FedEx Faces Challenge of Pension Calculations Under USERRA

Two employees have filed a proposed class action lawsuit under the Uniformed Services Employment and Reemployment Rights Act (USERRA) on behalf of a class of current and former employees of Federal Express Corporation (FedEx) who did not receive the full pension and retirement contributions mandated by USERRA for the periods in which the FedEx employees took leave from FedEx to serve in the United States Armed Forces.

According to the lawsuit, because thousands of service members employed by FedEx regularly work hours and receive compensation that are not fixed, their compensation has been “not reasonably certain.” Under USERRA, contributions for employees’ whose compensation is “not reasonably certain” for periods of qualified military service must be calculated using a formula that measures each employee’s own average rate of compensation during the 12-month period immediately prior to the period of qualified military service. This formula is commonly called a “12-month look-back” rule.

The lawsuit claims that since 2002 FedEx and the pension plan defendants have applied a policy for making pension and retirement contributions for periods of qualified military service that did not comply with USERRA, because they did not apply the 12-month look-back formula that USERRA requires. Instead, FedEx has applied a formula that is not a true 12-month look-back to determine the pension and retirement contributions and credits of employees whose compensation is not reasonably certain.

FedEx’s formula multiplies the average rate of pay during the 12-month period before a period of military service by the number of hours the FedEx employee would have worked without taking into account overtime or other factors that would increase the number of hours the FedEx employee works. “For FedEx employees like [the plaintiffs] whose compensation is not reasonably certain because they often work more than 40 hours in a week and receive overtime compensation, FedEx’s compensation formula always—or nearly always—causes the employees to receive lower amounts of USERRA pension and retirement contributions and credits than the amounts that are required under USERRA’s 12-month look back rule for their periods of qualified military service,” the lawsuit states.

The plaintiffs request that the court declare that FedEx’s policy with respect to the formula by which the pension and retirement contributions or credits related to employees’ qualified military service were calculated by FedEx and the its two retirement plans violated the rights of [employees and former employees] under USERRA, and order that FedEx and the plans re-calculate pension and retirement benefits consistent with USERRA. In addition, the suit asks that FedEx fully compensate employees for the loss of benefits due to its violation of USERRA, among other things.