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With the continuation of major troop deployments overseas, increasing numbers of employers and employees are finding themselves affected by the protections of the Uniformed Services Employment and Reemployment Rights Act of 1994 ("USERRA"), which provides comprehensive re-employment and anti-discrimination rights to employees who serve in America's military.[FOOTNOTE 1] Employees who seek to vindicate their rights under USERRA, however, are finding themselves at the center of a conflict among federal courts concerning whether USERRA claims may be subject to their employers' mandatory arbitration clauses.[FOOTNOTE 2] While most civil rights and employment discrimination claims have been found to be subject to the Federal Arbitration Act's policy of enforcing contractual agreements to arbitrate, courts disagree as to whether USERRA claims are exempt from this policy. The majority of federal courts have concluded that contracts to arbitrate USERRA claims are enforceable, but a pair of courts have held to the contrary, drawing support from USERRA's unusual statutory text and legislative history. This article addresses the current division on this issue.

I. USERRA AND MILITARY RECRUITING

USERRA contains an anti-discrimination provision and accompanying anti-retaliation provision that are similar to provisions in other civil rights statutes.[FOOTNOTE 3] But USERRA also offers service members re-employment rights, which, by contrast, are rather unusual creatures. An employee who must be absent from work because of military service lasting less than five years in cumulative length can claim a right to be rehired by the original employer after the service is concluded by giving adequate advance notice of the service.[FOOTNOTE 4] If qualified, the employee is entitled not only to his or her old position, but to the position that the employee would have had at the time of re-employment had the employee never left.[FOOTNOTE 5] If the employee has been gone for more than 90 days, the employer can offer, instead of the position the employee would have had, "a position of like seniority, status and pay."[FOOTNOTE 6] If the employee is not qualified to perform the job to which he or she would otherwise be entitled, whether due to a disability suffered in the war or some other reason, a complex series of provisions nonetheless give the employee the best job for which he or she is qualified.[FOOTNOTE 7] Ideally, therefore, USERRA should ensure that military service does not subject employees to any long-term employment-related opportunity costs, let alone deliberate workplace discrimination.

The uniqueness of USERRA's re-employment right reflects a significant difference between USERRA and most other employment discrimination statutes: it seeks not only to prevent invidious discrimination, or to integrate into society those that have been irrationally excluded from it, but also to protect a federal interest in military recruitment. The decision to serve in America's military is not made in a patriotic vacuum. Potential recruits will weigh the opportunity to serve one's country and the offered salary against the costs and risks of military service. For those who do not seek a lifelong military career, the costs include the forgone opportunity for advancement in civilian employment. By putting employers to the expense of rehiring soldiers once their service is concluded, USERRA serves to "eliminat[e] or minimiz[e] the disadvantages to civilian careers and employment which can result from [military] service," thus "encourag[ing] noncareer service in the uniform services."[FOOTNOTE 8] In other words, USERRA is not only an anti-discrimination measure, but a tax measure: By imposing rehiring duties on employers, the federal government can more cheaply afford a large military reserve.[FOOTNOTE 9]

Consequently, USERRA has become increasingly important as the risks of military service have increased. America's simultaneous wars in Iraq and Afghanistan have put potential recruits on notice that enlistment will likely lead to combat deployment in a guerilla war, carrying a serious risk of injury and death. In recent years, military recruiters have struggled to meet their targets[FOOTNOTE 10], despite relaxing their recruiting standards[FOOTNOTE 11] and providing other unusual incentives for enlistment.[FOOTNOTE 12] With enlistments falling short, the military has been relying heavily on its reserve forces. Members of the Army Reserve and National Guard have had their contractually agreed-to terms of service extended under the president's "stop-loss" authority,[FOOTNOTE 13] and Army Reserve officers find that resignations from the service are not being accepted.[FOOTNOTE 14]

The protection of USERRA is particularly important in this recruiting environment, especially given the heavy use of reserve troops who seek a long-term civilian career. The Pentagon's Office of Employer Support of the Guard and Reserve, which aids employees in exercising their rights under the act, received more than13,000 calls for assistance in 2007, and almost 8,000 in the first half of 2008.[FOOTNOTE 15] Compliance with the statute is made especially expensive by stop-loss orders, which make it difficult to predict when serving employees will be able to rejoin the civilian work force.[FOOTNOTE 16]

 

II. USERRA AND ARBITRATION

With resort to USERRA claims on the rise, it is increasingly important to understand whether agreements to arbitrate USERRA claims (usually made as part of an agreement to arbitrate all claims between employer and employee) are enforceable. Agreements to arbitrate are generally governed by the Federal Arbitration Act, under which they are "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."[FOOTNOTE 17] Congress can except certain types of agreements from the reach of the FAA, intending to forbid parties to waive a judicial forum for certain claims.[FOOTNOTE 18] When Congress does so, however, the intention "will be discoverable in the text of the [federal statute giving rise to the claim], its legislative history, or an inherent conflict between arbitration and [the statute]'s underlying purposes."[FOOTNOTE 19] All else being equal, there will not be a conflict between a federal statute and agreement to arbitrate claims arising under the statute; the right to a judicial as opposed to an arbitral forum is procedural rather than substantive, and, generally speaking, such a procedural right can be voluntarily waived.[FOOTNOTE 20]

A. Two Federal Trial Courts: USERRA's Pre-emption Provision Invalidates Contractual Limitations on Procedural Rights, Including Agreements to Arbitrate.

Two federal trial courts have concluded that contracts to arbitrate USERRA claims are invalid, mustering arguments from USERRA's text and legislative history. Both rely in part on USERRA's unusual pre-emption provision:

This chapter supersedes any State law (including local law or ordinance), contract, agreement, policy, plan, practice or other matter that reduces, limits or eliminates in any manner any right or benefit provided by this chapter, including the establishment of additional prerequisites to the exercise of any such right or the receipt of any such benefit.[FOOTNOTE 21]

Most statutory pre-emption provisions do not serve to pre-empt the FAA or invalidate arbitration agreements.[FOOTNOTE 22] But this provision contains singular language; there is nothing quite like it anywhere else in the United States Code. In particular, there is no obvious non-USERRA context in which courts speak of the invalidation of "additional prerequisites to the exercise" of a right.

 

The court in Lopez v. Dillard's, Inc.[FOOTNOTE 23] concluded that an agreement for binding arbitration of a USERRA claim constituted an "additional prerequisite[]" to the exercise of a USERRA right, and was thus invalid. Such an agreement "mandates that before exercising her rights under USERRA and obtaining the relief to which she is entitled thereunder, plaintiff must participate in an arbitration proceeding."[FOOTNOTE 24] Because USERRA itself did not provide for arbitration, that meant that the agreement served to "limit" the employee's right by placing an "additional prerequisite" (arbitration) in the way of the exercise of rights under USERRA.[FOOTNOTE 25] The Lopez court denied an FAA motion to compel arbitration on the basis of the provision.

 

Another court, in Breletic v. CACI, Inc.-Federal[FOOTNOTE 26] , observing that the pre-emption provision was ambiguous as to whether arbitration agreements were invalid, concluded that they were invalid on the basis of explicit legislative history to that effect. The House Committee on Veterans' Affairs report concerning the legislation that eventually became USERRA specifically interpreted this provision to invalidate contracts for binding arbitration:

Section 4302(b) would reaffirm a general pre-emption as to State and local laws and ordinances, as well as to employer practices and agreements, which provide fewer rights or otherwise limit rights provided under amended chapter 43 or put additional conditions on those rights. ... Moreover, this section would reaffirm that additional resort to mechanisms such as grievance procedures or arbitration or similar administrative appeals is not required. It is the Committee's intent that, even if a person protected under the Act resorts to arbitration, any arbitration decision shall not be binding as a matter of law.[FOOTNOTE 27]

The House Committee's language suggests, quite clearly, that it thought USERRA would invalidate a contract for "binding" arbitration of USERRA claims. Although there is no equivalent Senate committee report, the Breletic court concluded that the House report was enough to resolve ambiguity in USERRA's pre-emption provision in favor of invalidating arbitration agreements.[FOOTNOTE 28]

Finally, though neither court relied on a conflict between arbitration and the structure or purpose of USERRA, one might exist. As noted above, USERRA is not only a civil rights statute, but also a military recruitment measure; its success may be gauged not only by whether soldier-employees are given a fair opportunity to challenge any discrimination they face in the workplace, but also by how many employees agree to become United States reserve soldiers. Arbitration gives employees a fair shake, but it may not be as advantageous to them as court adjudication. If, as a practical matter, most employees likely to become reservists become subject to binding arbitration agreements with their employers, it might render the protections of USERRA less valuable and increase the costs of soldiering. Invalidating arbitration agreements and putting employers into a less favorable litigating position would then further USERRA's recruitment purpose: it would tax employers to make service as a reserve soldier more attractive, swelling the military's ranks.

B. The 5th and 6th Circuits' View: USERRA Should Not Be Unlike Other Civil Rights Statutes.

Despite the foregoing reasons to conclude that USERRA invalidates agreements to arbitrate USERRA claims, the majority of courts, including both the 5th and 6th circuits, the only federal courts of appeal to address the question, have concluded that USERRA claims can be arbitrated like any others.

In Garrett v. Circuit City Stores, Inc.[FOOTNOTE 29], for instance, the 5th Circuit rejected a plaintiff's argument that USERRA invalidated his agreement to arbitrate a USERRA claim with his employer. The court held that USERRA's pre-emption provision did not evidence a congressional intent to preclude arbitration, concluding that arbitration did not involve the waiver of any substantive rights protected by USERRA.[FOOTNOTE 30] However, the court relied heavily on opinions addressing other statutes, and did not specifically address the unusual language in USERRA forbidding the "establishment of additional prerequisites to the exercise of any" USERRA right. The court went on to dismiss the House Report's statement that USERRA forbade binding arbitration, stating that "legislative history should rarely be used in statutory interpretation," and that any legislative history concerning arbitration was probably limited to the context of union collective bargaining agreements.[FOOTNOTE 31] Finally, the court concluded that there was no "inherent conflict between arbitration and USERRA's underlying structure and purposes."[FOOTNOTE 32] In reaching this conclusion, the court focused on the differences in procedures used in the proposed arbitration and in federal court, concluding that the plaintiff had failed to show "that arbitration under Circuit City's rules would fail to allow a fair opportunity to present his claims."[FOOTNOTE 33]

The 6th Circuit reached the same conclusion in Landis v. Pinnacle Eye Care, LLC,[FOOTNOTE 34] following the reasoning of the Garrett court step by step. It also featured a concurring opinion by Judge Cole, which is worthy of note for specifically addressing the "additional prerequisites" language in the USERRA pre-emption provision. Reasoning that given the modern judiciary's fondness for arbitration, Congress could only invalidate arbitration agreements "with language that is unmistakably clear," [FOOTNOTE 35] Cole suggested that the phrase "prerequisite" referred only to nonbinding arbitration or other procedures that precede a final adjudication, rather than binding arbitration, which is itself a final adjudication:

Section 4302(b) precludes an employer from requiring an employee to submit to arbitration, mediation, or any grievance procedure as a prerequisite to filing suit in federal court. I presume that, in so doing, Congress intended employees, not employers, to dictate the method or forum in which they pursue their rights under USERRA. But now, if an employee's contract requires him or her to substitute federal court with arbitration, the employee has no choice but to do so. In other words, if Landis' contract required him to arbitrate any employment dispute under USERRA before bringing suit in federal court, Section 4302(b) expresses an opinion that such an arbitration would be hostile to USERRA's underlying structure and purpose. Yet if Landis's contract requires him to waive his right to federal court altogether, we must defer to the strong federal policy favoring arbitration.[FOOTNOTE 36]

Calling this result "incongruous," Cole nonetheless suggested that it was required by the "plain language" of the pre-emption provision.[FOOTNOTE 37]

However, Cole's interpretation of the phrase "prerequisite" as referring only to nonbinding arbitration is not necessarily as compelling as his concurrence suggests. The judge's interpretation takes "prerequisite" in its most literal sense, to refer to events that are required ("-requisite") to occur before, in the sense of temporally earlier than, the exercise of a USERRA right ("pre-"). Attention to the strictest meaning of a word can sometimes be valuable, but "prerequisite" has acquired a broader (and sloppier) common use as a synonym for "requirement," referring to an event or condition that must occur in order for another event or condition to occur, regardless if the two occur at the same time or even are, in some sense, different ways of describing the same event or condition. It is this use of "prerequisite" that courts deploy when, for instance, referring to 11th Amendment sovereign immunity as a "prerequisite" to a jurisdictional inquiry[FOOTNOTE 38], or to an inadequate jury instruction as a "prerequisite" to a meritorious claim of error.[FOOTNOTE 39]

If it is possible to read USERRA as using "prerequisite" in this sense of a logical requirement, one might argue that the context and purpose of the statute suggest this reading is more persuasive. While delay in adjudication could be particularly difficult for an unemployed veteran in need of a livelihood[FOOTNOTE 40], procedures that affect the ultimate disposition of the case could be seen as equally serious. Indeed, Cole himself admitted that the distinction he saw between binding and nonbinding arbitration was "incongruous."[FOOTNOTE 41]

While none of these arguments are necessarily conclusive, their combined force demonstrates that arguments that USERRA invalidates arbitration agreements are likely to persist, despite the current weight of precedent favoring arbitration. The House of Representatives is currently considering legislation which would, among other things, remove any ambiguity from the statute and explicitly establish that agreements to arbitrate USERRA claims are outside of the reach of the FAA and invalid.[FOOTNOTE 42] But absent an amendment to USERRA's pre-emption provision, the judiciary will continue to grapple with these close questions.

CONCLUSION

Although the majority of courts have concluded that employers and employees may agree to submit claims under USERRA to binding arbitration, there remain strong textual and policy arguments that USERRA pre-empts such agreements in order to reduce the cost of military service and encourage civilian workers to join America's military reserve. Until such time as the ambiguity in the statute is resolved by the Supreme Court or Congress, employers will do well to rely on the balance of existing precedent and draw comparisons to other civil rights statutes, while employees should focus on the peculiar language of USERRA's pre-emption provision and stress its role in military recruitment.

Howard S. Suskin is a litigation partner in the Chicago office of Jenner & Block LLP. Benjamin J. Wimmer is an associate in that office.

:::::FOOTNOTES:::::

FN1 38 U.S.C. §§4301 et seq.

FN2 Employees are protected if part of the "uniformed services," defined to include, among other things, the United States Armed Forces (including the Army Reserve) and the Army and Air National Guards. 38 U.S.C. §4303(16).

FN3 See 38 U.S.C. §4311.

FN4 Id. §4312(a). For a comprehensive but basic explanation of USERRA re-employment rights, see Nancy Bloodgood & Brian L. Quisenberry, "From War to Work: USERRA's Newly Issued Rules Provide Guidance to Employers," Fed. Law. Oct. 2006, at 38.

FN5 Id. §4313(a)(1)(A).

FN6 Id. §4313(a)(2)(A).

FN7 See, e.g., Id. §§4313(a)(1)(B), (a)(2)(B), (a)(3)-(4).

FN8 38 U.S.C. §4301(a)(1).

FN9 See Maj. Michele A. Forte, "Reemployment Rights for the Guard and Reserve: Will Civilian Employers Pay the Price for National Defense?" 59 A.F. L. Rev. 287, 335-342 (2007) (discussing the burdens USERRA places on employers).

FN10 See, e.g., Peter Spiegel, Army misses recruiting target by 7%, L.A. Times, June 12, 2007, at A13; Damien Cave, Vital Military Jobs Go Unfulfilled, Study Says, N.Y. Times, Nov. 18, 2005, A4 (noting that the military's successful general recruitment effort masked large shortfalls in critical combat specialist positions); see also Michael Kilian, Army Study: U.S. facing hard choices, Chi. Trib., July 12, 2005, at C9 (describing Army report detailing the strain that the simultaneous Afghan and Iraqi wars placed on the military).

FN11 See, e.g., Tom Bowman, "Army Is Enlisting More Low-Scoring Recruits," L.A. Times, Dec. 16, 2005, at A23.

FN12 See, e.g., Josh White, "Many Take Army's 'Quick Ship' Bonus," Wash. Post, Aug. 27, 2007, at A01 (describing the Army's offer of a $20,000 bonus to recruits willing to leave for basic training within a month); Spiegel at A13, supra n.10 (detailing bonuses paid for particular job specialties or extended terms of service); AP, "Army Guard Refilling Its Ranks," Wash. Post., Mar. 12, 2006, at A01 (describing a $2,000 bonus offered to Guard members for enlisting new members).

FN13 See 10 U.S.C. §12305(a) ("[D]uring any period members of a reserve component are serving on active duty. ... the President may suspend any provision of law relating to promotion, retirement, or separation applicable to any member of the armed forces who the President determines is essential to the national security of the United States."); see also Hannah Dyer, "Keeping Faith: the United States Military Enlistment Contract and the Implementation of Stop-Loss Measures," 34 Pepp. L. Rev. 791 (2007) (describing the use of stop-loss authority in the First and Second Gulf Wars, and describing various legal challenges to the use of that authority).

FN14 See Cpt. Elizabeth Cameron Hernandez, "The United States Army Reserve: Welcome to the Hotel California We Are All Just Prisoners Here," 12 Roger Williams U. L. Rev. 904, 914-16 (2007) (describing a policy implemented on December 17, 2004, under which resignations from Army Reserve officers will be accepted only if the officer served in Operations Noble Eagle, Enduring Freedom or Iraqi Freedom, if the officer provides "compelling personal reasons" for resigning, or if the officer belongs to a rank and specialty overstaffed by fifty percent). Additionally, resignations are automatically refused for any officers subject to a stop-loss order. Id. at 916.

FN15 Pam Belluck, "After Duty, New Chance for Old Job," N.Y. Times, June 21, 2008, at A11.

FN16 See Konrad S. Lee, "When Johnny Comes Marching Home Again" Will He Be Welcome at Work? 35 Pepp. L. Rev. 247, 250 (2008) ("Some reservists are called up for duty repeatedly, making it hard for some employers to plan budgets and strategies.").

FN17 9 U.S.C. §2.

FN18 Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991).

FN19 Id. (internal quotation marks omitted).

FN20 Id. at 29 (citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985)).

FN21 38 U.S.C. §4302(b).

FN22 See Lopez v. Dillard's, Inc., 382 F. Supp. 2d 1245, 1249 (D. Kan. 2005) (collecting statutes).

FN23 382 F. Supp. 2d 1245 (D. Kan. 2005).

FN24 Id. at 1248.

FN25 Id.

FN26 413 F. Supp. 2d 1329 (2006).

FN27 H.R. Rep. No. 103-65(I), at 20 (1993), reprinted in 1994 U.S.C.C.A.N. 2449, 2453 (citations omitted).

FN28 Breletic, 413 F. Supp. 2d at 1336-37.

FN29 449 F.3d 672 (5th Cir. 2006).

FN30 Id. at 677-78.

FN31 Id. at 679.

FN32 Id. at 680.

FN33 Id. at 681.

FN34 537 F.3d 559 (6th Cir. 2008).

FN35 Id. at 565.

FN36 Id. at 564.

FN37 Id.

FN38 United States ex rel. Long v. SCS Bus. & Tech Inst., 173 F.3d 890, 894 (D.C. Cir. 1999).

FN39 United States v. Easley, 994 F.2d 1241, 1246 (7th Cir. 1993)

FN40 See, e.g., McKinney v. Mo.-Kan.-Tex. R.R. Co., 357 U.S. 265, 270 (1958) (discussing Universal Military Training and Service Act, stating that "delay in the vindication of re-employment rights might often result in hardship to the veteran and the defeat, for all practical purposes, of the rights Congress sought to give him").

FN41 Landis, 537 F.3d at 564.

FN42 Reservist Access to Justice Act, H.R. 3393, 110th Cong. §3 (2007) (amending 38 U.S.C. §4432 to include the language: "Chapter 1 of title 9 [that is, the FAA] shall not apply with respect to employment or re-employment rights or benefits claimed under this subchapter").