Can we lay off an employee who is on military leave under USERRA?

Yes. If there is a legitimate business reason for the layoff and for the selection of the employee on military leave, an employer may be permitted to lay off an employee who is on a military leave of absence under the Uniformed Services Employment and Reemployment Rights Act (USERRA). 

USERRA addresses the topic of layoffs in various regulations. For example, Regulation 1002.248 gives an example of a reduction in force or a layoff as cause for discharge under USERRA. However, it is important to note that the employer has the burden of proof to demonstrate that the termination is not related to the employee exercising his or her rights under USERRA. To this end, the employer must provide a sound business reason for the layoff and ensure adequate documentation regarding this business decision and the layoff selection criteria in the event of a challenge. Keep in mind, any recall rights promised to employees in a temporary layoff will apply to those on military leave as well. Regulation 1002.42 further clarifies the rights and limitations of the USERRA protections: "If the employee is laid off before or during service in the uniformed services, and the employer would not have recalled him or her during that period of service, the employee is not entitled to reemployment following the period of service simply because he or she is a covered employee. Reemployment rights under USERRA cannot put the employee in a better position than if he or she had remained in the civilian employment position."