Are employers obligated to pay employees on military duty the difference between their civilian and military pay? A federal court in southern Ohio examined employers' obligations.

What happened. Kevin Koehler, a driver for Pepsi's Cincinnati plant, enlisted in the Army Reserve and was called to active duty from March to September 2002. Several times over the ensuing months, he was ordered to report for duty again, but each time, the deployment was canceled. Nevertheless, pursuant to its absenteeism policy, Pepsi apparently held some of those absences against him.

Koehler filed a complaint with the U.S. Department of Labor, and on June 17, 2003, he met with Pepsi officials to resolve the matter. At that meeting, Koehler agreed to drop his complaint and Pepsi agreed to pay the difference between his military and civilian pay for his period of active duty and to forgive two of the absences. Pepsi deposited $10,820 into his bank account but later withdrew the money with no explanation or authorization.

When Koehler hired an attorney to inquire about the withdrawal, the attorney was told first that Pepsi's practice toward employees in the military was only an internal guideline and that it covered only those who volunteer for active duty, not those who enlist in the reserves, as Koehler did. Koehler brought the company to court.

What the court said. The Uniformed Services Employment and Reemployment Rights Act (USERRA) bars employers from denying "any benefit of employment" to employees serving in the military, and although companies aren't required to pay the wages of those called to active duty, they may, as Pepsi did in this case, adopt a policy of providing differential pay.

If the employer adopts such a policy, USERRA protects the employee's rights under that policy. Here, the court found that Pepsi's policy did cover Koehler, despite Pepsi's denials, and that the June 17th agreement reinforced the policy. The court ordered Pepsi to pay the differential pay, and because the benefit was improperly withheld, the court doubled the amount. The court also held Pepsi liable for withdrawing the money from the account, a legal harm called conversion, and ordered it to pay $50,000 in punitive damages. Koehler v. PepsiAmericas, U.S. District Court for the Southern District of Ohio, No. 1:04cv742 (7/18/06).

Point to remember: Under USERRA, employers don't have to pay wage differentials to those in military service, but if they promise to do so, by policy, contract, or both, they are obliged to pay, or face double damages if the pay is improperly withheld.