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USERRA Requires Employer to Provide Returning Employee Equivalent Amount of Pay Rather than Equivalent Rate of Pay

In a case of first impression, the United States District Court for the Second Circuit recently held that the law requires an employer to pay an employee returning from military service to a commission-based job the same total amount of pay he or she received prior to activation- the employer violates the law by returning the employee to the same commission pay plan if, by doing so, the employee receives less pay than before the call-up.

The Uniformed Services Employment and Reemployment Rights Act (“USERRA”) and the Family and Medical Leave Act (“FMLA”) both require employers to reinstate eligible employees to their original or equivalent positions following their return from qualified leave, with limited exceptions.  USERRA defines an “equivalent” position as one with “like seniority, status and pay.”  Under the FMLA, an “equivalent” position is one with “equivalent benefits, pay, and other terms and conditions of employment.”

In Serricchio v. Wachovia Securities LLC, the Second Circuit held that the employee was not returned to an “equivalent position,” where he earned less in commissions than he did before being called up, even though he was paid according to the same commission schedule as before. Michael Serricchio, an Air Force reservist, was employed by Wachovia as a financial advisor when he was called to active duty following September 11, 2001.  Before he was called up, Mr. Serricchio earned more than $200,000 per year, which amount was comprised of a minimal guaranteed salary and substantial commission-based income.  During the two years that he served, many of Mr. Serricchio’s accounts left Wachovia and those that remained were assigned to other financial advisors.  When Mr. Serricchio returned to Wachovia, he was offered a position at the same commission structure, without regard to his prior book of business and without any assistance in rebuilding his book.

A jury found that Wachovia violated USERRA by offering him a position at less overall compensation than he was earning at the time he left, albeit at the same commission rate as had then applied.  Following a bench trial on damages and injunctive relief, the district court ordered Wachovia to reinstate Mr. Serricchio as a financial advisor and to offer him a fixed salary for three months, to be followed by nine months during which time he would receive a significant monthly draw to be offset by any commissions earned, as he rebuilt his book of business.

We are aware of no other case where an employer has been ordered to reinstate an employee returning from military leave to a position earning a fixed salary greater than the contingent pay the employee earned before the leave.  And, although the case applies only to reinstatement under USERRA and has precedential value only in the Second Circuit, it is troubling to the extent that its reasoning may be applied to reinstatement under the FMLA and in other jurisdictions.  The case is also troubling because it seems to require employers to fashion some sort of individualized compensation scheme for commission-based employees returning from leave, but gives no further guidance as to how that scheme should be balanced and for how long it should be held in place.  It will be interesting to see how this develops.

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Martha Zackin