Small businesses operate with a tight staff; each person counts and it’s difficult for staff to cover when an employee is out for any reason. But some employees may be reservists called to active duty to serve in war, to help FEMA during a disaster, or for other reasons. For example, my son-in-law was called to ground zero in New York City after 9/11. And as of late April 2025, there are 7,000 reservists now serving on the U.S. southern border between California and Texas. When an employee is away for a prolonged period, it puts a strain on the business and all its employees. And certain legal and practical issues come into play.
Here’s what owners need to know:
The job must be protected
Federal law—the Uniformed Services Employment and Reimbursement Rights Act (USERRA)—requires employees of any size (no exemption for small businesses) to essentially maintain a job position for the employee who is called away for active military service. This employee must be reinstated to the same or an equivalent position when they return from active duty.
Modifications to USERRA through the Senator Elizabeth Dole 21st Century Veterans Healthcare and Benefits Improvement Act, which became law on January 2, 2025, there are additional protections for an employee called to active duty. These include more protection against retaliatory action by employers, increased liquidated damages for employers that willfully violate the law, and the right of a service member to sue and get early relief in the form of an injunction, even though lost wages may be awarded if the case is successful.
Similar rules apply under the Civilian Reservist Emergency Workforce (CREW) Act of 2021. It applies to reservists deployed to a federal disaster, as well as any time needed to train for deployment.
If you’ve filled the position and just can reinstate the returning person without having to terminate the person who filled in, then weigh your options carefully.
- Create a comparable position. This makes sense where a company can afford to do so.
- Temporarily assign the returning employee to something while finding a suitable solution. As long as the returning employee isn’t being discriminated against, this may work as an interim solution.
- Claim undue hardship. The law requires a company to reinstate a returning vet and a company can be sued if it doesn’t company. But undue hardship may be a defense in an action against the business for non-reinstatement. For example, a number of years ago one court said: “An employer may be excused from the duty to rehire where “the employer’s circumstances have so changed as to make it impossible or unreasonable” to rehire the reservist.”
Tax incentive to give extra pay
A small employer may qualify for a tax credit the company pays the employee called to active duty an amount to make up for a decrease in pay in the military. The credit is 20% of up to $20,000 of a differential wage payment. A qualified payment must meet both of the following requirements:
- It’s made to a qualified employee for any period during which the employee is performing service in the uniformed services of the U.S. while on active duty for a period of more than 30 days. A qualified employee is a person who has been an employee for the 91-day period immediately preceding the period for which any differential wage payment is made. AND
- The payment represents all or a portion of the wages the employee would have received from the employer if the employee were performing services for the employer.
There’s more about the credit in the instructions to IRS Form 8932.
Other matters
It’s likely that in order to comply with the law and be fair to all of your staff, you’ll likely have additional things to do and may incur additional administrative costs.
- Post a notice. Employers are required to provide to persons covered by USERRA a notice of the rights, benefits, and obligations of the employees and employers under USERRA. You can find a free poster here.
- Keep good records. While the law does not require any special recordkeeping or reporting, you’ll want to track the days when a request for reinstatement is made. This is because action by the employee and the company is time-sensitive. For absences of 1-30 days, the service member is allowed time to travel home, plus 8 hours of rest, and must then report to work on the next working day. For absences of 31-180 days, the service member has 14 days to contact the employer and request reemployment. For absences of more than 180 days, the service member has 90 days to contact the employer and request reemployment. And there’s additional time if there’s a service-related injury.
Also check for state laws that may impose different or additional obligations on an employer. Paycor has a state-by-state listing of these laws.
Final thought
To learn more about USERRA, there’s an employment law guide from the DOL. If you find yourself in the position of having an employee called for public service, consider talking with an employment law attorney.
You’ll find more about employment law considerations and resources from this list of blogs.
