December 30, 2025|Franchise Frontlines
December 30, 2025 | United States Court of Appeals for the Tenth Circuit | Published Opinion
Executive Summary
In a published decision, Judge Murphy of the United States Court of Appeals for the Tenth Circuit reversed summary judgment entered in favor of the Kansas Department of Health and Environment (“KDHE”) in a case brought by the United States under the Uniformed Services Employment and Reemployment Rights Act of 1994 (“USERRA”). The government alleged that the State of Kansas, through KDHE, discriminated against a National Guard member when a grant-funded position held by the servicemember was eliminated. The district court concluded KDHE was not the employee’s “employer” under USERRA because the county health department formally hired, supervised, and paid her. The Tenth Circuit disagreed, holding that USERRA’s definition of “employer” is broader than traditional employment relationships and includes entities that exercise control over employment opportunities even if they do not directly hire or pay the employee. Because the record contained evidence that KDHE exercised influence over hiring decisions, supervised the employee’s work, and controlled the grant funding that supported the position, the court concluded that a reasonable factfinder could determine KDHE qualified as a USERRA employer.
Relevant Background
The Kansas Department of Health and Environment administers public health programs throughout the state. One component of the agency’s work involved administering federal grants through the Centers for Disease Control and Prevention to support sexually transmitted disease prevention initiatives. KDHE distributed a portion of those federal funds to county health departments through “Aid-to-Local” grants, which were conditioned on the counties meeting specific program objectives.
Finney County Health Department received one such grant and used it to fund a local disease intervention specialist position. Stacy Gonzales held that position from 2001 through 2010. Her responsibilities included interviewing individuals diagnosed with communicable diseases, identifying persons potentially exposed to infection, and coordinating referrals for medical treatment. Although Gonzales was formally employed by the county and received her salary and benefits from the county payroll system, a substantial portion of the funding for her position originated from the KDHE grant.
Gonzales was also an active member of the United States Army National Guard and periodically left her position to fulfill military obligations. During the course of her work, she interacted regularly with KDHE personnel who supervised statewide disease intervention programs. KDHE managers conducted quarterly meetings for both state and local disease intervention specialists, reviewed the performance metrics for local programs, and audited field work based on standards set forth in KDHE’s Field Services Manual.
In 2010, KDHE raised concerns about the performance of the Finney County program and warned county officials that grant funding could be withdrawn if the program failed to improve. Shortly thereafter, KDHE elected not to renew the Aid-to-Local grant. Without the grant funding, Finney County eliminated the disease intervention specialist position and Gonzales’s employment ended.
The United States filed suit alleging that KDHE violated USERRA by terminating Gonzales’s employment opportunities because of her military service. The district court granted summary judgment in favor of Kansas, concluding that KDHE was not Gonzales’s employer because Finney County hired, paid, and formally supervised her. The United States appealed.
Decision
The Tenth Circuit began its analysis with the statutory definition of “employer” under USERRA. The statute defines an employer as any entity that either pays salary or wages for work performed or “has control over employment opportunities.” The court emphasized that this language reflects a deliberately broad definition designed to capture entities that exercise meaningful authority over a servicemember’s employment prospects.
The court rejected the district court’s conclusion that only entities exercising direct control over hiring, firing, or compensation could qualify as employers under USERRA. Nothing in the statutory text suggests that employer status requires direct or absolute control. Instead, the statute contemplates that more than one entity may simultaneously qualify as an employer where multiple actors share or influence employment decisions.
The court further explained that the statute explicitly includes entities to which employment responsibilities have been delegated. This language reinforces that Congress anticipated situations in which employment authority is distributed across multiple institutions rather than confined to a single formal employer.
Applying that framework, the court first concluded that KDHE did not qualify as Gonzales’s employer based on the payment of wages. Although the Aid-to-Local grant funded a substantial portion of the position, Finney County issued Gonzales’s paychecks and determined her salary and benefits through its human resources system.
The court then turned to the second statutory pathway—control over employment opportunities. Whether KDHE exercised sufficient control, the court explained, is a factual question requiring examination of the practical realities of the relationship rather than formal labels.
The record contained evidence suggesting KDHE exercised influence over multiple aspects of Gonzales’s employment. Testimony indicated that KDHE personnel participated in the interview process for local disease intervention specialists and provided input into hiring decisions. KDHE also supervised the substantive duties of the position by establishing training requirements, auditing field work, and evaluating program performance under the grant.
The evidence further indicated that KDHE retained authority to decide whether Aid-to-Local grant funding would continue each year. In some years, the grant funded a substantial majority of Gonzales’s salary. When KDHE chose not to renew the grant, Finney County eliminated the position altogether. A reasonable factfinder could therefore conclude that KDHE exercised meaningful control over Gonzales’s continued employment.
The Tenth Circuit also concluded that the district court applied the summary judgment standard too narrowly by viewing the grant relationship as insulating KDHE from employer status. The district court emphasized that Finney County supervised Gonzales’s daily office behavior and issued her paychecks. However, the appellate court explained that those facts did not negate evidence that KDHE supervised the substantive program responsibilities associated with the grant and exercised significant influence over the continued existence of the position itself.
Because the evidence could support competing inferences regarding KDHE’s level of control over Gonzales’s employment opportunities, the court held that summary judgment was inappropriate. The case was therefore remanded for further proceedings.
Looking Forward
This decision underscores the breadth of USERRA’s definition of “employer” and reinforces that courts will examine the practical realities of employment relationships rather than focusing solely on formal payroll or hiring authority. Entities that do not directly employ a worker may nonetheless qualify as employers where they exert meaningful influence over hiring decisions, supervision, or the continued availability of a position.
The opinion also highlights the importance of considering how funding structures can affect employment relationships. Where an entity provides grant funding that substantially supports a position and retains authority to terminate that funding, courts may view that authority as a form of control over employment opportunities. In such circumstances, the entity’s role may extend beyond that of a passive funding source and into the realm of employer responsibility.
For organizations that operate through layered relationships involving government agencies, grant programs, or contract-based service structures, the case serves as a reminder that statutory definitions of “employer” can reach beyond traditional employment arrangements. Courts evaluating employment protections statutes will often look to the totality of the relationship, including who influences hiring decisions, supervises the work performed, and ultimately determines whether the position continues to exist.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.
Thomas O’Connell is a Shareholder at Buchalter LLP and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
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