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CONGRESS OF THE UNITED STATES

CONGRESSIONAL BUDGET OFFICE

A

PAPER

MAY 2005

The Effects of 

Reserve CallUps on Civilian 

Employers

CBO

The Congress of the United States O Congressional Budget Office

CBO

The Effects of Reserve Call-Ups

on Civilian Employers

May 2005

A

PAPER
Note

Unless otherwise specified, all years are fiscal years.
Preface

The ability of reservists to contribute to national defense depends in part on the support 

of their civilian employers. The current trend toward longer and more frequent reserve 

deployments, however, raises questions about the ability of civilian employers, particularly 

small businesses, to absorb the costs they experience when their reservist employees are called 

up. This Congressional Budget Office (CBO) paper, which was requested by the Chair of the 

Senate Committee on Small Business and Entrepreneurship, examines the implications of 

reserve call-ups for civilian employers and considers measures that might alleviate problems 

that businesses face. In keeping with CBO’s mandate to provide objective analysis, the paper 

makes no recommendations. 

The report was prepared by Heidi L. W. Golding of CBO’s National Security Division under 

the supervision of J. Michael Gilmore and Matthew S. Goldberg. David Brauer, Arlene 

Holen, Carla Tighe Murray, Jennifer Smith, Ralph Smith, Jo Ann Vines, and Tom Woodward 

provided helpful comments on a draft of the analysis, as did external reviewer Glenn Gotz. 

(The assistance of external reviewers implies no responsibility for the final product, which 

rests solely with CBO.)

Leah Mazade edited the paper, and Janey Cohen proofread it. Maureen Costantino prepared 

the report for publication and designed the cover. Lenny Skutnik printed the initial copies, 

and Annette Kalicki and Simone Thomas prepared the electronic version for CBO’s Web site 

(www.cbo.gov).

Douglas Holtz-Eakin

Director

May 2005

Summary and Introduction 1

CBO’s Findings 2

Options for Mitigating the Effects of Reservists’

Activations 2

An Overview of the Reserves 3

Organization 3

Selected Demographic Data 5

Employment Profile 6

DoD’s Use of the Reserves 8

Recent Mobilizations 8

DoD’s Plans for the Future 10

How Reservists’ Call-Ups and Federal Protections Affect 

Employers 12

Effects of Job Vacancies 12

Effects of Uncertainty About the Timing and 

Duration of Call-Ups 12

Effects of USERRA on Employers’ Labor Costs 13

CBO’s Analysis of the Distribution of Businesses’ Losses 

from Reservist Call-Ups 15

Data from Interviews 15

Findings 16

Options for Alleviating Businesses’ Costs for Reservist

Activations 20

Effects on Stakeholders 20

Potential Alternatives 22

Appendix: Reservists’ Protections Under Federal Law 29

CONTENTS
vi THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS

Figures

1. Organization of the Military Reserves 4

2. Selected Reservists by State, 2004 6

3. Selected Reservists as a Proportion of a State’s Population 7

4. Civilian Employers of Selected Reservists, 2004 8

5. Civilian Occupations of Selected Reservists, 2000 9

6. Annual Active-Duty Days per Ready Reserve Member 10

Boxes

1. Selected Legal Authorities for Mobilizing the Reserves 5

2. The Continuum of Service 11

3. State Initiatives 21
The Effects of Reserve Call-Ups on

Civilian Employers

Summary and Introduction

The military reserves provide trained service members 

and units that are available for active military duty during 

peacetime and war.1

 Over the past decade, the Department of Defense (DoD) has dramatically increased its reliance on the reserve forces, particularly since the terrorist

attacks of September 11, 2001. The reserves are integral 

to current operations—of service members deployed in 

November 2004 in Iraq and Afghanistan, about 33 percent were reservists—and DoD foresees continued reliance on them. (Throughout this paper, “reserves” refers 

to the individual services’ National Guard and reserve 

components: the Air Force Reserve, the Air National 

Guard, the Army Reserve, the Army National Guard, the 

Coast Guard Reserve, the Marine Corps Reserve, and the 

Navy Reserve.)

Yet many reservists, when they joined the military, probably did not anticipate the increased frequency and duration of the activations that have occurred during the past 

several years and may be finding those mobilizations 

more disruptive than they might have expected.2

 To 

alleviate difficulties with call-ups, the Congress has enacted legislation to provide civil and employment protections and financial relief. The Uniformed Services Employment and Reemployment Rights Act of 1994 

(USERRA), the primary legislation governing service 

members’ employment rights, guarantees the right of reservists to be reemployed by their civilian employer after 

serving on active duty, prohibits employers from discriminating against individuals in any aspect of employment 

because of their service in the reserves, and mandates 

some continuation of benefits to reservists who have been 

activated.3 By ensuring that people who are interested in 

military service can retain their jobs and participate in the 

reserve forces without fear of reprisal by their civilian employers, those provisions may also aid DoD in its recruiting and retention efforts.

The increased pace of reservist activations has focused attention on how call-ups affect the civilian employers of 

reservists, including reservists who are self-employed. Yet 

there is little information about the type and magnitude 

of the disruption that firms experience when their reservist employees or reservist owners are activated. As a result, 

the impact of call-ups on businesses has not been systematically examined.

This Congressional Budget Office (CBO) report examines the combined effects of reservists’ activations and 

federal job protections on civilian employers. It also 

addresses the question of financial losses among selfemployed reservists, a group that some people maintain 

deserve special assistance because they may have experienced particularly negative effects from the recent rise in 

activations.4 In its analysis, CBO used survey informa1. See 10 U.S.C. §10102, added by Pub. L. 103-337, Div. A, Title 

XVI, Subtitle C, § 1661(a)(1), 108 Stat. 2970, and most recently 

amended by the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005, Pub. L. 108-375 §511, 118 Stat. 

1877.

2. Although in some contexts the terms “mobilization,” “activation,” 

and “call-up” may have different meanings, in this report they are 

used interchangeably.

3. Codified at 38 U.S.C. § § 4301-4333 (2000), as most recently 

amended by the Veterans Benefits Improvement Act of 2004, 

Pub. L. 108-454, § 201-204, 118 Stat. 3606. The protections of 

USERRA do not apply to self-employed reservists or reservist 

business owners, terms that are used synonymously in this paper 

to refer to both incorporated and unincorporated businesses 

owned by reservists.

4. At many points in the discussion, the experience of reservist business owners is combined with that of other employers. At other 

times, the unique issues confronting self-employed reservists are 

treated separately.
2 THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS

tion collected by the Departments of Defense and Labor 

and by other organizations; it also interviewed reservists, 

manpower experts, business and reserve associations, and 

others. Although such data are limited and any conclusions drawn from them cannot be generalized to all employers, they provide insight into the problems that some 

employers are confronting.

CBO’s Findings

CBO’s analysis revealed that most employers are unaffected by the activation of reservists. Only about 6 percent of business establishments employ reservists, and 

fewer than half a percent of self-employed people are in 

the reserves. Among firms with reservist employees and 

owners, substantial variation is seen in their ability to adjust to a reservist’s call-up. Activations create vacancies 

that firms would not otherwise have had. Some businesses may absorb the loss of personnel at little cost, but 

others may experience slowdowns in production, lost 

sales, or additional expenses as they attempt to compensate for a reservist’s absence. A smaller number yet may 

find that they are unable to operate for lengthy periods—

or at all—without their reservist and may experience financial losses or insolvency. Such problems are likely to 

be more severe for:

B Small businesses that lose essential (key) employees;

B Businesses that require workers with highly specialized 

skills; and 

B Self-employed reservists.

Small businesses (generally those with fewer than 100 

employees) employ about 18 percent of all reservists who 

hold civilian jobs; businesses with fewer than 500 employees and self-employed reservists employ about 35 

percent. But there are no precise data on the number of 

reservists who are key employees or who have highly specialized skills. On the basis of survey information about 

reservists’ civilian occupations, CBO estimates that out of 

the 860,000 reservists in the Selected Reserves (the primary source of reserve personnel), between 8,000 and 

30,000 of them probably hold key positions in small 

businesses. In addition, about 55,000 reservists are selfemployed. Considering that snapshot of reservists’ employment, CBO expects that as many as 30,000 small 

businesses (0.6 percent of all such firms) and 55,000 selfemployed individuals (less than 0.5 percent of the selfemployed) may be more severely affected than other reservist employers if their reservist employee or owner is 

activated.

In addition, CBO found that although USERRA provided employment protections to reservist employees, it 

might be exacerbating the difficulties that call-ups present 

for those individuals’ employers. The legislation limits 

firms’ flexibility in avoiding vacancies and imposes additional costs on some employers.

Options for Mitigating the Effects of Reservists’

Activations

To help lessen the adverse effects of call-ups, two broad 

approaches are available: policymakers could enact legislation, or DoD could change its policies. Either approach, however, would require balancing a number of 

goals that sometimes conflict, such as providing reservists 

with a wide range of protected civilian employment, assisting DoD’s efforts to recruit and retain the military 

personnel it requires, minimizing the value of the labor 

resources being diverted from the civilian economy and 

improving DoD’s allocation of personnel, and avoiding 

harm to small businesses. In its analysis, CBO considered 

several potential measures to mitigate the undesirable effects of call-ups, evaluating the measures in terms of those 

goals and their effects on DoD, reservists, and their employers. Options might include:

B Compensating businesses through tax credits or direct 

payments;

B Subsidizing loans to employers;

B Providing or subsidizing call-up insurance for businesses; or

B Exempting certain reservists from call-ups.

The first three options, depending on how they were 

structured, could advance the goals listed above, including that of maintaining the legislated employment protections that reservists enjoy. The options would at least 

partially offset financial losses for firms that had reservist 

employees or owners who had been activated. In addition, the measures might increase employers’ support for 

reservists’ military service, which could in turn encourage 
THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS 3

more individuals to either join or remain in the reserves. 

Moreover, if mechanisms could be developed so that 

DoD faced more of the costs associated with call-ups, it 

would then be better able to evaluate the most costefficient mix of reserve and active-duty personnel. In particular, it might have an incentive to recruit civilians 

whose absence from their positions would pose less cost 

to employers and thus decrease any amounts DoD might 

pay in compensation.

The final option features a different mechanism from 

that of the others: it would reduce the number or frequency of call-ups rather than compensate employers for 

activations that had occurred. For example, DoD could 

exempt certain reservists or particular civilian positions 

from call-ups. Employers might benefit from that option, 

but if it was formulated too broadly, it might interfere 

with DoD’s efforts to provide sufficient forces for war and 

other military contingencies. In addition, if call-ups were 

limited, reservists who were eager to serve and who 

wanted to be activated might be less satisfied with reserve 

service. By the same token, reservists who found the current levels of activation too high might be more satisfied.

All of the options would assist at least some of the businesses affected by call-ups. But none of the measures are 

likely to completely eliminate the problems that firms 

face. The rules that established which businesses were eligible for assistance and the extent of that aid would determine the degree to which a particular measure reduced 

the losses that some reservist employers and owners incurred from a call-up.

Another consideration is that the options entail either direct or indirect costs for the federal government and, consequently, for taxpayers. Even the fourth option, which 

calls for limiting certain reservists’ call-ups, would entail 

indirect costs. Declaring some individuals ineligible for 

activation might impede DoD’s ability to mobilize sufficient personnel and might discourage participation in the 

reserves. DoD would then need to use pecuniary or other 

incentives to attract additional people to reserve service.

The direct costs of compensating businesses through tax 

credits or direct payments, or by offering loans or insurance—the first three options—could be substantial, depending on how a measure was structured. The more targeted a remedy is, the more cost-effective the solution 

will be. That notion implies that any remuneration 

should be based on the actual loss that a firm experiences. 

However, calculating the decrease in profitability associated with call-ups may be virtually impossible. As CBO’s 

interviews revealed, some business owners, even when 

they could quantify a change in profits, could not isolate 

how much of the decline was due to a reservist’s activation and how much was due to other causes, such as a 

downturn in the economy, shifts in demand for the firm’s 

products, or increased competition. Instead, the basis for 

compensating an employer’s loss might be approximated. 

For example, the reservist’s civilian salary or the costs of 

replacing the reservist could be used as measures of the 

firm’s financial loss. Another approach would be to base 

compensation more broadly on the type or size of the 

business.

An Overview of the Reserves

The military’s increased use of the reserves over the past 

several years has highlighted that component of the 

armed forces. The section that follows sketches some demographic features of this group as well as the positions 

they fill and the firms that employ them in the civilian 

sector of the economy.

Organization

The nation’s military reserves, totaling 1.8 million members, are organized by service. Each service, including the 

Coast Guard, has a reserve component. In addition, the 

Air Force and Army each have a National Guard component. In general, National Guard units are organized and 

controlled at the state level. All states (including the District of Columbia) and all U.S. territories have both 

Army and Air National Guard units.

The personnel in each of those components are assigned 

to one of three categories: the Standby Reserve, the Retired Reserve, or the Ready Reserve (see Figure 1). 

Standby Reservists, who are not required to train, are 

generally reservists who have a temporary hardship or disability or who have been exempted for other reasons. Retired Reservists are primarily former members of the 

armed forces who are receiving military retired pay. The 

Ready Reserve, with more than a million members, is the 

largest component, comprising the Selected Reserve, the 

Individual Ready Reserve, and the Inactive National 
4 THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS

Figure 1.

Organization of the Military Reserves

Source: Congressional Budget Office based on data from the Office of the Assistant Secretary of Defense for Reserve Affairs.

Note: The figures in parentheses indicate numbers of reservists.

Guard. All reservists may be mobilized for national security reasons under certain circumstances (see Box 1).

Members of the Selected Reserve, which is considered essential to the initial missions that the military undertakes 

when the country goes to war, must be available to mobilize within 24 hours. This component of the reserves is 

primarily organized into units that “drill” (train) one 

weekend a month; in addition, members of the Selected 

Reserve participate in extended training for two weeks 

each year. Some Selected Reservists, however, support the 

military in other ways. For example, Individual Mobilization Augmentees do not train with a unit except when 

they prepare for mobilization. By contrast, the Active 

Guard/Reserve comprises military personnel on full-time 

active duty who support the reserves in such areas as personnel administration. All active members of the National Guard are part of the Selected Reserve.

By comparison with the Selected Reserve, the other two 

components of the Ready Reserve participate less intensively. Many members of the Individual Ready Reserve 

Total Reserves and National Guard

Air National Guard, Air Force Reserve,

Army National Guard, Army Reserve,

Coast Guard Reserve,

Marine Corps Reserve, and Navy Reserve

(1.8 million)

Standby Reserve

(22,000)

Ready Reserve

(1.15 million)

Selected Reserve

(859,000)

Retired Reserve

(622,000)

Individual Ready Reserve

(284,000)

Inactive National Guard

(1,400)
THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS 5

have separated from the active-duty military before their 

contract has expired (for example, for medical reasons) 

and are fulfilling the remainder of their total service obligation in the reserves. Such reservists do not perform regularly scheduled training. Members of the Inactive National Guard must meet with their unit once a year but 

do not participate in training.

Selected Demographic Data

Reservists volunteer from all parts of the United States 

and its territories.5 However, more than 40 percent of the 

reserve population comes from 10 populous states: in descending order by number of reservists, they are California, Texas, Pennsylvania, Florida, New York, Ohio, Georgia, Virginia, Illinois, and Alabama (see Figure 2). The 

greatest concentrations of reservists as a proportion of 

population are in the District of Columbia, Hawaii, 

North Dakota, Vermont, Alaska, and South Dakota (see 

Figure 3). In those states, about 1 of every 100 residents 

over the age of 17 is a reservist.

Reservists also represent a wide variety of races and ethnicities.6 Although the bulk of the force (72 percent) describes itself as white, about 16 percent of reservists are 

black, and 9 percent are Hispanic, with other races and 

ethnicities making up the remainder. Seventeen percent 

of reservists are female.

Box 1.

Selected Legal Authorities for Mobilizing the Reserves

Under a Presidential declaration of national emergency (partial mobilization), an authority designated 

by the Secretary of Defense, as specified in 10 U.S.C. 

§12302, may order to active duty as many as a million Ready Reservists at one time for no more than 

24 consecutive months. As specified by 10 U.S.C. 

§12301(a), the entire reserves, including Standby 

and Retired Reservists, may be ordered to active duty 

under a Congressional declaration of war or national 

emergency (full mobilization) for the duration of the 

war or national emergency and for six months thereafter. (However, Standby and Retired Reservists may 

not be ordered to active duty under a Congressional 

declaration unless there are “not enough qualified reserves in an active status or in the inactive National 

Guard in the required category who are readily available.”) The Presidential Selected Reserve Call-Up 

Authority, as specified at 10 U.S.C. §12304, allows 

the federal government to mobilize as many as 

200,000 members of the Selected Reserve and the 

Individual Ready Reserve for no more than 270 days 

even without the stipulation of a national emergency.

Other authorities exist for the mobilization of reserves but are more restrictive—for example, regarding the duration of the call-up or the consent required. As an illustration, 10 U.S.C. §12301(b) 

allows an authority designated by the Secretary of 

Defense at any time to order any reserve member to 

active duty for no more than 15 days per year. The 

authority may be exercised without the consent of 

the reservist. However, the appropriate governors 

must consent to any such order for their state’s National Guard members. In addition, 10 U.S.C. 

§12301(d) allows an authority designated by the 

Secretary of Defense to order a reserve member to 

active duty with the consent of that member (in 

other words, it provides for calling up reservists who 

volunteer for active duty). Again, governors, or other 

appropriate authorities, must consent to any such order for their state’s National Guard members.

In addition to those federal authorities, the states’ 

governors may call up their National Guard units to 

help respond to domestic emergencies—typically, to 

participate in disaster relief efforts.

5. Based on data on reservists’ states of origin from DoD’s Defense 

Manpower Data Center (for 2004) and from the Population Division of the Bureau of the Census (for 2003).

6. Based on data from DoD’s Defense Manpower Data Center as of 

September 2004.
6 THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS

Figure 2.

Selected Reservists by State, 2004

Source: Congressional Budget Office based on data from the Department of Defense’s Defense Manpower Data Center.

Note: Data include the District of Columbia as well as the Coast Guard Reserve.

Employment Profile

Among Selected Reservists in 2004, most (about 75 percent) worked for pay in the civilian labor force.7

 Of that 

group, private-sector firms employed 52 percent (or 

about 335,000 individuals). Eighteen percent of paid reservists worked in firms with fewer than 100 employees 

(see Figure 4 on page 8); 8 percent worked in firms that 

had between 100 and 499 employees; and another 26 

percent worked in firms that employed 500 or more people. In addition, 9 percent (or 55,000) of Selected Reservists who worked in the civilian sector were self-employed 

or worked without pay in a family business as their primary source of employment. Four percent were employed 

by nonprofit organizations.

Federal, state, or local governments employed 36 percent 

of Selected Reservists who worked in the civilian sector 

in 2004. Among those who worked for the federal government, DoD was the largest employer. The proportion 

of reservists employed in the public sector is larger than 

the proportion of nonreservists who work in that sector

—a statement that holds true even after excluding the 

fairly sizable group of reservists who are full-time military 

technicians.

Hawaii

Alaska

Calif.

Nev.

Ariz. N. Mex.

Oreg.

Wash.

Idaho

Utah

Mont.

Wyo.

Colo.

N. Dak.

S. Dak.

Nebr.

Kans.

Okla.

Tex.

Minn.

Iowa

Ill.

Wisc.

Mo.

Ark.

La.

Miss. Ala.

Fla.

Ga.

S.C.

Tenn.

Ky.

Ind.

Ohio

N. C.

Va. W. Va.

Pa.

N. Y.

Maine

D C.

Vt.

Mich.

Md.

Del.

N. J.

Conn.

R. I.

Mass.

N.H.

Top 10 States

Middle 31 States

Bottom 10 States

7. The data on reservists’ employment derive from CBO’s analysis of 

Department of Defense, Defense Manpower Data Center, May 

2004 Status of Forces Survey of Reserves (CD-ROM release of data, 

February 2005). CBO’s estimates include almost 70,000 military 

technicians who support the reserve units full time as government 

employees and are members of the Selected Reserve as a condition 

of employment. Estimates of reservists who work for pay in the 

civilian sector do not include Active Guard/Reservists, who make 

up about 9 percent of the Selected Reserve and are employed by 

the military.
THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS 7

Figure 3.

Selected Reservists as a Proportion of a State’s Population

Source: Congressional Budget Office based on data from the Department of Defense for 2004 and data covering 2000 to 2003 from the Population Division of the Bureau of the Census.

Note: Data include the District of Columbia as well as the Coast Guard Reserve.

Reservists differ from active-duty forces along several dimensions. With an average age of 33, reservists bring 

about five more years of experience to the military than 

active-duty service members do.8

 In addition, reservists 

tend to be more highly educated. In 2000, about 17 percent of enlisted reservists had a bachelor’s or higher degree compared with 9 percent of active-duty enlisted service members.9

Also differing somewhat from the active-duty force is the 

mix of occupations that the reserves represent. Some military capabilities, such as civil affairs and air traffic control, reside primarily in the reserve force. Generally, however, reservists are drawn from a variety of civilian occupations (see Figure 5). About 33 percent of reservists report that they are executives, managers, or professionals; 

of that group, managers or executives account for 24 percent, and health care practitioners and technicians make 

up 18 percent. The occupational category of executives, 

managers, and professionals is the largest among reservists 

(and is similar percentagewise to that category in the 

overall U.S. workforce).10 In general, the balance of the 

reserves (67 percent) is drawn roughly equally from service, sales, construction, and production occupations.11

Hawaii

Alaska

Calif.

Nev.

Ariz. N. Mex.

Oreg.

Wash.

Idaho

Utah

Mont.

Wyo.

Colo.

N. Dak.

S. Dak.

Nebr.

Kans.

Okla.

Tex.

Minn.

Iowa

Ill.

Wisc.

Mo.

Ark.

La.

Miss. Ala.

Fla.

Ga.

S.C.

Tenn.

Ky.

Ind.

Ohio

N. C.

Va. W. Va.

Pa.

N. Y.

Maine

D C.

Vt.

Mich.

Md.

Del.

N. J.

Conn.

R. I.

Mass.

N.H.

Top 10 States

Middle 31 States

Bottom 10 States

8. Data on reserve forces as of September 2004 come from DoD’s 

Defense Manpower Data Center; data on active-duty forces are 

from Department of Defense, “2003 Demographics of the Military Community,” available at www.mfrc-dodqol.org/stat.cfm.

9. For data on active-duty forces, see Congressional Budget Office, 

Educational Attainment and Compensation of Enlisted Personnel 

(February 2004). For data on reserve forces, see Paul Hogan, 2000 

Survey of Reserve Component Personnel Overview (Falls Church, 

Va.: Lewin Group, 2002).

10. Estimates of reserve forces are based on information as of 2000 

obtained by CBO from DoD’s Defense Manpower Data Center. 

Information on the U.S. workforce was drawn from Bureau of the 

Census, Occupations: 2000, Census 2000 Brief C2KBR-25 

(August 2003), available at www.census.gov/population/www/

cen2000/briefs.html. 

11. Sales or office occupations have a much smaller representation 

among reservists than among the U.S. workforce—18 percent for 

reservists versus 26.7 percent of employed civilians.
8 THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS

Figure 4.

Civilian Employers of Selected Reservists, 2004

Source: Congressional Budget Office based on data from the Department of Defense’s Defense Manpower Data Center.

Notes: The data include the military technician category, personnel who support reserve units full time as government employees and are 

members of the Selected Reserve as a condition of their employment. The data do not include the Coast Guard Reserve.

Percentages may not add to 100 because of rounding.

The occupational profile of both self-employed reservists 

and reservists who are employed in small businesses tends 

to differ from that of the overall reserve force. Self-employed reservists are concentrated in fewer occupations 

than is characteristic of the reserves in total. They are 

most likely to consider themselves to be in construction 

and sales occupations; however, they are also more likely 

than reservists who are not self-employed to be health 

care or legal professionals or to work in occupations related to building and grounds maintenance. Reservists 

who work for small businesses are less likely than other 

reservists to be managers or professionals and more likely 

to be in occupations related to food service, construction, 

or sales.

DoD’s Use of the Reserves

In the early 1990s, while engaged in Operations Desert 

Storm and Desert Shield, DoD began mobilizing reservists more extensively than it had in earlier years, when reserve call-ups were rare. Since then, reservists have provided critical manpower for missions ranging from 

peacekeeping and humanitarian efforts to counterdrug 

operations and small-scale contingencies. After the terrorist attacks of September 11, 2001, however, the pace and 

extent of reserve call-ups increased, raising questions 

about the degree of the disruptions that both reservists 

and their employers are experiencing and the impact of 

those upheavals on the recruiting and retention of reservists. DoD plans to continue its reliance on reserve personnel for the foreseeable future, but at the same time it is 

considering several approaches for mitigating the potentially adverse effects of such a strategy.

Recent Mobilizations

Between September 2001 and November 2004, the Department of Defense called up more than 410,000 reservists. At the end of calendar year 2004, the number of reservists supporting DoD’s current operations numbered 

187,000.

 (20%)

 (7%)

 (9%)

 (4%)

 (9%)

 (26%)

 (8%)

 (18%)

Federal

Government

State

Government

Local

Government

Self-Employed or

Family Business

Private Firm with

More than 500 Employees

Private Firm with

100 to 499 Employees

Private Firm with

Fewer than 100 Employees

Nonprofit

Institutions
THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS 9

Figure 5.

Civilian Occupations of Selected Reservists, 2000

Source: Congressional Budget Office based on data from the Department of Defense’s Defense Manpower Data Center.

Note: The data include the Coast Guard Reserve as well as the military technician category, personnel who support reserve units full time as 

government employees and are members of the Selected Reserve as a condition of their employment.

Increasing in tandem with those activations has been the 

time that reservists spend on active duty. Before Desert 

Storm/Desert Shield, the average number of days a reservist spent on active duty in exercises and operations 

each year was about one; that measure had risen to an average of more than 75 days in 2004 (see Figure 6). For reservists called to active duty since September 11, 2001, 

tours have averaged more than 300 days.12

DoD’s activations of the reserves for its current operations have not been evenly distributed among the reserve 

components.13 The Army has supplied the bulk of the 

manpower: at the end of calendar year 2004, about 

160,000 members (30 percent) of the Army National 

Guard and Reserve were on active duty in support of the 

military’s current operations. By comparison, the Navy 

had about 3,400 (4 percent) of its reservists mobilized.

In addition to differences in the mobilization rates of reserve components, the activation of reservists in particular occupations has varied, with some specialties being 

used much more intensively than others.14 For example, 

from September 11, 2001, through November 2004, callup rates among some officer career fields (such as military 

police, intelligence, and fixed-wing aviation) had reached 

more than 45 percent. Mobilization rates for some enlisted specialties (such as installation security, law enforcement, and motor vehicle operators) were even higher, exceeding 55 percent. Some individuals—about 64,000 

members (7.5 percent) of the Selected Reserve—had 

been mobilized multiple times. Yet reservists in other career fields (for example, medical and legal) experienced 

relatively low rates of mobilization.

 (33%)

 (18%) (17%)

 (1%)

 (15%)

 (16%) Management,

Professional,

and Related

Farming,

Forestry,

and Fishing

Sales and Office Service

Construction,

Extraction,

and Maintenance

Production,

Transporation,

and Material Moving

12. Estimates are based on information as of November 2004 

obtained by CBO from DoD’s Office of the Assistant Secretary of 

Defense for Reserve Affairs.

13. Mobilization data are from the Department of Defense, available 

at www.defenselink.mil/releases/2004/dec2004.html.

14. Estimates are based on information as of November 2004 

obtained by CBO from DoD’s Office of the Assistant Secretary of 

Defense for Reserve Affairs.
10 THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS

Figure 6.

Annual Active-Duty Days per Ready Reserve Member

Source: Congressional Budget Office based on data from the Office of the Assistant Secretary of Defense for Reserve Affairs.

Notes: Annual active-duty days include time spent mobilized to support the military services or combatant commands under voluntary and 

involuntary orders as well as to assist in domestic emergencies, counterdrug operations, and exercises. They exclude most training.

The number of days for 2004 is estimated.

Since the 2001 terrorist attacks, DoD has relied on involuntary mobilization, although some individuals have 

chosen to volunteer. Even before the attacks, some reservists volunteered for active duty, and some volunteered for 

longer-than-usual tours. In 2001, for instance, DoD activated more than 120,000 reservists for periods longer 

than 30 days; about 15 percent of those individuals 

served tours that exceeded 180 days.15 On the basis of interviews with reservists and manpower experts, CBO has 

concluded that those activations were largely voluntary. 

Some people signed up during slowdowns in their civilian 

jobs; others, because of their desire to serve. Those individuals, like reservists who are mobilized involuntarily, 

are also protected by the employment provisions of the 

Uniformed Services Employment and Reemployment 

Rights Act of 1994.

DoD’s Plans for the Future

Military analysts anticipate that deployments of reserve 

personnel will remain an important component of fighting the global war on terrorism over the next few years. 

The Department of Defense expects that reservists’ active-duty tours will continue at the current pace, lasting 

about one year, on average. However, to minimize the 

disruption to reservists’ civilian lives, Secretary of Defense 

Donald Rumsfeld has directed the services to “limit involuntary mobilization to reasonable and sustainable 

rates, using not more than one year in every six as the 

planning metric.”16

In addition, as directed by law, DoD conducts annual 

and contingency-specific screening of reservists to ensure 

their immediate availability for active duty.17 As part of 

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

0

10

20

30

40

50

60

70

80

15. Estimates are based on information obtained by CBO from 

DoD’s Defense Manpower Data Center.

16. Office of the Deputy Assistant Secretary of Defense for Reserve 

Affairs (Readiness, Training, and Mobilization), Rebalancing 

Forces: Easing the Stress on the Guard and Reserve (January 2004).

17. See 10 U.S.C. §12302, 10 U.S.C. §10149, 32 C.F.R. §§44.1- 

44.5, and Department of Defense Directive 1200.7.
THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS 11

that screening, it assesses the hardship that individuals 

might face if they were mobilized. The annual program, 

which is suspended under partial or full mobilization, allows some Ready Reservists to transfer to the Standby or 

Retired Reserve or to be discharged. Those who may be 

eligible for transfer or discharge are reservists whose mobilization would:

B Result in extreme personal hardship or hardship for 

their community; or 

B Seriously harm their employer’s ability “to perform 

functions essential” to the nation’s defense, health, or 

safety.

Currently, the annual screening program is suspended. 

However, since September 11, 2001, DoD has granted 

waivers or delays to about 225 reservists under a special 

exemption program.18

To help meet the military’s future needs for personnel, the 

Defense Department has begun to implement a new 

management system for the reserves. Called the “continuum of service,” it aims to provide a mechanism to allow 

individuals to serve in the reserves at varying levels of participation throughout their military careers (see Box 2).19

The continuum may encourage reservists to volunteer for 

active duty and may provide a greater range of opportunities for serving in the reserves. However, the military’s increased reliance on voluntary commitments may strain 

the operations of reservists’ civilian employers. Some 

Box 2.

The Continuum of Service

The Department of Defense (DoD) has begun to 

implement a new management system that is designed to offer reservists more flexibility in fulfilling 

their reserve commitment. DoD officials envision a 

reserve force in which reservists can participate at 

varying levels of intensity at different points in their 

career—sometimes, for perhaps only a few days a 

year; at other times, for extended periods of as much 

as a year. To encourage alternatives to the traditional 

reserve commitment, the continuum would enable 

service members to move more easily between reserve status and active duty. DoD officials are currently studying how best to structure compensation 

to encourage such movement and are working to 

ease institutional policies that impede it. In addition, 

as part of the change, the Defense Department is 

seeking to develop new forms of affiliation among 

employers, potential reservists, and the military.

The result, some senior DoD officials believe, will be 

a more attractive form of military service that offers 

new ways to serve. They are hopeful that with those 

changes, DoD can enlist people who were unable or 

unwilling to join previously—particularly individuals whom the military has had trouble recruiting and 

retaining in the past, such as people who have advanced technical skills. DoD officials believe that ultimately, the continuum will create a more flexible, 

capable reserve force.1

1. For further discussion of the continuum of service, see 

Department of Defense, Office of the Assistant Secretary of 

Defense for Reserve Affairs, Review of Reserve Component 

Contributions to National Defense (December 2002); John D. 

Winkler and others, “A ‘Continuum of Service’ for the AllVolunteer Force,” in Barbara A. Bicksler, Curtis L. Gilroy, 

and John T. Warner, All-Volunteer Force: Thirty Years of Service (Dulles, Va.: Brassey’s, Inc. [now Potomac Books], 

December 2004); and Glenn Gotz, “Restructuring Reserve 

Compensation,” in Cindy Williams, ed., Filling the Ranks: 

Transforming the U.S. Military Personnel System (Cambridge, 

Mass.: MIT Press, 2004).

18. The annual screening program may be suspended at the discretion 

of the Secretary of Defense when an involuntary activation occurs 

under 10 U.S.C. §12304 (or a Presidential Selected Reserve CallUp Authority). In September 2001, the program was suspended 

upon the authorization of partial mobilization, although DoD 

created a special exemption process in October 2001. In calendar 

year 2000, DoD removed 246 reservists from the Ready Reserve.

19. Because DoD is still refining and implementing the continuum 

concept, how the reserves will eventually be configured is uncertain, and the full implications for employers are unknown.
12 THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS

firms may find that their reservist employees are absent 

more often or for longer periods.

How Reservists’ Call-Ups and Federal 

Protections Affect Employers

DoD’s greater reliance on the reserves in recent years 

and its expectation of continuing that policy mean that 

private-sector employers of reservists and self-employed 

reservists may experience longer and more costly absences 

from the workplace. Legislated job protections—in particular, those contained in the Uniformed Services Employment and Reemployment Rights Act of 1994—

hinder employers’ ability to adjust to the mobilization of 

reservists and require that employers incur the cost of 

continuing some of those reservists’ benefits while they 

are away. Thus, instead of DoD’s bearing the full costs of 

a reserve mobilization, employers also bear some of the 

costs of call-ups.20

Effects of Job Vacancies

The mobilization of reserve personnel can create involuntary and unexpected absences for employers. Businesses 

face decisions about replacing a reservist—whether to 

hire a substitute, have other employees fulfill the reservist’s job duties, keep the position open and allow work to 

go undone, or, in the most extreme case, close the

business.

No matter how a firm chooses to deal with the vacancy, 

the reservist’s mobilization may disrupt the business’s normal flow of work and entail costs. For example, hiring a 

new employee may require significant expenditures for 

recruiting, administration, and training. Although some 

recruiting and hiring techniques, such as direct application, can be inexpensive, others can be costly. Hiring 

through a temporary agency may increase employers’ 

costs, even if the wages and productivity of the reservist 

and the temporary hire are comparable, because such 

agencies’ fees generally exceed 50 percent of the temporary worker’s wages. Also, fees charged by recruiting firms 

may range between 10 percent and 30 percent of a new 

hire’s salary in the first year. For a position paying the median national salary in the private sector (about $40,000 

in current dollars), firms could face direct recruiting expenditures of more than $4,000.21 The time that staff 

members spend to screen and interview candidates adds 

to the costs of hiring.

Shifting personnel or allowing work to remain undone 

may also be costly. Shifting duties among a firm’s remaining employees may require the business to pay overtime 

or suffer problems with employee morale and retention. 

Some firms, regardless of how they deal with their reservist’s absence, may find that they cannot continue business 

as usual. Work slowdowns or stoppages, an inability to 

deliver products, or a permanent loss in sales may be unavoidable. Some firms may even shut down when a reservist is activated or when they find later that they cannot operate for lengthy periods without their reservist 

employee.

Effects of Uncertainty About the Timing and 

Duration of Call-Ups

Employers often receive little warning of a reservist’s mobilization. A survey published by DoD in 2003, which 

questioned reservists who had been mobilized over the 

previous 24 months, indicated that reservists notified 

their civilian employers an average of 13 days before their 

mobilization began.22 The survey also showed that almost 60 percent of reservists gave their employers advance notice of one week or less. A further problem for 

employers is that DoD sometimes changes reservists’ mobilization or demobilization dates. In addition, for recent 

operations, DoD has extended many reservists’ tours of 

duty during the time in which they were activated.

Lack of advance warning and uncertainty about reservists’ 

activation or deactivation can exacerbate the problems 

that call-ups pose for employers. With little time to plan 

20. For additional discussions on employers’ costs and ways to remunerate employers, see Glenn Gotz, Strengthening Employer Support 

of the Guard and Reserve, Document D-2755 (Alexandria, Va.: 

Institute for Defense Analyses, January 2003); and Colin M. 

Doyle and others, Analysis of Employer Costs from Reserve Component Mobilization, IDA Paper P- 3872 (Alexandria, Va.: Institute 

for Defense Analyses, December 2004).

21. See Bureau of Labor Statistics, National Compensation Survey: 

Occupational Wages in the United States, July 2003—Supplementary 

Tables (August 2004), Table 4.2. Annual earnings in 2003 dollars 

for white-collar workers in the private sector were $45,962; for 

blue-collar workers, $31,566; for service workers, $19,239; and 

for professional specialty and technical occupations, $56,927.

22. Department of Defense, Defense Manpower Data Center, May 

2003 Status of Forces Survey of Reserve Component Members: Tabulations of Responses, DMDC Report No. 2003-10 (November 

2003).
THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS 13

for a reservist’s absence, firms may be less able to avoid 

vacancies. Some businesses that CBO interviewed for this 

analysis complained that they would not have filled an 

activation-induced vacancy as they had if they had known 

the reservist’s actual dates of active duty. For example, one 

firm believed that its reservist employee—the network 

coordinator for its information technology operations—

faced only a short mobilization. As a result, the firm contracted, at a premium, for a short-term worker to carry 

out day-to-day maintenance of its computer network. 

However, the reservist’s tour was extended by more than 

six months, and the temporary hire proved significantly 

more costly than a permanent hire would have been. 

Effects of USERRA on Employers’ Labor Costs

The Uniformed Services Employment and Reemployment Rights Act of 1994 was enacted to minimize disruptions for people who serve in the uniformed services 

and to encourage military service by reducing any negative repercussions of individuals’ service on their civilian 

careers. USERRA grants reservist employees broad job 

protections that apply to all employers (self-employed reservists are not covered by the law) and that protect fulland part-time workers as well as some temporary workers, regardless of the duration of their employment with 

the employer. The law applies to all personnel in the uniformed services (including the Commissioned Corps of 

the Public Health Service) and others whom the President may designate in time of war.23

Broadly speaking, USERRA specifies the following:24

B Employers may not discriminate against individuals in 

hiring, retention, promotion, or other aspects of employment on the basis of membership or service in a 

uniformed service.

B Employees absent from their civilian employment to 

serve in the uniformed services are entitled to reemployment and to the rights and benefits they would 

have had if they had been continuously employed, 

even if their service was voluntary. However, service 

members must meet certain criteria before USERRA’s 

reemployment protections apply. For one, USERRA’s 

protections cease once a reservist’s cumulative absences 

with an individual employer exceed five years. (Some 

duty, including annual active-duty training and involuntary call-ups as a result of a domestic emergency or 

war, is not counted toward the five-year limit.)25

B Reservist employees continue to accrue pension benefits as they would have had they not been called up 

and may retain their health care coverage, although 

the reservist may be required to pay the full premium 

(including the employer’s share).

B Employers must regard a reservist’s absence for active 

duty as a leave of absence or furlough. Thus, employees who are reemployed under USERRA are entitled 

to all rights and benefits that other employees on nonmilitary leave receive.26

For several reasons, USERRA may increase the costs of 

hiring and retaining reservist employees. First, it limits 

employers’ ability to adjust to reservists’ absences. Second, it mandates that certain benefits that firms may pro23. USERRA’s reemployment protections extend to national call-ups 

of the National Guard; they do not extend to state call-ups. Some 

states have state-mandated employment protections.

24. See Pub. L. 103-353, 108 Stat. 3150 (codified at 38 U.S.C. §§ 

4301-4333), for the text of USERRA. The appendix provides 

additional discussion of some provisions.

25. Secretaries of the military departments individually determine 

whether voluntary duty after September 11, 2001, is exempt from 

the five-year limitation. To date, the Army has exempted voluntary duty when service in support of the war on terrorism exceeds 

24 months. The other services have exempted all voluntary duty 

in support of the current partial mobilization of the reserves.

26. USERRA’s reemployment rights and protections are somewhat 

similar to those provided under the Family and Medical Leave Act 

of 1993 (FMLA), which requires employers to grant unpaid, jobprotected leave to employees who must be absent from work for 

specific medical reasons. Under FMLA, the employer must maintain the employee’s group health care coverage, provided that the 

employee pays his or her share of the premium. In general, however, FMLA’s provisions are less generous than USERRA’s. For 

example, employers are not required to provide more than 12 

weeks of leave in any 12-month period; employees must have been 

employed at the firm for at least one year to qualify for protected 

leave; and small businesses (those that regularly employ fewer than 

50 employees) are exempt from the law. 

USERRA’s health care availability provisions for those ordered to 

active duty for more than 30 days are similar to the Consolidated 

Omnibus Budget Reconciliation Act (COBRA) health benefit 

provisions of 1986 (although COBRA does not apply to employers with fewer than 20 employees). COBRA permits certain 

former employees and others to buy into an employer-sponsored 

health insurance plan. Under both USERRA and COBRA, the 

employer may require the beneficiary to pay up to 102 percent of 

the cost of the insurance.
14 THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS

vide to activated reservists be continued. Third, it opens 

up employers to the risk—and the costs—of litigation.

Impact on Employers’ Flexibility. When a reservist employee is mobilized, USERRA limits the actions that 

some employers might undertake to avoid the costs entailed by the vacancy. If the law were not in place, privatesector employers might shift the costs of reservists’ absences to the employees themselves by lowering their 

wages when they were not activated or curtailing their 

benefits when they were. Alternatively, in the absence of 

USERRA, employers simply might not hire reservists.

USERRA’s hiring and pay provisions, however, do not allow employers to pay reservists less than they would have 

received if they had not been in the reserves or to shift to 

less-expensive (that is, nonreservist) workers. Under the 

law, employers that have reservist employees must bear 

the extra costs of activations no matter the cause of the 

call-up—whether it be a national emergency or a reservist’s preference for military duty. Because of that lack of 

flexibility, firms with reservist employees will have higher 

costs and lower profits than their competitors who have 

no reservist employees, all else being equal.27 For short 

call-ups, the consequences for a firm’s bottom line might 

be modest; for longer activations, the continued costs and 

lost revenues could be substantial.28

Costs of Continuing Reservists’ Benefits. USERRA’s provisions explicitly address two common employee benefits: 

health insurance and pensions. The law specifies that an 

employee covered by an employer’s health insurance plan 

may elect to continue coverage during his or her reserve 

service. For activations of 30 days or less, the employee 

may not be required to pay more than the employee’s typical share of the cost; for service that exceeds 30 days, the 

employer may require the reservist to pay the premium—

both the employee’s and the employer’s share—and some 

administrative fees.29 CBO estimates that in 2004, U.S. 

employers’ costs for health care coverage averaged about 

$260 per month for single coverage and $600 per month 

for family coverage.30 If employers offer reservists the 

minimum benefits required by law (some employers elect 

to offer more generous coverage), then the employers’ 

costs for continuing their reservist employees’ health benefits are likely to be similar to those estimated amounts, 

regardless of how long the call-up lasts.31

Employers that provide pension benefits to their employees must maintain a reservist’s eligibility to participate in 

the firm’s pension plan and must continue vesting and 

the accrual of benefits as if the employee were continuously employed. Employers offering defined-contribution 

retirement plans must match their reservist employees’ 

contributions (at the rate established for the firm’s plan) if 

the reservists pay into the fund.32 According to the Bureau of Labor Statistics, about two of every five privatesector workers contribute to a defined-contribution 

plan.33 Although there is considerable variation, many 

employers match the first 6 percent of contributions at a 

rate of 50 percent.34 By CBO’s estimates, the cost to employers for reservists’ benefits under such plans would av27. A countervailing effect, however, might be that because of their 

military training, reservists are more productive than other 

employees with similar skills and education.

28. Whether call-ups affect economic growth in the long run is difficult to measure. Because in the past mobilizations have been relatively limited, there is not enough information available to 

conduct rigorous empirical studies.

29. Under the Veterans Benefits Improvement Act of 2004, employers 

must provide that option for up to 24 months. Formerly, 

USERRA specified only 18 months. 

30. In general, CBO’s estimates of costs for health care benefits are 

based on Kaiser Family Foundation and Health Research and 

Educational Trust, 2004 Employer Health Benefits Survey (Menlo 

Park, Calif.: Kaiser Family Foundation, 2004).

31. Reservists automatically have comprehensive health care coverage 

through the military health care system (TRICARE) when they 

are ordered to active duty for more than 30 days. Reservists’ families are also eligible for TRICARE from the first day of the reservist’s active-duty service if his or her orders exceed 30 days.

32. A defined-contribution plan specifies how much the employer will 

contribute annually and makes payments in retirement that 

depend on the investment return from those funds. A definedbenefit plan, by contrast, promises a specific benefit in retirement, 

and the employer is responsible for accumulating sufficient funds 

to pay it. 

33. Bureau of Labor Statistics, National Compensation Survey: 

Employee Benefits in Private Industry in the United States, March 

2004 (November 2004). The data include both full- and parttime employees. As a context for the estimates, 59 percent of 

employers offer retirement plans, and 50 percent of employees 

who work for private employers participate in them—21 percent 

through defined-benefit plans and 42 percent through definedcontribution plans. Some employees participate in both types of 

plans.

34. Bureau of Labor Statistics, Employee Benefits in Medium and Large 

Private Establishments, 1997, Bulletin 2517 (September 1999), 

available at www.bls.gov/ncs/elas/home.html.
THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS 15

erage about $175 per month, or $2,100 for a one-year activation.35

Under USERRA, employers that offer defined-benefit retirement plans must credit the time that the reservist 

spends in military service in computing benefits. About 

one of every five private-sector employees participates in a 

defined-benefit plan.36 Typically, employers’ expenses for 

reservists in defined-benefit programs—in CBO’s estimation, about $335 per month, or $4,020 for a one-year activation—would be higher than their expenses for reservists in defined-contribution plans.

Some employers can bear additional costs without hardship, and evidence shows that many of them voluntarily 

offer reservists benefits that exceed those required by law. 

For example, almost 50 percent of private-sector employers offer some paid military leave to employees.37 And according to recently activated reservists, about 16 percent 

of employers continued either full or partial pay for their 

employees’ entire activation.38 In addition, there is evidence that at least some firms continue to subsidize their 

reservist employees’ health care insurance.39 In a survey 

of large employers, 40 percent of respondents revealed 

that they maintained their reservists’ health care coverage 

at existing levels for the duration of the activation. That 

action, however, may not be representative of all employers—or even of all large employers.

Potential Costs for Litigation Under USERRA. An employer may be required to remunerate a reservist employee for lost pay or benefits and litigation expenses as a 

result of its failure to comply with USERRA. If the employer is found to have willfully violated the law, the employee’s award may be doubled. 

In 2004, reservists lodged almost 1,500 complaints with 

the Department of Labor against employers. A handful of 

cases was forwarded to the appropriate authorities for resolution. Among the remaining complaints, awards were 

made in about 500 instances; the average amount was 

roughly $2,500.40 (However, one recent case was settled 

for about $500,000.) The $2,500 average amount does 

not take into account other indirect or less tangible costs 

that employers may incur for such litigation—such as the 

time spent in resolving the case, fees for outside attorneys, 

higher premiums for liability insurance, and loss of goodwill among the community or employees. 

CBO’s Analysis of the Distribution of 

Businesses’ Losses from Reservist

Call-Ups 

There is little direct evidence showing the extent of the 

losses experienced by firms that employ reservists. The 

Department of Defense has begun to systematically collect information about reservists’ employment. It is also 

in the preliminary stages of surveying employers to gauge 

the extent of their support for reservist employees and the 

problems posed by those employees’ activations. 

Because that information is not yet available, CBO used 

existing survey data and interviews with reservists, military manpower experts, advocacy groups, and others to 

shed light on how calling up reservist employees might 

affect different types of employers.

Data from Interviews

CBO conducted 19 interviews with a cross-section of reservist business owners and employers who had reservists 

in their workforce. Those interviews included 12 recipients of Military Reservist Economic Injury Disaster 

Loans (MREIDLs) from the Small Business Administra35. CBO’s estimates of the costs for private-sector employees’ retirement benefits are based on Bureau of Labor Statistics, National 

Compensation Survey: Employee Benefits in Private Industry and 

“Employer Costs for Employee Compensation—September 

2004” (news release, December 2004).

36. Bureau of Labor Statistics, National Compensation Survey: 

Employee Benefits in Private Industry.

37. Ibid.

38. Department of Defense, Defense Manpower Data Center, May 

2004 Status of Forces Survey of Reserve Component Members: Tabulations of Responses, Report No. 2004-015 (October 2004).

39. Mercer Human Resource Consulting, “Reservist Pay and Benefits—Results” (summary briefing, May 2003), available at 

www.imercer.com/us/qs/QuickStart.asp.

40. The National Committee for Employer Support of the Guard and 

Reserve, a DoD organization that provides information on 

USERRA to employers and reservists and informally mediates 

complaints, reported more than 5,600 inquiries in calendar year 

2004 that required the services of an informal ombudsman. 

Underreporting of violations is possible, for several reasons. Some 

reservists may not know their rights under USERRA, or employers may violate the law but cite other reasons for an adverse 

employment action. As a result, the actual cause for the employer’s 

action may be difficult to discern. 
16 THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS

tion.41 In addition, through the newsletter of the National Veterans Business Development Corporation, 

CBO solicited accounts of businesses’ experiences. (The 

Veterans Corporation, a nonprofit organization created 

in 1999 under Public Law 106-50, assists veteran-owned 

businesses.) CBO also contacted three Fortune 500 companies.

CBO obtained information on 28 separate mobilizations 

(some firms had multiple reservists who were mobilized 

or an individual who had been activated more than once). 

Mobilizations of reservist business owners accounted for 

the majority (15) of the call-ups. Another six of the mobilizations were reservists employed at firms with fewer 

than 50 employees; the remainder were employees of Fortune 500 companies. One-half of the mobilizations lasted 

for more than eight months.

CBO’s findings based on those limited data should be interpreted with caution. In particular, the experiences of 

these firms should not be attributed to the entire population of reservist employers and business owners, nor even 

to other businesses of the same or a similar size. For example, recipients of MREIDLs are probably among those 

small businesses that face relatively large losses. To qualify 

for such loans, a small business that experiences the callup of a critical employee must be able to demonstrate 

that financial injury resulted from the mobilization. Also, 

the three large employers that CBO interviewed offer 

benefits that exceed those that the law requires. As a result, they may support and accommodate the needs of 

their reservists to a greater degree than other employers 

do.

Nevertheless, although the experiences of the businesses 

that CBO interviewed may not be typical of reservist employers as a whole, the analysis can shed some light on the 

effects of call-ups since it included diverse industries, geographic locations, and reservist occupations. The employers ranged from large telecommunications firms to small 

manufacturers and retail stores. The occupations of the 

called-up reservists also varied, from managers, physicians, and information technology personnel to sales personnel, service technicians, and shipping clerks.

In its interviews, CBO asked about the reservist’s skills, 

the duration of the call-up, how the company handled it, 

and its financial impact. The stories of individual firms, 

some of which are included in the following discussion, 

illustrate how businesses respond to the mobilization of a 

reservist and the kind of losses that some employers face.

Findings

Most firms are not affected by reservists’ activations simply because they do not employ reservists. Six percent of 

business establishments employ them;42 less than 0.5 percent of self-employed individuals are reservists.43 The 

limited information available indicates that among 

businesses with reservist employees, those that require 

workers with highly specialized skills and those small 

businesses that lose key employees when reservists are 

called up are likely to experience the greatest impact. 

Also probably affected to a larger extent are self-employed 

reservists.

There are no precise data on the number of reservists who 

are key employees or who have highly specialized skills. 

However, on the basis of information about reservists’ 

civilian occupations, CBO estimates that the number of 

drilling reservists who work in highly skilled or key positions in small businesses is probably between 8,000 and 

30,000.44 With more than 410,000 drilling reservists 

mobilized since the September 11 terrorist attacks, as 

many as 15,000 small businesses, in CBO’s estimation, 

may have experienced financial losses or had significant 

problems managing their workloads or scheduling, or 

handling other interruptions to their operations. Of the 

reservists called up, about 26,000 of them were probably 

self-employed. With almost 5 million small businesses 

and another 15 million self-employed people in the 

United States, the number of affected businesses has been 

41. The MREIDL program, which was established by the Veterans 

Entrepreneurship and Small Business Development Act of 1999 

(Public Law 106-50), is discussed later.

42. Veronia Nieva and others, 1999 Employer Reservist Survey: Final 

Report (Rockville, Md.: Westat, Inc., August 2000).

43. Estimate based on CBO’s analysis of Department of Defense, 

May 2004 Status of Forces Survey of Reserves; and Bureau of Labor 

Statistics, “Self-Employment in the United States: An Update,” 

Monthly Labor Review (July 2004), pp. 13-23.

44. The lower bound equals CBO’s estimate of reservists employed as 

executives or managers in small businesses, whereas the upper 

bound equals CBO’s estimate of reservists who are executives, 

managers, or professionals in small businesses. Those estimates are 

based on information as of 2000 obtained by CBO from DoD’s 

Defense Manpower Data Center and Department of Defense, 

May 2004 Status of Forces Survey of Reserves. 
THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS 17

comparatively small.45 However, the problems that individual firms face when reservist employees are mobilized 

can vary substantially.

Additional findings by CBO based on the businesses it 

interviewed include the following:

B The call-ups of reservist employees were disruptive regardless of a firm’s size. However, the large businesses 

that CBO interviewed did not experience any significant losses, whereas the small businesses, even those 

that did not receive a MREIDL, commonly experienced declining profits.

B Many of the small businesses and medical or dental 

practices did not hire a replacement for their critical 

reservist employee. Some of those that did experienced 

lower revenues or problems in managing production.

B Several of the smallest businesses that lost critical employees either fully or partially shut down for the duration of the mobilization.

B Although some firms received more than a month’s 

advance warning of the call-up, several received less 

than three days’ notice and were more likely than 

firms that received more warning to have difficulty adjusting to the vacancy. (For example, one business 

owner hired a replacement for himself sight unseen.)

B Many of the businesses responded that they did not 

have a plan in the event that their reservist employee 

was activated, although they knew a call-up was

possible. 

Effects on Firms with Highly Specialized and Skilled 

Workforces. It is likely that USERRA disproportionately 

imposes greater costs—resulting from both mandated 

benefits and the reservist’s absence—on employers who 

use a more specialized or skilled labor force. For example, 

retirement benefits are generally based on an employee’s 

wages. Since highly skilled or specialized employees are 

usually paid more than those with lesser skills, employers’ 

costs for retirement benefits will also be higher when such 

employees are mobilized. In addition, skilled employees 

are much more likely than their less skilled counterparts 

to participate in retirement plans (53 percent versus 18 

percent, respectively, for defined-contribution plans).46

CBO estimates that the average annual cost of providing 

pension benefits (whether under a defined-contribution 

or defined-benefit plan) for a professional worker who 

participates in an employer-sponsored program is about 

$5,300; for a service worker, the cost is $1,700.

The cost of the vacancy created by a highly skilled reservist who has been called up is also likely to be greater than 

that for a less skilled individual. For example, finding and 

hiring a replacement will probably be more expensive. 

For many jobs that require relatively few specialized skills, 

inexpensive recruiting methods such as direct application 

or personal referrals can generate a relatively large pool of 

applicants. By contrast, employers with vacancies that demand highly specialized or specially certified personnel 

typically incur higher costs in generating an applicant 

pool because they may rely on advertising in newspapers 

and professional journals or perhaps even use specialized 

job placement firms. For a job offering a salary of 

$100,000, the direct costs of recruiting, screening, and 

hiring may exceed $15,000. Significant expenditures of 

time potentially add to that cost.

An additional complication arises when reservists who 

have skills and knowledge that are particular to their employer are activated. In that case, a replacement might 

require extensive training and not be fully productive for 

some time. The employer would then bear the costs

of both the training and the new employee’s lower

productivity.

CBO’s interviews with firms that had reservist employees 

indicated that employers may not replace highly skilled 

personnel but may instead shift the firm’s workload 

among their remaining employees, scale down production, or allow work to go undone. The time and expense 

of recruiting combined with the lower productivity of replacement workers make it likely that an employer will 

not replace the reservist employee unless the firm has no 

one else on its payroll with similar skills. All else being 45. In 2003, according to the Bureau of Labor Statistics’ Current 

Population Survey, a little more than 10 million self-employed 

individuals were unincorporated; another 5 million were incorporated. The number of small businesses (those with fewer than 100 

employees) comes from the Census Bureau’s Statistics of U.S. Businesses for 2001 and is available at www.census.gov/epcd/www/

smallbus.html#empsize.

46. Skilled employees here are defined as white-collar workers; less 

skilled workers are those employed in service occupations. See 

Bureau of Labor Statistics, National Compensation Survey: 

Employee Benefits in Private Industry.
18 THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS

equal, the financial losses of firms that employ highly 

skilled reservists will probably be higher than those of 

other employers that face reserve call-ups.

Although CBO’s findings from its interviews should not 

be generalized to all businesses, they do illustrate what 

some individual businesses are facing when they lose reservist employees to a call-up. One small firm that CBO 

surveyed had experienced two separate call-ups among its 

workforce of about 30: the manager of operations and 

sales (for a nine-month activation) and the shipping/

receiving clerk (for a one-year activation). The firm hired 

a replacement for the clerk before the reservist employee 

was deployed, and although the replacement took a couple of weeks to gain proficiency, the firm’s sales and profitability did not drop. In fact, because the hiring and

recruiting costs for the position were low and the individual was not very experienced, the firm believed that the 

total costs for the replacement were lower than the reservist’s normal compensation.

By comparison, the manager’s call-up had more-severe repercussions. Unable to find an outside replacement who 

knew the specialized production processes and the customer base, the company instead relied on existing staff 

to cover the job functions as best they could. But the remainder of the staff did not have the manager’s sales and 

operations management expertise, and consequently, service to existing clients suffered and no new sales were 

generated. Indeed, the firm maintained that its sales fell 

by about 40 percent during the call-up period, and its 

profits were eliminated. Although the firm did not lay off 

any staff, it required long-term loans to cover its operating expenses.

Effects on Small Versus Large Firms. The provisions of 

USERRA that require employers to continue activated reservists’ benefit coverage disproportionately affect large 

employers. Employees of larger firms are almost twice as 

likely as their counterparts at small businesses (67 percent 

versus 37 percent) to participate in retirement plans; they 

are also more likely to participate in defined-benefit plans 

(which are more costly for employers, on average).47

Consequently, larger employers are more likely to face additional retirement costs when reservists are called up—

by CBO’s estimates, an average of $330 per month compared with $220 per month for small firms. Large employers typically also pay more for USERRA-mandated 

health care coverage: about $640 per month for family 

coverage compared with smaller firms’ costs of $520 per 

month, on average.48 In addition, more employees at 

large firms than at small businesses (68 percent versus 50 

percent) are covered by employer-sponsored health insurance. Among those covered employees, more large-firm 

employees (41 percent) elect family coverage than do 

small-firm employees (33 percent).

The cost of the vacancy, however, will probably be higher 

among small businesses, which are unlikely to have more 

than one individual with similar skills and thus cannot as 

easily shift the reservist’s workload to other employees. 

The small businesses that CBO interviewed indicated 

that such shifting, particularly for positions held by 

highly skilled reservists, was often not feasible. In addition, some data suggest that smaller firms are at a relative 

disadvantage in several respects when their reservist employees are activated, consistently experiencing more 

problems than their larger counterparts do with such activities as finding and hiring replacement workers, scheduling work, and delivering products.49 Since the ability of 

small firms to shift their workload is more limited, they 

are more likely to leave the position vacant or hire a temporary employee. If it costs less to shift work than to hire 

additional labor or leave a position vacant—a likely scenario—small firms will experience greater financial losses 

than larger firms when their reservist employees are called 

up. 

CBO interviewed both large and small employers, and 

their anecdotal accounts of the effects of reservist mobilizations illustrate the differences discussed above. At one 

Fortune 500 company, one of the firm’s network engineers had been mobilized twice since the 2001 terrorist 

attacks. The first call-up lasted six months; the second 

was ongoing at the time of CBO’s interview. The reservist 

was part of a group of 10 network engineers. For both ac47. See Bureau of Labor Statistics, National Compensation Survey: 

Employee Benefits in Private Industry. In this case, large employers 

are those with 100 or more employees.

48. CBO’s estimates based on Kaiser Family Foundation and Health 

Research and Educational Trust, 2004 Employer Health Benefits 

Survey. That survey classified employers with fewer than 200 

employees as small and those with 200 or more employees as 

large.

49. Nieva and others, 1999 Employer Reservist Survey. In that survey, 

companies with fewer than 50 employees were classified as small 

employers, whereas firms with 50 or more employees were classified as large employers. 
THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS 19

tivations, the company hired a contract worker as a replacement (at a higher wage than the reservist received). 

Because the replacement did not know the work environment well, the firm redistributed the more complicated 

and long-term tasks to the permanent staff. Although the 

firm considered the replacement’s productivity to be 

lower than the reservist employee’s productivity, the impact of the call-up on the company was negligible.

By contrast, the service manager of one small business 

that sells and repairs office machines has been mobilized 

intermittently since September 2001, and the company 

hired an additional permanent worker to carry out 

his duties. Because the position required multiple certifications, the recruiting and hiring process was a timeconsuming one, according to the firm, and the replacement did not begin work until about two months after 

the job search began. Adding to the burden on the firm 

was that the replacement required classroom and on-thejob training; in addition, his productivity through his 

first year was lower than the reservist’s (although the costs 

he generated, including the expenditures for training, 

were higher). The firm claimed that it was unable to fulfill some contracts and that its profits declined significantly. To mitigate some of the problems it was having in 

meeting its operating costs, the firm obtained a long-term 

loan. 

Effects on Self-Employed Reservists. Typically, reservists 

who are self-employed are essential to their own business, 

in part because they generally possess special skills or 

knowledge. As such, the absence of the reservist owner 

can have a significant impact on the firm’s health. Thus, 

on the one hand, reservist-owned businesses are among 

the most likely to be harmed by involuntary call-ups. 

On the other hand, voluntary call-ups may benefit selfemployed reservists. If timed to occur during seasonal or 

economic slowdowns, voluntary call-ups can smooth seasonal fluctuations in the owner’s income.

Two pieces of legislation enacted in recent years are relevant to self-employed reservists. The Veterans Entrepreneurship and Small Business Development Act of 1999 

provides financial and other assistance to small businesses 

that are hurt when an “essential” employee or owner is ordered to active duty in support of a military conflict.50

For preexisting direct loans by the Small Business Administration (SBA), the law requires the SBA to defer repayment of the principal and interest and to reduce the 

loans’ interest rates; the law also requires the SBA to encourage lenders that are participating in SBA loan programs to defer repayments.51 For businesses that meet 

certain criteria, the SBA is also authorized to provide 

working-capital loans—Military Reservist Economic Injury Disaster Loans—at interest rates that are lower than 

those prevailing in the market. A further feature of the 

law is that it makes SBA programs for business counseling 

and training available to any small business that is adversely affected by a reservist’s mobilization.

The other law that helps some self-employed reservists is 

the Servicemembers Civil Relief Act of 2003, which provides active-duty personnel and reservists with relief from 

a myriad of financial and civil obligations. In particular, it 

allows certain self-employed reservists to:

B Suspend and reinstate professional liability insurance;

B Reduce certain business debt interest costs; and

B Terminate certain business lease agreements arising before the reservist’s active-duty service.

Reservist business owners report that their firms face substantial hardships when call-ups occur. According to one 

DoD survey, 33 percent of self-employed reservists who 

had not been activated in the past two years responded 

that a three-month mobilization or deployment would 

pose a very serious or serious problem to their business or 

professional practice; 22 percent of reservists who had recently been activated said that the damage actually done 

to their business was a serious or very serious problem.52

That statement appears to be borne out by the fact that 

more than 50 percent of the businesses to which the SBA 

awarded MREIDLs were owned by the reservist who had 

been called up.

CBO’s interviews with recently demobilized reservists 

confirmed that the impact can be severe. Although some 

50. The law (Pub. L. 106-50, 113 Stat. 233) defines an essential 

employee as someone “employed by a small business concern and 

whose managerial or technical expertise is critical to the successful 

day-to-day operations of that small business concern.”

51. The period of assistance on existing loans may begin upon the 

receipt of orders and ends no later than 180 days after the reservist 

is released from active duty. Deferrals and interest rate reductions 

are not automatic.

52. Department of Defense, May 2003 Status of Forces Survey of 

Reserve Component Members.
20 THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS

reservist owners subcontracted with competitors to fulfill 

existing contracts and some found other reservists to fill 

in for them, some owners reported that they had had to 

lay off part or all of their staff, and several had to close 

their businesses for the duration of their activation. 

Those who closed earned no profits. Some self-employed 

reservists reported that they had greater indebtedness at 

demobilization than before they were activated because of 

ongoing business-related expenses (such as payments for 

rent and equipment).

The self-employed reservists that CBO interviewed also 

indicated that the effects on their businesses extended beyond the time of their activation and that it often took 

several months after their businesses or practices were 

fully operational for their sales and receipts to return to 

predeployment levels. 

The circumstances of a dentist that CBO interviewed offer some insight into what reservist owners face. The dentist, who had a small staff, was called up early in 2003 for 

three months; including training, he was away from his 

practice for about four months. Because his most recent 

activation did not entail deploying overseas, he was able 

to return home occasionally to maintain his practice. 

Revenue, however, dropped by about 90 percent. He laid 

off one employee and reduced the hours of the others. 

Because of recurring monthly expenses and lost revenues, 

he calculated that the activation cost him between 

$200,000 and $250,000 in a practice that typically generated annual revenues of double those amounts. He applied for a MREIDL but did not qualify. Instead, he 

added personal debt and refinanced an existing business 

loan. Despite learning that he would probably deploy 

again in 2005, he has no plans to quit the reserves.

Options for Alleviating Businesses’ 

Costs for Reservist Activations

Although the mobilization of reserve personnel leaves 

most employers unaffected, a small number of firms have 

experienced a severe impact from reservists’ activations. 

That circumstance has led to interest in ways to alleviate 

the difficulties that employers confront.53 Proponents argue that there are several reasons to help employers of reservists and reservist owners of businesses—for example, 

to help reduce, if not entirely eliminate, the competitive 

disadvantage that those businesses face and to ease DoD’s 

recruiting and retention efforts by encouraging firms to 

be more supportive of reservist employees. Proponents 

also contend that employers are being unfairly asked to 

bear the costs of reservists’ mobilization.

One argument of proponents has been that special consideration is justified at least for certain classes of employers that bear a disproportionate share of those costs. One 

such class might be self-employed reservists. Observers 

who support special consideration for them would probably acknowledge that self-employed people freely chose to 

join the reserves after weighing the impact that call-ups 

would have on their business—but they would also note 

that the frequency and duration of recent mobilizations 

have been unprecedented and exceed the expectations 

that self-employed reservists had when they volunteered. 

Indeed, self-employed reservists may have made choices 

(such as not developing a complete backup plan for their 

own activation) that initially seemed reasonable but that 

have proven inadequate under actual circumstances. By 

that argument, they might merit some compensation.

Other people would argue that no remediation was necessary for any group of business owners, claiming that 

employers ought to sacrifice for the greater public good. 

They would note that some employers offer their reservist 

employees more benefits than are required by law (presumably either from a sense of patriotic duty; to capture 

the goodwill of their customers, workers, and community; or to attract reservist applicants for jobs). Paying 

compensation to those employers would reward them for 

something that they were doing anyway and from which 

they might already be benefiting.

Effects on Stakeholders

In its analysis of potential options for mitigating the 

problems that some private employers might be experiencing from call-ups, CBO considered the alternatives’ 

effects on three categories of stakeholders: DoD, reservists’ employers, and reservist employees.

The Department of Defense. DoD pursues a personnel 

policy that calls for a mix of active-duty (permanent) and 

reserve (temporary) forces. The reserves provide a “surge” 

capability for the military, and they cost DoD relatively 

little when they are not activated—compared with DoD’s 

costs for active-duty service members. Although the reserves are used continually, they are activated in much 

53. States have carried out several initiatives, but most focus on alleviating the effects on reservists rather than the costs confronting 

employers. For a brief discussion, see Box 3. 
THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS 21

greater numbers during wartime or national emergencies. 

To meet its manpower needs, DoD must offer compensation or conditions of service that are attractive enough to 

induce a sufficient number of individuals to join and remain in the reserves. USERRA is one part of the incentive package offered to potential reservists. DoD, however, does not pay the costs associated with the law’s 

benefits; as a result, civilian employers bear a portion of 

the expenditures that call-ups generate.

DoD weighs costs and benefits in deciding when to rely 

on its military reserves. However, the Defense Department may overutilize the reserves relative to active-duty 

forces because the costs of using reserve personnel appear 

to be lower than they actually are. Policies that shifted the 

costs of call-ups from employers to DoD might lead the 

Defense Department to improve its allocation of personnel within the military and between the military and the 

private sector.

Employers. Employers also weigh the benefits of hiring 

and retaining reservists against the costs they entail and 

against the costs and benefits of hiring nonreservists. The 

presence of USERRA increases businesses’ costs. Policies 

that decreased employers’ costs from mobilizations would 

reduce or eliminate the difference in costs between employing reservists and employing nonreservists. In that 

case, employers should have little or no incentive to 

choose nonreservists over reservists, all else being equal, 

and employers’ support for reservists might increase.

Box 3.

State Initiatives

Many states have acted to assist their reservists, but 

in general, employers have received little aid at the 

state level. A range of assistance may be provided to 

reservists who have been mobilized, including the 

following:1

B Financial relief. More than two-thirds of states 

provide relief for certain reservists from property 

or income taxes or extend tax-filing deadlines. In 

addition, some states have set up funds to supplement some reservists’ military pay. Further, more 

than half of the states give reservists who are state 

employees some military leave with pay. Some of 

those states make up the difference between what 

the military pays and the employee’s regular salary. Still others grant full or partial pay, usually 

with some limits on its duration.

B Education assistance. Most states offer some assistance ranging from tuition refunds for reservists 

who are called up to scholarships for family

members.

B Employment assistance. States generally offer protection of reservists’ employment in a manner 

similar to that provided under USERRA but covering states’ activation of their National Guards. 

In some states, preference is given to veterans in 

decisions about hiring for state government jobs.

B Other benefits. These range from providing mobilization guides to reservists and their families to 

paying for life insurance.

By contrast, the assistance that states offer to reservists’ employers or reservist business owners appears to 

be very limited. Self-employed reservists are more 

likely than reservists’ employers to receive assistance—because as reservists, they may receive special 

reductions in personal property taxes or state income 

taxes. A small number of self-employed (incorporated) reservists may also receive unemployment insurance compensation when their tour of duty is finished. A few states extend or waive deadlines for 

professional licensing or have or are considering legislation to grant state income tax credits to employers of reservists. 1. See also the National Governors Association publication 

“State and Territorial Support for National Guard and Regular Military Members and Their Families” (October 2004).
22 THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS

Reservist Employees. Also to be considered is that reservists (including the self-employed) voluntarily decide to 

join and stay in the reserves on the basis of the value they 

receive from reserve service compared with the costs they 

incur from it. The value they derive includes compensation and nonpecuniary rewards, such as the satisfaction of 

serving their country. The costs might include the risk of 

injury or death and any negative repercussions of their 

service on their civilian career.

Without USERRA’s protections, reservists might receive 

lower compensation relative to the compensation of nonreservists, or they might not be hired for a job. As a result, 

they would seek positions with firms that could most easily absorb the costs of call-ups. USERRA lessens some of 

the costs of serving in the military and makes that service 

more attractive. Policies that increased the willingness of 

employers to hire and retain reservists would also probably lower the costs of military service for those employees 

and could increase participation in the reserves.

Potential Alternatives

CBO evaluated the effects of several potential measures to 

help employers deal with the problems that call-ups may 

pose. The measures include compensating businesses 

through tax credits or direct payments, subsidizing loans 

to employers, providing or subsidizing call-up insurance 

for businesses, and exempting certain reservists from callups.

Compensate Businesses Through Tax Credits or Direct 

Payments. Providing remuneration for disruptions or 

losses would reduce or eliminate the hardships that some 

firms undergo when their reservist employee or owner is 

mobilized. Compensation could be based on one of the 

following:

B Lost profits; 

B The costs of continuing legally mandated benefits for 

activated reservists; 

B Replacement costs (for recruiting and hiring a new 

worker); or

B Other (nonpecuniary) problems, such as difficulties 

for employers in scheduling work or uncertainty about 

a reservist’s mobilization and demobilization.

Possible Mechanisms. Several different approaches might 

be used to compensate employers of reservists or reservist 

business owners. One way would be for the federal government to reimburse a firm’s lost profits. Changes in a 

firm’s profitability reflect changes in its revenues or costs. 

To fully compensate employers, remuneration should 

equal the decrease in a firm’s profits that resulted from a 

call-up. The use of that kind of mechanism would eliminate losses stemming from the costs of replacing a reservist or continuing his or her benefits, or from lower receipts. However, it is virtually impossible to measure lost 

profitability. A business’s receipts and profits fluctuate for 

many reasons, including changes in the economy or in 

tax law, the number and behavior of its competitors, and 

other factors. Generally, the impact of any one employee’s 

absence is difficult to discern.

It would be easier for both the government and employers to use measures other than profits to approximate a 

firm’s financial loss. The simplest method would be an 

award based on a fixed reimbursement rate. Employers 

could be paid a set amount for each reservist who was activated or for each month that the reservist was mobilized. As more-detailed information on employers’ costs 

for mobilized reservist employees became available, the 

levels of the awards could be based on a firm’s industry, 

size, or geographic location or the reservist’s occupation 

or position. That approach would allow the fixed remuneration to more closely correspond to the likely loss that 

the reservist’s employer or business experienced.

Yet the financial injury that employers sustain probably 

varies even among firms in the same industrial category. 

With a fixed reimbursement rate, the payment would not 

be directly linked to the loss that an individual employer 

had to bear. Some employers would be overcompensated 

and others, undercompensated.

Another alternative would be to compensate firms for 

readily identifiable expenditures, such as the costs of recruiting replacements or providing legally mandated benefits. The advantage of that approach is that although unlikely to offset a firm’s total losses, it might more closely 

approximate them for some employers than a fixed reimbursement would. The method has several drawbacks, 

however. First, accounting for and verifying costs could 

be relatively more difficult than under some other ap-
THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS 23

proaches.54 Second, the federal government might end 

up reimbursing companies for benefits they would have 

offered even without USERRA’s mandates and consequently would pay some firms more than they required to 

offset the difficulties they encountered. Third, the reimbursement could alter employers’ responses to a call-up, 

encouraging activities that were eligible for reimbursement but not necessarily economically efficient. Finally, 

some firms that were harmed by call-ups would receive 

no financial assistance. Examples are businesses that had 

no readily identifiable costs (such as those that relied on 

shifting work or allowing it to remain undone during the 

reservist’s activation) and firms that shut down.

Policymakers could also choose to reimburse employers 

on the basis of a reservist’s civilian compensation, which 

is a measure of productivity and thus represents the employee’s value to the firm.55 One advantage of such an approach is that it should be relatively easy to administer. In 

addition, it would aid all firms that had reservist employees who were mobilized—regardless of how the firm dealt 

with the vacancy. At the same time, however, it might 

overcompensate some employers—most probably, firms 

that could shift or hire personnel easily. Moreover, if such 

a provision applied to self-employed individuals, it would 

provide an incentive for those with high earnings to join 

the reserves—which would result in DoD’s substituting 

more-costly reservists for less-costly ones. To diminish 

that possibility, payments could be capped.

A further issue would be whether to reimburse employers 

through direct payments from the federal government or 

through the tax code. If a mechanism could be developed 

so that DoD bore the cost of payments to employers (and 

thus more of the costs of call-ups), one advantage of making those payments direct reimbursements would be that 

DoD would be better able to evaluate the most costefficient mix of reserve and active-duty personnel. Also, 

as DoD found that the costs of reservists varied on the 

basis of their civilian employment, it would have an incentive to recruit civilians from lower-cost sectors of the 

business community. Consequently, the value of the labor 

resources that were diverted from the civilian economy 

might decline. One drawback of direct payments, however, is that DoD would need to create a new unit, or 

work with other federal agencies, to administer the

program.

By contrast, tax credits, though not without their own 

difficulties, could be administered through the existing 

tax system. (Such difficulties might include noncompliance—employers’ claiming a credit when they do not 

qualify for one—and enforcement.) A disadvantage of tax 

credits is that they would not aid firms that had little or 

no business income or that were tax-exempt nonprofit 

entities.

No matter how the government chose to remunerate employers with activated reservists, some firms would see 

their costs fall. The competitive disadvantage faced by 

employers of reservists would be reduced, if not entirely 

eliminated. As a result, businesses would be more likely to 

support their reservist employees’ service, and the reservists’ civilian work environment might improve. In turn, 

people might be more likely to join or remain in the reserves.

Proposed Legislation. Legislation to compensate selfemployed reservists or reservist employers affected by callups was introduced in the 108th Congress. However, either the bills were not enacted, or the portions relating to 

compensation were removed from larger bills prior to 

their passage. The relevant provisions of some of those 

bills are briefly described below. 

B Jumpstart Our Business Strength (JOBS) Act, S. 1637. 

This Senate bill included an income tax credit for 

costs incurred by an employer to replace reservists who 

had to be absent because of active duty. Available to 

small businesses, the credit would have been based on 

the replacement’s compensation and capped at $6,000 

per year for most employees ($10,000 for employees 

in certain manufacturing sectors). The bill also included a tax credit for employers based on the amount 

that employers paid in total compensation to their reservists who were absent for active-duty service. That 

additional credit was limited to $15,000 per year or 

less for most reservists. The Joint Committee on Taxation estimated that for 2005, the cost of those provisions would have been $320 million. Both tax credits 

54. The experience of the British is instructive. Since the late 1990s, 

employers can provide documentation and receive some reimbursement to help cover recruiting, overtime, and other costs associated with reservist employee call-ups. However, the requests 

have been relatively fewer than anticipated. Surveys and anecdotes 

point to burdensome documentation requirements and low reimbursement rates as reasons. 

55. Because total compensation is difficult to calculate, the reimbursement might be based on cash compensation.
24 THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS

were removed from the final bill. (The final bill, H.R. 

4520, was enacted as Public Law 108-357 in October 

2004.)

B National Defense Authorization Act for Fiscal Year 

2005, H.R. 4200. As passed in the House of Representatives, the National Defense Authorization Act for 

Fiscal Year 2005 included an income-maintenance 

provision to replace the lost income of involuntarily 

mobilized reservists who were experiencing extended 

and frequent active-duty service. It instructed DoD to 

pay up to $3,000 per month to certain service members to make up the difference between their average 

monthly civilian income and their total monthly military compensation. CBO estimated that the cost of 

the provision for 2005 would have been $60 million. 

Although the proposal would not have affected most 

civilian employers, self-employed reservists would 

have been eligible. The provision was removed from 

the final bill.

B Guardsmen and Reservist Employer Tax Act of 2003, 

H.R. 2399. As introduced in the House of Representatives, this bill would have allowed employers to take a 

credit against their income tax for reservist employees 

who were called up. The credit (up to $25,000 per 

qualified employee) would have been based on the difference between the reservist employee’s average daily 

qualified compensation and his or her average daily 

military pay and allowances. A similar credit would 

have been created for self-employed reservists. The bill 

did not come to a vote in the House.

Subsidize Loans to Employers. Another option would be 

to offer subsidized loans to employers. One way to do so 

would be to improve the availability and effectiveness of 

the Small Business Administration’s MREIDL program. 

Currently, under the Veterans Entrepreneurship and 

Small Business Development Act of 1999, small businesses that suffer substantial economic losses because an 

essential employee (including an owner or operator) is 

called up during a period of military conflict may apply 

for a Military Reservist Economic Injury Disaster Loan, 

which is a working-capital loan designed to be used to 

pay certain expenses that could not otherwise be paid 

(such as payroll, fixed debts, and accounts payable) until 

the reservist is able to return to the business and the firm’s 

normal operations are resumed. To qualify for a loan, an 

applicant must be a small business or small agricultural 

cooperative and must demonstrate the harm that the reservist’s call-up is having or will have on the firm’s finances.56 An applicant may borrow up to $1.5 million at 

an interest rate of 4 percent or less with a maximum term 

of 30 years. Repayment generally begins about four 

months after the reservist is deactivated. Since the first 

loan was granted in 2001, the program has awarded more 

than 200 loans totaling $18 million and averaging about 

$87,500.

Several aspects of the loan program may limit the number 

of businesses that apply for and receive MREIDLs or may 

delay a firm’s receipt of funds: 

B Eligibility is restricted to businesses that cannot secure 

sufficient credit elsewhere.

B The loans are available only to small businesses (and 

small agricultural cooperatives) and only during a period of military conflict. 

B A business may not apply for a loan until the reservist 

is ordered to active duty, so the loss of the reservist 

may occur before financial assistance is available. 

Some businesses (particularly those that are owned by 

reservists) may have difficulty applying for the loan 

until after the reservist is deactivated.

B Not all potentially qualified employers are likely to 

know about the loan program, in part because the 

SBA’s direct outreach to them has been limited. Although the agency provides information about the 

loan program through its Web site and through various publications and mailings, it markets MREIDLs 

primarily to reservists, not to employers. Reservists 

receive information about the loans at mobilization 

sites and through demobilization kits. Thus, while 

self-employed reservists may be aware of the program, other eligible employers’ awareness may be 

more limited.

Various suggestions have been made about how to restructure the MREIDL program to provide more-flexible, 

timely loans to a larger proportion of reservist employers. 

Some additional features might include approving loans 

prior to a reservist’s call-up, adding revolving lines of 

credit to the loan portfolio that firms might use once the 

reservist was activated or received notice of activation, or 

linking the loan program to assistance in business plan56. As defined in 13 CFR part 121.
THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS 25

ning. Also, the loans’ availability could be enhanced by 

allowing them to be made when no military conflict was 

occurring and by permitting employers that had other 

non-SBA financing options to qualify for the loans. But 

to keep the program focused on the firms that were the 

most affected, eligibility could still be made contingent 

on demonstrating financial damage from an expected or 

actual call-up.

The primary benefit of an expanded loan program is that 

more employers would be able to spread the losses they 

incurred from a reservist’s absence over an extended time 

frame and make up such losses at a lower cost than they 

would otherwise have paid. Because businesses would be 

better able to cope with such absences, employers would 

be more likely to support their reservist employees. Another advantage is that a loan program could be targeted 

toward businesses that encountered financial problems; 

businesses that could absorb the costs of a call-up would 

not qualify for a loan.

The effects of this option on DoD and on employees 

would be much the same as the effects of the previous option (direct payments to employers). If mechanisms were 

developed so that DoD faced the costs of subsidizing the 

loans, it would bear more of the costs of a mobilization 

and so be motivated to make more-efficient decisions 

about labor resources. Employees might benefit if their 

employers were more likely to support their reservist activities, knowing that the disruption to the firm would 

not be as severe. That support could in turn help in 

DoD’s recruiting and retention of reserve forces.

Relying on an expanded MREIDL program has drawbacks, however. First, a loan would help the recovery of 

firms that employed reservists or that were owned by one, 

but it would not prevent financial losses nor fully compensate for them. In that respect, it might provide less assistance than a direct payment or tax credit. Second, a 

loan program might not assist the firms that were most 

injured: those businesses might not qualify for a loan because they lacked the capability to pay it back. Third, verifying the extent and cause of a firm’s financial damage 

might be difficult and costly. If loan administrators could 

not accurately determine the losses from call-ups, SBA 

loans might become available to some firms that were 

seeking financing for other purposes but unavailable to 

other firms that were indeed harmed by reservists’ activations. The former would raise the cost of the program; 

the latter would mean that the loan program was less effective than it might be in alleviating injuries to firms.

Provide or Subsidize Call-Up Insurance for Businesses. 

As another alternative, the federal government—possibly 

through DoD—could offer or subsidize an insurance 

plan that would offset the financial costs associated with 

the activation of an essential employee by spreading the 

risk of incurring such costs among more employers. (If 

successful, such a plan could offset the costs to individual 

employers entirely.) But implementing a fiscally sound—

that is, a self-sustaining—program presents substantial 

difficulties, as DoD’s previous experience with a reservist 

insurance program illustrates. In 1996, the Congress instructed DoD to establish income-maintenance insurance 

for reservists in response to widespread concern that reserve personnel might see their income drop when they 

were activated. The insurance, known as Ready Reserve 

Mobilization Income Insurance (RRMII), promised enrolled reservists a monthly benefit upon mobilization, 

equal to their purchased coverage, for up to 12 months in 

an 18-month period. The monthly cost to reservists was 

$12 for coverage of $1,000 per month; maximum coverage was $5,000 per month. DoD began to offer the insurance to reservists in October 1996.

The RRMII program experienced two significant problems: much lower enrollment than DoD had anticipated 

and severe adverse selection. Adverse selection occurs 

when individuals who are most likely to suffer a loss (and 

collect a payment) disproportionately enroll in an insurance program. The enrollment period for the RRMII 

program occurred at about the same time that DoD was 

mobilizing reservists for deployment to Bosnia. Service 

members who knew that they were shortly to deploy (and 

consequently be eligible for RRMII benefits) enrolled at 

much higher rates than did other reservists—with the result that the program’s benefit payments were significantly greater than its accumulated premiums. With the 

program facing insolvency, the Congress terminated it 

only a little more than a year after its initial offering.57

DoD’s experience with the RRMII program provides 

some lessons for the design of a call-up insurance program for businesses. As with RRMII, an immediate issue 

57. For a more detailed discussion of the program, see Lawrence 

Kapp, The Ready Reserve Mobilization Income Insurance Program,

Congressional Research Service Report 98-652F (August 1998).
26 THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS

is that the fund might be required to pay out significant 

benefits before it had accumulated significant assets. To 

illustrate the magnitude of that problem, consider a case 

in which all private-sector employers of drilling reservists 

(including nonprofit organizations) purchased coverage 

of $1,000 per month for each of their reservist employees. Under the assumption that 100,000 reservists were 

mobilized (of whom roughly one-half were employed in 

the private sector), the fund would have an ongoing 

monthly liability of almost $50 million. For the fund to 

remain solvent, each employer would have to pay 

monthly premiums of about $120 for each reservist. (The 

premiums would be scaled in proportion to changes in 

the number of reservists mobilized.) Alternatively, policymakers could choose to set lower premiums and then appropriate start-up funds to “seed” the program.

Another consideration in designing a call-up insurance 

program for employers of reservists (including reservist 

business owners) is adverse selection. Employers that were 

aware that they employed reservists would have at least 

some information about the likelihood that their reservist 

employee would be mobilized, and those facing a greater 

risk of losses from a mobilization would be more likely 

than those facing a lesser risk to purchase the insurance. 

Adverse selection would be greatest, however, among the 

self-employed because they would obviously have advance knowledge of their intention to volunteer for active 

duty. The problem of adverse selection could be mitigated by determining premiums based on anticipated activation rates and the degree of adverse selection. It could 

also be lessened by requiring a waiting period before coverage became effective—which would eliminate the problem of firms’ enrolling after learning of a pending mobilization.

An advantage sometimes cited for an insurance program 

is that it could reduce the losses that employers experienced when reservists were activated while protecting reservists’ civilian employment. If the benefits that employers received translated into more support for reservists, 

individuals who no longer faced uncertain prospects in 

their civilian employment might be more willing to join 

and stay in the reserves at the current level of military 

compensation.

The effects of such a program on DoD would be similar 

to those of the other options. If DoD was responsible for 

the costs of subsidizing the insurance program, it would 

bear more of the cost of reservists’ call-ups. And as its 

costs for the reserves increased, it would face a stronger 

incentive to use the military’s active-duty service members more intensively and its reserves less intensively.

Besides the difficulty of crafting a financially sound program, offering call-up insurance to employers would have 

other disadvantages. First, it would not help all employers 

that might be affected by reservists’ mobilizations. For example, not all such employers know that they employ reservists. (Some reservists take annual leave when they fulfill their normal training requirements and may not 

disclose their reserve status to their employer.) Consequently, employers may underestimate the risk of an employee’s being called up and be unlikely to purchase insurance. Second, depending on how the program was set 

up, the cost of administration could be substantial. The 

provision of insurance is not a so-called core competency 

of DoD’s; thus, such a program might be more costly for 

the Defense Department to administer than if it established a program through private insurers. 

Exempt Certain Reservists from Call-Ups. Another means 

by which the federal government could help the employers of reservists would be to limit the call-ups some reservists experience. One way to do that would be to allow 

businesses to claim a hardship waiver and request that an 

individual or position be exempt from active duty. (In 

evaluating those claims, DoD could work with other federal agencies that have expertise in small business matters.) An advantage of that alternative would be that the 

number of waivers could be limited: they would be available only to employers that were likely to experience significant losses from a call-up. Consequently, this option 

would help firms that most needed help, yet still provide 

reservists, through USERRA, with a wide range of employment protections. In regard to the Defense Department, this approach might have little impact on DoD’s 

recruiting and retention efforts.

Certain disadvantages apply to that kind of hardship 

waiver, however. Determining case by case whether an 

employee or position should be exempt from activation 

could be difficult and time-consuming. Moreover, if the 

waiver exempted individuals rather than positions, employers who were unaware of their employee’s reserve 

status would not apply. Indeed, for reservists who wish to 

be called up for active duty, this approach would be an 

incentive to hide their reserve status until their mobiliza-
THE EFFECTS OF RESERVE CALL-UPS ON CIVILIAN EMPLOYERS 27

tion orders were received. As a result, the reservist’s employer would have little time to plan for the individual’s 

departure.

Another alternative for exempting individuals from mobilization would apply mainly to self-employed reservists. 

During the annual screening that DoD conducts to ensure the immediate availability of personnel for active 

duty, the department could require self-employed reservists to submit a business plan demonstrating their ability 

to withstand a lengthy call-up. Individuals who were unable to mobilize for lengthy periods without hardship 

could be transferred to the Standby Reserve. One advantage of such an approach is that fewer businesses headed 

by self-employed reservists would experience losses from 

lengthy activations; another is that its impact on the military’s recruiting and retention would probably be small. A 

disadvantage of this alternative is that the program would 

be very limited and would not help most businesses that 

were affected by call-ups. In addition, its administration 

would add modestly to DoD’s costs.

Appendix: Reservists’ Protections

Under Federal Law

The Uniformed Services Employment 

and Reemployment Rights Act of 1994

The Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) grants reservist employees broad job protections from which no employer is 

exempt. The law significantly expanded the employment 

and reemployment rights granted under its predecessor, 

the Veterans Reemployment Rights Act of 1940. 

Eligibility 

Generally, reservists are entitled to the reemployment and 

employment rights and benefits provided by USERRA if 

they:

B Leave service under honorable conditions;

B Serve less than five years of cumulative active duty 

while with an individual employer (some duty, including annual active-duty training and call-ups resulting 

from a domestic emergency or war, is exempt from the 

five-year limit);1

B Give their civilian employer advance notice, either 

written or verbal, of voluntary or involuntary call-up 

to active duty; and 

B Report back to work or apply for reemployment in a 

timely manner. Service members who have been on 

active duty for less than 31 days must report to their 

employer at the next regularly scheduled work period 

following their completion of service. Reservists who 

serve more than180 days must submit an application 

for reemployment no later than 90 days following the 

completion of their period of service.2

Discrimination and Retaliation

Employers are prohibited from denying initial employment, reemployment, retention, promotion, or any other 

benefit of employment on the basis of membership or 

service in, application for membership or service in, or 

obligation to serve in the uniformed services, including 

the reserves. Employers may not take any adverse employment action against an employee who has exercised a 

right or enforced a protection under USERRA or who 

has testified in a proceeding or assisted an investigation 

under the law.

Reemployment Protection

Reservists whose absence from a position of employment is necessitated by reason of service in the uniformed 

services are entitled to reemployment rights under 

USERRA, with distinctions based on the period of 

service.

A reservist whose period of service was less than 91 days is 

entitled to be reemployed in the position he or she would 

have occupied with the employer if continuously employed, the duties of which the reservist is qualified to 

perform. A reservist whose period of service was for more 

than 90 days is entitled to be reemployed in the position 

he or she would have occupied with the employer if continuously employed—or a position of like seniority, status, and pay—the duties of which the reservist is qualified to perform. A reservist who has a disability that was 

incurred during or aggravated by his or her service and 

who is not qualified, because of the disability, to perform 

the duties of the position he or she would have occupied 1. Secretaries of the military departments individually determine 

whether voluntary duty after September 11, 2001, is exempt from 

the five-year limitation. To date, the Army has exempted voluntary duty when service in support of the war on terrorism exceeds 

24 months. The other services have exempted all voluntary duty 

in support of the current partial mobilization.

2. Certain exemptions to those requirements exist. See Pub. L. 103-

353, codified at 38 U.S.C. §§4301-4333, for the text of 

USERRA. 
30 APPENDIX

with the employer if continuously employed, is entitled 

to any other position equivalent in seniority, status, and 

pay, the duties of which the reservist is qualified to perform.

Reservist employees are entitled to the seniority rights 

and benefits that they had on the date they left employment for service in the uniformed services and to any additional seniority benefits and rights they would have attained if their employment had been continuous.

Employers may not require reservist employees to use vacation, annual, or similar leave to fulfill their military obligations.

Reservists who are activated are deemed to be on furlough 

or on leave of absence during their period of service. 

They are entitled to rights and benefits not determined 

by seniority that are provided by the employer to other 

employees of similar seniority, status, and pay who are on 

furlough or leave of absence.

Except for cause, an employer is prohibited from discharging a reservist reemployed under USERRA within 

one year after reemployment if the reservist’s period of 

service was more than 180 days or within 180 days after 

reemployment if the period of service was more than 30 

but less than 181 days. Under certain circumstances, such 

as undue hardship for the employer, the law does not require the employer to rehire the returning reservist. 

Health and Pension Benefits Protection

Employees covered under employer-sponsored health 

plans may elect to continue coverage for up to 24 months 

during absences for service in the uniformed services. If 

the employee elects to continue coverage, the employer 

must continue to pay the employer’s portion of the premium during service of 30 days or less, but for service exceeding 30 days, the employee may be required to pay up 

to 102 percent of the premium, which includes the employer’s portion, the employee’s portion, and some administrative costs.3 If the employee elects to discontinue 

the health plan or the coverage is otherwise properly terminated, employees are entitled to immediate reinstatement of the employer-sponsored health care coverage 

upon reemployment. Upon reinstatement, no exclusion 

or waiting period may be imposed if one would not have 

been imposed had the plan not been terminated. The 

prohibition does not apply to coverage of any illness or 

injury determined (by the Secretary of Veterans Affairs) 

to have been incurred in or aggravated by the performance of service in the uniformed services.

The right to pension benefits of an employee reemployed 

under USERRA is protected. The period of service is not 

treated as a break in service with the employer that maintains the plan; rather, it is considered service with the employer for purposes of determining accrued benefits and 

their nonforfeitability. The employer is liable to the plan 

for funding any obligation to provide benefits and must 

allocate the employer’s contribution for the reemployed 

service member to the same extent that the allocation occurs for other employees. The reemployed service member is entitled to accrued benefits that are contingent on 

the employee’s contributions only if the employee makes 

contributions. The payment cannot exceed what the employee would have had to make if employment had been 

continuous. The period for making the payment is three 

times the duration of the period of service but cannot exceed five years.

Complaints and Enforcement Procedures

A person who is entitled to protection under USERRA 

and who believes that his or her employer refused or 

failed to comply may file a complaint with the Secretary 

of Labor, through the Veterans’ Employment and Training Service (VETS). VETS will investigate and make reasonable attempts to resolve the complaint. If it cannot be 

resolved, a service member whose employer is a state or a 

private employer may request that the complaint be referred to the U.S. Attorney General. The Attorney General may file a civil action in U.S. District Court on behalf of the service member.4

 Service members employed 

by federal executive agencies may request that the complaint be referred for litigation before the Merit Systems 

Protection Board. Service members may also initiate private civil action against their employers.

As remedy, the court or the board may require the employer to comply with the provisions of the law, may 

3. Reservists automatically have comprehensive health care coverage 

through the military health care system (TRICARE) when they 

are ordered to active duty for more than 30 days. Their families 

are also eligible for TRICARE from the first day of the reservist’s 

active-duty service if his or her orders exceed 30 days. 4. A political subdivision of a state is considered a private employer 

for purposes of this law.
APPENDIX: RESERVISTS’ PROTECTIONS UNDER FEDERAL LAW 31

award compensation for lost wages and benefits (courts 

may award an equal amount as liquidated damages if the 

state’s or private employer’s actions were willful), and may 

award attorneys’ fees and other litigation expenses.

The Servicemembers Civil Relief Act of 

2003

The Servicemembers Civil Relief Act of 2003, which replaced the Soldiers’ and Sailors’ Relief Act of 1940, provides a variety of protections for members of the uniformed services who are called to military service “to 

enable such persons to devote their entire energy to the 

defense needs of the Nation.” The full protections afforded service members under the law are not discussed 

here.5 However, the provisions that are described are representative of the protections granted under the law and 

include provisions that may aid self-employed reservists.

Among other protections, the Servicemembers Civil Relief Act of 2003:

B Grants service members the right to stay court and administrative hearings if military service materially affects their ability to defend their interests. Courts or 

administrative officials are required to grant one 90-

day stay if requested. Additional stays can be granted 

at the discretion of the judge or official. (§522)

B Clarifies the application of the reduction in interest 

rates to 6 percent on loans and obligations entered 

into before the service member began military service. 

Under the law, annual interest in excess of 6 percent 

must be forgiven if the service member’s request is in 

writing and accompanied by a copy of his or her orders. This provision is applicable only if the service 

member’s ability to pay is materially affected by his or 

her military service. (§527)

B Precludes evictions without a court order of a service 

member’s family for nonpayment of rent from rental 

property occupied primarily as a residence. That provision applies if the rent on the premises does not exceed $2,400 for 2003; the rent ceiling is adjusted 

annually by the yearly increase in the November housing component of the consumer price index. (§531)

B Grants the right of a service member to terminate real 

property leases for residential, professional, business, 

agricultural, or similar purposes that were intended to 

be occupied by the service member or dependents, in 

which the lease is executed prior to a call-up. Installment contracts for the purchase or lease of real or personal property, on which a deposit or installment is 

paid, may not be terminated or property repossessed 

for nonpayment or breach during military service, except by court order. (§§535 and 532)

B Permits the termination of a motor vehicle lease on a 

vehicle used by service members and their dependents. 

A lease entered into before the service member was 

called to active duty may be terminated if the activation is for 180 days or more; leases entered into during 

military service may be terminated if the service member is ordered to a permanent change of station outside the continental United States or is deployed for a 

period of 180 days or more. (§535)

B Permits service members to maintain their state of residence for tax purposes despite military relocations to 

other states. Accordingly, military compensation is not 

“income” in the state of relocation, personal property 

is not located in the state of relocation, and the state of 

relocation is precluded from using the military income 

of a nonresident service member to increase the tax liability of the service member or spouse subject to tax 

in that state. (§571)

B Provides for the suspension of existing professional liability insurance coverage for health care and legal service professionals who are called to active duty and for 

the subsequent reinstatement of that insurance once 

the military service is completed. (§593)

B Provides the right to reinstatement of health insurance 

that was in effect on the day before activation but terminated during service. No exclusion or waiting period for a condition may be imposed on the 

reinstatement if the condition arose before or during 

the period of active duty, if no exclusion or waiting period would have been imposed if coverage had not 

been suspended, and if the condition is not defined as 

“a disability incurred or aggravated in the line of 

duty.” This provision does not apply to service members who are entitled to participate in employer-sponsored insurance benefits under USERRA. (§594)

5. For the full text of the law, see Public Law 108-189, codified at 50 

U.S.C. App. §§ 501-596.