Military vets claim FedEx lowballed pension contributions in class action suit

By Tyson Fisher, Land Line staff writer | Thursday, May 18, 2017

A lawsuit has been filed in a Tennessee federal court alleging that FedEx denied military veterans full pension and retirement contributions required under the Uniformed Services Employment and Reemployment Rights Act (USERRA), court documents reveal.

Two plaintiffs who were in the military started working at FedEx in 2001 and regularly took leave for service over a period of more than a decade. According to the lawsuit, FedEx has unfairly lowballed retirement contributions for those on military leave since at least 2002.

USERRA provides that returning service members are re-employed in the job that they would have attained had they not been absent for military service, with the same seniority, status and pay, as well as other rights and benefits determined by seniority, according to the Department of Labor’s website.

Court documents show that FedEx is required by law to make pension contributions to employees for periods in which they are in military service. FedEx has been making such contributions based on fixed wages.

However, the lawsuit states thousands of FedEx employees receive compensation that is not fixed, including overtime. Therefore, contributions should be based on an individual’s average rate of compensation during the 12-month period immediately before military service, a formula referred to as a “12-month look-back.” Instead, FedEx simply multiplied the average pay rate for the previous 12 months by the number of hours the employee would have worked, ignoring possible overtime and other factors that can add to a paycheck.

The lawsuit claims that USERRA mandates employers to treat returning military members as if they had never left. Ignoring potential compensation beyond the pay rate violates that clause, plaintiffs argue.

Plaintiffs’ claims are not without merit. According the USERRA § 4318(b)(3):

For purposes of computing an employer’s liability under paragraph (1) or the employee’s contributions under paragraph (2), the employee’s compensation during the period of service described in subsection (a)(2)(B) shall be computed—

(A) at the rate the employee would have received but for the period of service described in subsection (a)(2)(B), or

(B) in the case that the determination of such rate is not reasonably certain, on the basis of the employee’s average rate of compensation during the 12-month period immediately preceding such period (or, if shorter, the period of employment immediately preceding such period).

Section B clearly states that average rate of compensation rather than average rate of pay should be used to calculate employer contributions when the employee’s paychecks fluctuate. This “12-month look-back” rule typically applies to workers who receive overtime, work varying hours, or are paid on commission.

Furthermore, just two days before the class action suit was filed, a judge panel for the U.S. Court of Appeals for the Sixth Circuit ruled that FedEx’s pension contribution calculations for military members were in direct violation of federal laws.

In January 2014, an aviation mechanic for FedEx who was also a lieutenant for the Navy Reserve filed an individual lawsuit making similar claims of unfair contributions and claimed that he was wrongfully terminated as retaliation for questioning the calculation. In February 2016, a district court judge ruled against both claims.

On May 10, an appellate court panel affirmed the district court’s ruling that the lieutenant was not wrongfully terminated. However, they reversed the ruling regarding unfair contributions, citing USERRA § 4318(b)(3). Two days later, a class action suit was filed.

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