key employee

The Family and Medical Leave Act – The Key Employee Rule Under the FMLA

One common employer complaint about FMLA leave is that some employees are so important that the company “cannot afford” to let them go on leave.  This is never a good excuse for denying an otherwise eligible employee’s request for FMLA leave.  However, there is a provision that allows employers to deny reinstatement to a key employee after the conclusion of his or her leave.

An employee returning from FMLA leave is geneentitled to reinstatement to the same position, or an equivalent position with the same pay, benefits, and working conditions.  This right is not absolute — for example, if, during the employee’s FMLA leave, there is a bona fide layoff of all employees in that facility, there is no obligation to reinstate the employee after the FMLA leave ends.  One important exception to the right to reinstatement is the key employee rule.  Contrary to what the name might suggest, the key employee rule has nothing to do with how important the worker is to the company’s operations.  Instead, it is a simple question of pay rates, and math.

A key employee is defined by the FMLA regulations as a salaried, FMLA-eligible employee, who is among the highest paid 10 percent of all the company’s employees within a 75 mile radius.  (The FMLA loves radius-based tests).  To qualify as a key employee, the worker must be paid on a salary basis — if the highest paid employee in town is an hourly worker, he does not qualify as a key employee under the FMLA.  To determine the top ten percent of earners, the company must take into account all forms of payment including “wages, premium pay, incentive pay, and non-discretionary and discretionary bonuses.”  This calculation must be made as of the date the key employee gives notice of leave.

Key employees are eligible to take FMLA.  However, the company has the right to deny reinstatement if it determines that “restoration of the employee to employment will cause substantial and grievous economic injury to the operations of the employer.”  The test is not whether the employee’s absence, through FMLA leave, will cause substantial and grievous economic injury, but whether his or her return will do so.  Employers should be forewarned that “substantial and grievous” is a high standard to meet, and the regulations do not provide any useful guidance as to what types of facts qualify as a substantial and grievous economic injury.

Employers seeking to rely on the key employee provision must comply with strict notice requirements. If the employee believes that there is a chance that a key employee’s reinstatement may be denied, the company must notify the employee of his “key employee” status as soon as he first requests FMLA leave. The employer must then give a second notice as soon as it determines that the substantial and grievous economic injury test will be met and that it intends to deny restoration.  Both notices must be in writing, and the employer must explain its reasoning fully.  The employee must also be given the opportunity to return to work immediately rather than face a denial or reinstatement.  Even then, once the employee ends his leave and seeks reinstatement, the employer must perform yet another a “substantial and grievous” review to determine whether circumstances have changed, and again provide written notice to the employee.  Compliance with these notice provisions is strictly enforced, and failure to give notice at every step may cause the employer to lose the protection of the key employee provisions.

The regulatory burdens and requirements surrounding the FMLA key employee provision are strict.  Any employer seeking to rely on these regulations must make sure that all i’s are dotted and all t’s crossed. If you have any questions about the key employee provision, or the Family and Medical Leave Act in general, call New Orleans employment attorney Charles Stiegler at (504) 267-0777 or email me today.