The aerospace and defense industry operates in a complex regulatory environment in which labor and employment law is continuously evolving. Recent developments relating to the Uniformed Services Employment and Reemployment Rights Act (USERRA), the National Labor Relations Board (NLRB), noncompete agreements, and the Service Contract Act (SCA) present significant compliance challenges for employers. Understanding these changes is critical for businesses to mitigate legal risks and adapt to shifting regulatory expectations.
UNIFORMED SERVICES EMPLOYMENT AND REEMPLOYMENT RIGHTS ACT
USERRA provides several key protections for service members in their civilian employment:
- Anti-discrimination and anti-retaliation provisions – Unlike other employment laws that apply a three-part McDonnell Douglas burden-shifting framework, USERRA uses a step analysis. Initially, the employee must establish a connection between military status and an adverse employment action. If that burden is met, the employer must then demonstrate that the action would have occurred even if the employee had not served in the military.
- Unpaid military leave provisions – Employees are entitled to unpaid leave for up to five cumulative years. Recent amendments have expanded coverage to include state-funded National Guard call-ups for disaster response and certain FEMA workers.
- Reemployment rights under the escalator principle – Returning service members must be reemployed in the position they would have held had they not taken leave.
- Other benefits – Employees on military leave may be entitled to continued medical insurance and pension contribution catch-ups.
COMMON ISSUES EMPLOYERS FACE UNDER USERRA
Employers at times struggle with USERRA’s scope and application, particularly in such areas as the following:
- Voluntary vs. involuntary military duty – All forms of service, including voluntary training, are covered under USERRA, with limited exceptions.
- Duration and frequency of leave – Employers have expressed concerns when employees regularly volunteer for military duty, impacting business operations. However, USERRA protects voluntary service, and options to limit its frequency are limited.
- Paid military leave – USERRA does not explicitly require employers to provide paid military leave, but recent federal appellate court decisions have found that military leave may be comparable to jury duty, bereavement leave, or sick leave.
- Reemployment position and performance evaluations – Employers often question whether to provide performance ratings to employees on military leave as these ratings can affect promotions and compensation upon return.
RECOMMENDATIONS FOR USERRA COMPLIANCE
Employers should consider taking the following proactive steps to ensure USERRA compliance:
- Review and update policies to reflect recent amendments covering National Guard activations and FEMA workers and address paid military leave obligations in light of recent case law
- Consult military points of contact for clarification on the five-year service limit and exemptions
- Engage in dialogue with employees and military representatives to address concerns about extended leave and consulting legal counsel
NATIONAL LABOR RELATIONS BOARD IN TRANSITION
Recent transitions at the NLRB have significantly altered its policy direction. The past two months have seen the removal of Board Member Gwynne Wilcox and General Counsel Jennifer Abruzzo as well as the appointment of Acting General Counsel Bill Cowen, who has served in various NLRB roles since 1979.
Under the Acting General Counsel, the NLRB has already undergone several immediate changes:
- The revocation of previous General Counsel memoranda and initiatives (see below on noncompetes)
- A shift toward a “more traditional settlement approach” in unfair labor practice (ULP) cases, reducing aggressive remedies
- Less-targeted enforcement, with a greater focus on litigation that could reshape Board precedent
Currently, the Board lacks a quorum, significantly limiting its activities. It cannot issue final decisions until at least one additional Board member is confirmed, and presidential nominations are likely months away. Additionally, uncertainty surrounds ongoing litigation over the legality of Member Wilcox’s removal. In the meantime, the Acting General Counsel has delegated certain Board authorities regarding case processing to administrative law judges (ALJs) and regional directors.
Furthermore, the case-processing impact of terminations at the NLRB has led to procedural challenges, particularly in representation and ULP cases.
In representation cases:
- Regional offices will continue processing union election petitions, holding elections, and issuing certifications
- There is a potential challenge to the authority of regional directors to administer these cases given the Board’s current inability to review decisions
- Until the Board regains a quorum, requests for review of regional director decisions will remain unresolved
In ULP cases:
- Regional offices will continue investigating complaints and ALJs will proceed with hearings and issuing decisions
- Appeals and dispositive motions are unlikely to halt proceedings
- While exceptions to ALJ rulings can still be filed with the NLRB, no final decisions will be issued until the Board is restored to at least three members, creating uncertainty for pending cases
It is worth noting that the labor policy and political landscape appears to be shifting toward a more employer-friendly approach, but with less predictability. The president has aligned with union leaders like Sean O’Brien of the Teamsters and Harold Daggett of the ILA, with Daggett praising the president’s “unwavering support” for labor. Additionally, Lori Chavez-DeRemer’s nomination as Secretary of Labor, reportedly at the recommendation of O’Brien, signals potential pro-labor policies. Having co-sponsored the PRO Act, Chavez-DeRemer’s appointment raises speculation about a Republican-backed version of the legislation, reflecting a shifting and complex labor agenda for the president’s second term.
THE EVOLVING NONCOMPETE LANDSCAPE: FEDERAL AND STATE DEVELOPMENTS
Various federal efforts to restrict noncompete agreements have encountered legal and administrative roadblocks:
- The Federal Trade Commission’s proposed nationwide ban on most noncompetes, set to take effect in September 2024, was invalidated by a federal court in Texas. While the FTC commenced an appeal of this order in October 2024, it recently filed an unopposed motion requesting a 120-day stay, which the Fifth Circuit granted on March 12, 2025
- For now, noncompetes remain enforceable subject to state law
- NLRB Acting General Counsel rescinded previous NLRB memoranda that had suggested most noncompetes violated the National Labor Relations Act
Meanwhile, states continue to take diverse approaches to noncompete regulation:
- California, Minnesota, North Dakota, and Oklahoma prohibit most noncompetes. In 2024, California went even further by increasing ramifications for employers using prohibited noncompetes
- A growing number of states have passed noncompete laws, with common provisions including notice requirements, duration restrictions, and income thresholds to limit enforceability
- In some others, the analysis continues to center on reasonableness: is the restriction reasonable in scope and necessary to protect the employer’s legitimate protectable interests including confidential information, trade secrets, employee goodwill, and customer/client goodwill?
- Factors in this analysis include the duration of the restriction, the scope of activity restrained, the geographic reach, and the sufficiency of consideration to support the restriction
Employers with multistate operations must navigate a patchwork of varying and evolving state laws, making compliance complex.
THE SERVICE CONTRACT ACT AND WAGE & HOUR COMPLIANCE
The new administration’s Executive Order 14148 rescinded the prior administration’s nondisplacement rule (Executive Order 14055), eliminating the requirement for federal contractors to offer employment to workers from a predecessor contract.
However, there are several recent enforcement actions that federal contractors should be aware of with regard to compliance with the Service Contract Act (SCA), as the US Department of Labor (DOL) remains active in enforcing SCA violations.
- In July 2023, the Armed Services Board of Contract Appeals ruled that contractors must comply with the SCA even if the SCA FAR Clause 52.222-41 was not included in their contract. The board held that the contractors were not entitled to an equitable adjustment for all costs it incurred from a $1.5 million settlement with the DOL despite the government’s failure to include the SCA Clause.
- In September 2023, in DOL v. Seven Hills, Inc., a Pentagon food court contractor and its president were debarred for failing to pay prevailing wages, overhead, and health benefits after signing a contract modification with an SCA clause and wage determination. The DOL found the company showed “culpable disregard” for whether it was violating the SCA.
- In January 2024, in DOL v. Davis-Paige Management Systems, LLC and Michael Davis, a contractor and its CEO were debarred for failing to make payroll, with the DOL finding no “unusual circumstances” to justify the violations.
- Most recently, in March 2024, the DOL fined 35 contractors at a California naval base $1.5 million in back wages and damages for widespread SCA and Fair Labor Standards Act violations, including failures by subcontractors to pay correct prevailing wages, health and welfare benefits, and overtime.
These cases highlight strict SCA enforcement and the severe consequences for noncompliance, including financial penalties and debarment.
KEY SCA COMPLIANCE TAKEAWAYS
Employers should consider taking the following proactive steps to avoid liability under the SCA:
- Verify SCA coverage and consult contracting officers when in doubt
- Properly classify employees to ensure they are paid according to the wage determination
- Flow down wage determinations to subcontractors and monitor compliance
- Segregate SCA-covered work from noncovered work to ensure proper wage application
Additionally, regarding broader wage and hour considerations, employers must remain vigilant of the following:
- Meal break violations – States such as Washington have imposed penalties of 30 additional minutes of pay for missed meal breaks
- Calculating the regular rate correctly – Litigation over the failure to include bonuses and restricted stock units in the regular rate is increasing
CONCLUSION
As labor and employment laws and regulations remain in flux, employers in the aerospace and defense industry must carefully navigate:
- USERRA compliance, particularly concerning paid military leave and reemployment rights
- NLRB uncertainty amid leadership transitions and shifting enforcement priorities
- The evolving patchwork of state noncompete laws
- SCA enforcement trends and wage and hour compliance challenges
By staying informed and proactively updating policies, businesses can mitigate risk and ensure compliance with the latest legal developments.