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
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.
Follow this link to read Employment Matters
for additional insights from Martha J. Zackin of Mintz Levin's Boston office.
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