LAW REVIEW 1067
My Big Bank Will Be Taken Over by Bigger Bank
By Captain Samuel F. Wright, JAGC, USN
220.127.116.11—Successors in Interest
18.104.22.168—Continuous Accumulation of Seniority-Escalator Principle
I am an Army Reserve officer and ROA member. I have read with great interest your “Law
Review” articles about the Uniformed Services Employment and Reemployment
Rights Act (USERRA), available at www.roa.org/law_review. I expect to be called to active
duty for a year, from January 2011 to January 2012.
I work for Big Local Bank (BLB),
which has 80 branches, all in this state.
BLB is being bought out and taken over by Big National Bank (BNB), which
has more than 800 branches nationwide but currently has only 11 branches in
this state. BNB has grown tremendously
in recent years by taking over small and intermediate sized banks to gain
market share in new states and cities.
The sale of BLB to BNB is likely to
be finalized in March or April 2011, about three months after I leave to go to
Afghanistan on active duty. When I
return from active duty in January 2012, will I have reemployment rights at
Yes, if BNB
qualifies as the “successor in interest” to BLB. Based on your description, it seems clear
that BNB will be the successor in interest and will inherit BLB’s obligation to
reemploy you under USERRA. This assumes,
of course, that you meet the USERRA eligibility criteria. You must have left the civilian job for the
purpose of performing voluntary or involuntary service in the uniformed
services, and you must have given the pre-service employer (BLB) prior oral or
written notice. Your cumulative period
or periods of uniformed service, relating to your BLB-BNB employment, must not
have exceeded five years. If this is an
involuntary call-up, it does not count toward your five-year limit. You must have been released from the period
of service without having received a punitive (by court martial) or other than
honorable discharge, and you must have made a timely application for
reemployment after release. It seems
quite likely that you will meet these criteria.
enacted USERRA in 1994, as a long-overdue recodification of the Veterans’
Reemployment Rights Act (VRRA), which goes back to 1940. USERRA is codified in title 38, United States
Code, sections 4301-4335 (38 U.S.C. 4301-4335).
of USERRA defines 16 terms used in this law, including the term
“employer.” That definition includes
“any successor in interest to a person, institution, organization, or other
entity referred to in this subparagraph.”
38 U.S.C. 4303(4)(A)(iv).
not define the term “successor in interest” but the term is addressed in
USERRA’s legislative history, as follows:
“This provision [the definition of “employer”] would also have the
effect of placing liability on a successor in interest, as is true under
current law. The Committee [House
Committee on Veterans’ Affairs] intends that the multi-factor analysis utilized
by the court in Leib v. Georgia-Pacific
Corp., 925 F.2d 240 (8th Cir. 1991) is to be the model for
successor in interest issues, except that the successor’s notice or awareness
of a reemployment rights claim at the time of merger or acquisition should not
be a factor in this analysis. In actual
practice, it is possible that the successor would not have notice that one or
more employees are absent from employment because of military responsibilities
and a returning service-person should not be penalized because of that lack of
notice.” House Rep. No. 103-65, 1994 United States Code Congressional &
Administrative News 2449, 2454.
officials work with BNB officials to finalize the details of this acquisition,
it is unlikely that the BLB officials will divulge: “We have an employee, Jane Doe, who is away
from work for about a year serving in the Army in Afghanistan. Jane is scheduled to return in about January
2012.” The fact that BNB was not aware
of your potential USERRA claim at the time of the acquisition should not be a
factor in determining your reemployment rights at BNB.
of USERRA (38 U.S.C. 4331) gives the Secretary of Labor the authority to promulgate
regulations about the application of USERRA to state and local governments and
private employers. The Department of
Labor (DOL) published proposed USERRA regulations in September 2004, for notice
and comment. After considering the
comments received and making a few minor adjustments, DOL published the final
USERRA regulations in the Federal
Register on December 19, 2005. Those
regulations are now published in title 20 of the Code of Federal Regulations
(C.F.R.), in Part 1002. The regulations
address the successor in interest issue as follows:
Section 1002.35. Is a successor in interest an employer
covered by USERRA?
definition of “employer” includes a successor in interest. In general, an employer is a successor in
interest when there is a substantial continuity in operations, facilities, and
workforce from the former employer. The
determination whether an employer is a successor in interest must be made on a
case-by-case basis using a multi-factor test that considers the following:
a. Whether there has been a substantial
continuity of business operations from the former to the current employer;
b. Whether the current employer uses the
same or similar facilities, machinery, equipment, and methods of production;
c. Whether there has been a substantial
continuity of employees;
d. Whether there is a similarity of jobs
and working conditions;
e. Whether there is a similarity of
supervisors or managers;
f. Whether there is a similarity of
products or services.
Section 1002.36. Can an employer
be liable as a successor in interest if it was unaware that an employee may
claim reemployment rights when the employer acquired the business?
In order to be a successor in interest, it is not necessary for an
employer to have notice of a potential reemployment rights claim at the time of
the merger, acquisition, or other form of succession.
20 C.F.R. 1002.35, 1002.36 (bold
headings in original).
Applying these principles, it seems
likely that a court would find that BNB is the successor in interest to BLB and
that BNB has the obligation to reemploy you, upon your return from active duty.
Q: BNB currently has only 11
branches in my state. Unfortunately for
me, one of those branches is right across the street from the BLB branch where
I work. That BNB branch is considerably
larger and newer than the BLB branch where I work. It seems likely that BNB will retain most of
the acquired BLB branches, but the particular branch where I work will likely
close. If the BLB branch where I work is
closed by the time I return from active duty in January 2012, what effect will
that have on my reemployment rights?
What can I do to protect my rights while I am deployed to Afghanistan?
A: If you meet the USERRA eligibility criteria, and if
BNB qualifies as the successor in interest to BLB, BNB will be required to
reemploy you “in the position of employment in which the person [you] would have been employed if the
continuous employment of such person had not been interrupted by such service,
or a position of like seniority, status, and pay, the duties of which the
person is qualified to perform.” 38
U.S.C. 4313(a)(2)(A) (emphasis supplied).
In its first case construing the
VRRA, the Supreme Court enunciated the “escalator principle” when it held: “The returning veteran does not step back on
the seniority escalator at the point he stepped off. He steps back on at the precise point he
would have occupied had he kept his position continuously during the war.” Fishgold
v. Sullivan Drydock & Repair Corp., 328 U.S. 275, 284-85 (1946). Section 4316(a) of USERRA [38 U.S.C. 4316(a)]
codifies the escalator principle in the current reemployment statute.
It has always been the case that the
escalator can descend as well as ascend.
The reemployment statute does not protect you from a bad thing (like a
layoff or reduction in force) that clearly
would have happened anyway even if you had not been on active duty at the
Let us assume that you are the chief
teller of the BLB branch, and that branch closes after BNB takes over BLB. When you return from active duty in January
2012, you find that the BLB branch where you had worked has been turned into a
fast food restaurant. The question then
becomes: “What would have happened to Jane Doe’s job if she had not been on active
duty in Afghanistan at the time BNB took over BLB?” To answer that question, we will need to look
to what happened to the other BLB employees of the branch that closed, and what
happened to the chief tellers of other BLB branches after the takeover.
During the time that you are on
active duty, and especially after the BNB takeover of BLB, there will likely be
a lot of upheaval in the employment at the BLB branches. There will be opportunities to apply for new
BNB jobs that come open. You should
apply for those jobs as the opportunities are announced. If BNB refuses to hire you on the grounds
that you are not immediately available to start work (because you have months
left to go on your deployment) that would amount to a clear violation of
section 4311 of USERRA, 38 U.S.C. 4311. See McLain v. City of Somerville, 424 F.
Supp. 2d 329 (D. Mass. 2006); Beattie v.
Trump Shuttle, 758 F. Supp. 30 (D.D.C. 1991). I also invite the reader’s attention to Law
Review 0746 (September 2007), available at www.roa.org/law_review.
While you are deployed to the tip of
the spear, your time will be fully engaged in your military duties, and we
don’t want you to spend precious time applying for BNB jobs on the
Internet. This is a safety issue, your
safety and that of your colleagues in arms.
If I am in the foxhole next to yours, I should not have to worry that
you are not paying full attention to your sector of the perimeter because you
are busy completing an on-line job application.
Texting while on watch is sort of like texting while driving—don’t even
think about it.
strongly recommend that you draft and sign a limited power of attorney to a trusted colleague at work,
authorizing that individual to access your personnel record and to apply, on
your behalf, for promotions, transfers, benefits, etc. This limited power of attorney is separate
and different from the general power of attorney that you grant to your
husband, to act on your behalf in business matters generally while you are
deployed. The agent to whom you issue
the limited power of attorney should be a trusted colleague at work who is
likely to learn of opportunities as they arise—your husband does not work for
the bank and is unlikely to have access to this information.
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