Yes, this is illegal. And ditto on boycotting Pep Boys. They are retards if they thought they could get away with this. And as the fiance of a Marine Corps Reservists, I despise the fact that they even thought of this!
By law, an insitution (job or college) must hold the reservist's place open for 2 years. They can fill it with others, but as soon as that reservist comes back down to reserve status, they must be given their spot back, if the reservist so wishes.
As a Battery Commander in the Army Guard, I had this situation show up regularly. The issue here was Active Duty for Training (going to school) instead of an actual deployment.
The Federal law is clear. Anywhere, any time,for any reason, with a life time limit of 5 years total. Problems occur because the various states also have vetern re-employment laws which in many cases are much weaker than the Federal code. Employers tend to be familiar with their state laws rather than the federal regs. (heck, they are business owners, not lawyers).
I expect alot of these problems will go away in the future now that everyone has had a good look at what being a Reservist really means.