According to the 8th U.S. Circuit Court of Appeals, the Uniformed Services Employment and Reemployment Rights Act (USERRA) requirement that a returning service member be reemployed in the position that he or she would have occupied had that employment not been interrupted by a military commitment does not preclude layoff or termination of a returning service member. Milhauser v. Minco Products, Inc., 8th Cir., No. 12-1756, December 5, 2012.

The clause that guarantees reemployment to returning service members often is referred to as the “escalator” principle, as it imagines the employee on the step of an escalator that continues to move up or down during the period of military leave. A returning service member does not return to the same position upon reemployment, but rather is placed into the position into which his or her “escalator step” has moved during the period of leave, and no better or no worse.

Douglas Milhauser worked as a maintenance technician at Minco Products beginning in 2006. During his employment, Milhauser’s performance was considered to be poor. His work was inconsistent, other employees complained about his attitude, and he received at least one written reprimand from his supervisors.

In 2008, customer orders began to decline, and Minco posted its first ever annual loss. When orders continued to decline in 2009, Minco began to take cost-cutting actions, including reducing overtime, pay cuts and, ultimately, reductions in its workforce. In March of 2009, Minco eliminated 18 jobs, with plans to cut 32 more in June.

Between 2007 and 2009, Milhauser was called to military duty three times. During his last deployment, Milhauser suffered a severe reaction to a vaccine, which ended his military service in May 2009. Milhauser reported back to Minco on June 3, 2009. During that same time period, Milhauser’s supervisor was asked to name four employees of the 13 who he supervised, to be considered for termination. The termination criteria was based on job duties, technical expertise, and certain subjective factors including attitude and work ethic. The supervisor included Milhauser in the recommended list for termination, partly on the basis that Milhauser’s areas of specialization duplicated those of other employees, and could be readily absorbed by the remaining technicians. Milhausen was dismissed in the second round of cuts, and was informed of that fact when he reported back to work on June 3.

Milhauser’s ensuing lawsuit against Minco went to trial, during which Minco presented evidence of Milhauser’s poor performance and the difficult economic conditions upon which the reductions in force were based. At trial, the jury found in favor of Minco. Milhauser appealed his claim that Minco had failed to provide reemployment as required by the USERRA. In the appeal, Milhauser argued that under the USERRA, termination was not a possible reemployment position.

The Eighth Circuit disagreed and upheld the jury’s verdict, finding that the jury’s decision – that Milhauser’s “position of employment” would have been terminated, even had he not left for military service – is entirely consistent with the USERRA. The escalator principle requires that an employee’s career trajectory be viewed as if uninterrupted by military duty. The regulations that implement the USERRA specifically state that “the escalator principle may cause an employee to be reemployed in a higher or lower position, laid off, or even terminated.”

Employers should not generalize this holding to mean that any returning serviceperson can be laid off or fired without cause. To the contrary, Milco’s success in this case was based at least in part on the fact that the business difficulties being faced by that company during the relevant period, and its responses to those difficulties in the form of spending cuts and layoffs, were fully documented. That documentation allowed the jury to come to the conclusion that Milhauser’s position would have been eliminated whether or not he had been away from work on a period of military leave. Once the jury reached that conclusion, it simply viewed the situation in the light of the escalator principle, and determined the company’s action to be consistent with the USERRA.