rights is "whether the reemployment position offered — if not the same job the servicemember would have had but for the period of service — is of like seniority, status and pay to that position." The USERRA regulations add that "the rate of pay must be determined by taking into account any pay increases, differentials, step increases, merit increases, or periodic increases that the employee would have attained with reasonable certainty had he or she remained continuously employed during the period of service."

Before trial, the company moved for summary judgment on the basis that it had satisfied its obligations under USERRA by reinstating the plaintiff at the same commission rate that he enjoyed before he left, albeit without the same book of business. The district court denied the motion and a jury awarded the plaintiff backpay, liquidated damages, attorneys fees and pre-judgment interest in the amount of $1.64 million.

The district court also awarded equitable relief by ordering the company to fix the plaintiff’s salary at $12,500 per month for three months (an amount greater than his pre-deployment income) while he regained his broker’s licenses, to be followed by a nine-month period (at the same monthly amount) in which his income would be offset by any commissions he earned as he rebuilt his book of business.

On appeal, the Second Circuit upheld the district court's decision. With respect to the remedial order, the court reasoned in pertinent part as follows:

    The plain text of USERRA and the case law make clear, as the Department of Labor explained in its well-reasoned letter, that USERRA requires an employer to offer a servicemember returning to a financial advisor position the book of business he would have had but for his period of service. To the extent that the pre-service book of business is unavailable for one or more reasons, USERRA obligates the employer to take steps to restore the servicemember to a position of like "pay," which may include providing an interim salary while the servicemember rebuilds his book of business …. It is not enough … to offer the servicemember simply a minimal draw and the same commission rate as he received preservice without regard to his preservice book of business.
As a case of first impression, the Serricchio decision may be adopted by other courts facing similar issues while the ongoing draw-down in Iraq continues and more servicemembers return home. Indeed, the DOL certainly supports such an approach. Moreover, given the similarities between USERRA's remedial provisions and those in the FMLA, courts also may try to use the Serricchio approach in claims asserted by commission-based FMLA plaintiffs.

Accordingly, employers should carefully consider the terms under which returning commission-based servicemembers (and possibly other employees) are reinstated, and not limit the analysis to the applicable commission rate.