Under the Family and Medical Leave Act (FMLA), eligible employees can take up to 12 weeks of unpaid leave and must be restored to the same (or an equivalent) role upon their return to work. However, the FMLA also has a narrow exception that permits employers to deny reinstatement of key employees.
Who Are Key Employees?
The U.S. Department of Labor (DOL) defines a key employee as a “salaried, FMLA-eligible employee who is among the highest paid 10 percent of all the employees employed by the employer within 75 miles of the employee’s worksite.”
Although key employees usually hold important positions, employers should remember that classification is based entirely on salary instead of level of importance.
Earnings attributable to the 10% threshold include regular salary, incentive pay, premium pay and bonuses. Attributable earnings do not include incentives whose value will be determined in the future, such as benefits or stock options.
Note that “salaried” means that the employee is paid on a “salary basis,” as defined by the Fair Labor Standards Act (FLSA). This includes salaried executive, administrative, professional and computer employees who are exempt from overtime under the FLSA.
Invoking the Key-Employee Exception
If the employer cannot manage without a key employee for 12 weeks, it may consider invoking the key-employee exception, which would allow replacement of the key worker. But prior to taking that route, the employer must determine that restoring the key employee will cause “substantial and grievous economic injury” to its business operations.
According to the DOL, the “substantial and grievous economic injury” standard is difficult to meet. In fact, it’s stricter than the Americans with Disabilities Act’s “undue hardship” requirement.
To avoid having to invoke the key-employee exception, the employer should consider whether it’s possible to temporarily replace the key employee or to do without him or her for the duration of the leave. If a permanent replacement must be found, the employer can then consider whether restoring the key employee will cause substantial economic injury to the business. Minor inconveniences and expenses are not considered substantial and grievous economic injury.
Notifying Key Employees
If the employer believes that it might need to deny reinstatement, it must inform the key employee that he or she qualifies as such and may be denied restoration. The notice must be given in writing to the employee at the time he or she submits his or her FMLA leave request. Failure to provide this notice on time will result in the employer forfeiting its right to deny reinstatement.
Once the employer determines that it will suffer substantial and grievous economic injury, it must serve the key employee with another written notice — in person or via certified mail. This notice must state the basis for the employer’s determination, the employer’s intention to deny reinstatement and the employee’s right to still take the FMLA leave.
As noted, the standard for denying reinstatement is tremendous. Therefore, employers should obtain expert advice before invoking the key-employee exception.