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HR MATTERS E-TIPS
THIS WEEK'S E-TIP: FMLA and the Key Employee Exception
October 2, 2007, Volume 9, No. 40
Published by Personnel Policy Service, Inc.
"Your Policy and Compliance Experts Since 1972"
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THIS WEEK'S E-TIP: FMLA and the Key Employee Exception
Do you think you can deny FMLA leave to an employee considered "key"
to your organization? Be careful. The FMLA allows you to deny only
reinstatement, not the actual leave itself, to certain key employees,
and
the standard for this denial is very hard to meet. |
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THIS WEEK'S E-TIP: FMLA and the
Key Employee Exception
Many employers mistakenly think that you can deny Family and
Medical
Leave Act (FMLA) leave to upper level, highly compensated
employees.
After all, who really thinks an organization can wait 12 weeks
while its
CEO (or for that matter, its HR Manager) takes a medical leave?
While it is true the FMLA puts some limits on the rights of
these key
employees, the law only affects their reinstatement, not their
right to take
leave. In addition, the FMLA places a heavy burden on you to
notify key
employees of their status before denying reinstatement. Below,
find out
how the FMLA restricts your use of the key employee exception. (Click
to download a free FMLA Checklist.)
* The FMLA Reinstatement Requirement *
The FMLA states that you may deny reinstatement at the end of an
FMLA leave to a highly compensated "key" employee if
reinstatement
would cause "substantial and grievous economic injury" to your
operations. The important point here is that although a key
employee
may not qualify for reinstatement, the employee is still
entitled to take an
FMLA leave and to receive all benefits of the leave.
In addition, to invoke the exception, the statute imposes two
more
requirements. First, you must notify the employee of the
organization's
intent to deny reinstatement once you determine it would cause a
qualifying injury. Second, if the leave has already begun, you
must give
the employee the opportunity to return to work within a
reasonable period
of time once the notice is given.
* Who is a Key Employee? *
The FMLA defines key employees as salaried employees who are in
the
highest paid ten percent of your workforce within 75 miles of
the
employee's worksite. The term "salaried" means "paid on a salary
basis"
and exempt from the minimum wage and overtime requirements under
the Fair Labor Standards Act. (Download
free report: "FLSA
Exemption Regulations: Understanding The Issues.")
The FMLA regulations (found in 29 C.F.R. §§825.216 - 825.219)
specify
that in determining whether an employee is among the highest
paid ten
percent, you calculate and compare year-to-date earnings and
divide by
weeks worked, including paid leave. Earnings include wages,
premium
pay, incentive pay, and bonuses. Incentive pay that has a value
determined at some future date (like stock options), benefits,
or other
perks are not included. In addition, the regulations state that
no more
than a total of ten percent of your workforce may be designated
as key
employees.
* Substantial and Grievous Economic Injury *
As noted above, it is the reinstatement of the key employee, not
the
employee's absence, which must cause substantial and grievous
economic injury to you in order to deny reinstatement. To
determine
whether the reinstatement will cause "substantial and grievous
economic
injury," the regulations suggest that you may consider whether
reinstatement immediately threatens the economic viability of
the firm or
whether it will cause long-term economic injury.
In addition, you should take into account your ability to
replace the
employee on a temporary basis or do without the employee for the
leave
period. Minor inconveniences and costs that you would experience
in
the normal course of business are not sufficient reasons to deny
reinstatement. The regulations also state, somewhat cryptically,
that the
requirement to show substantial and grievous economic injury is
"different from and more stringent than" the "undue hardship"
test
required by the Americans with Disabilities Act to deny
accommodation
requests. |
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* Notice to Key Employee *
To take advantage of the key employee exception, you must provide
several notices to the employee before denying reinstatement. First,
you
must give the employee a detailed written notice explaining the key
employee exception at the time leave is requested, or as soon as you
make the key employee designation. The notice must advise that the
employee is considered a key employee and, therefore, may be denied
reinstatement if you determine reinstatement would cause substantial
and grievous economic injury. The notice also must specify that the
employee is entitled to take a leave under the FMLA and to receive
all
benefits of the leave, including the continuation of health
benefits, even if
not reinstated. If you do not provide this notice, you may not deny
reinstatement, even if you can show your organization would suffer
substantial and grievous economic injury.
Second, as soon as you make a "good faith determination" that you
will
not reinstate the employee because of substantial and grievous
economic injury, you must give notice of that fact in writing,
either in
person or by certified mail. The regulations indicate (but do not
specifically require) that the employer should be able to give the
notice
before the leave begins. In addition, this notice must explain the
basis
for finding that substantial and grievous economic injury will
result.
Further, if the leave has already started, you must give the
employee the
option of returning to work and provide a reasonable time in which
to do
so.
If the employee does not return in response to your economic injury
determination and notice, the employee still may continue on FMLA
leave and maintain any health insurance provided. In effect, rights
under
the FMLA continue until either the employee gives notice of not
returning
to work or you actually deny reinstatement at the conclusion of the
leave.
Even if the employee chooses not to return to work after the notice,
the
employee still may request reinstatement at the scheduled end of the
FMLA leave. At that time, you must revisit the issue of substantial
and
grievous economic injury based upon current facts. Then, you may
deny
reinstatement only if you again conclude that substantial and
grievous
economic injury will result. Once you have made this determination,
you
must notify the employee in writing an additional time, either in
person or
by certified mail, that the organization will deny reinstatement.
* Reinstatement May Be Best Bet *
Clearly, the FMLA's regulatory requirements impose a significant
burden
on employers that want to invoke the key employee exception to deny
job reinstatement. (Click
to download a free FMLA Checklist.) The
hoops you must jump through, including proof of substantial and
grievous economic injury and the giving of required notices, makes
the
exception difficult, if not impossible, to use.
And, as a practical matter, most employers cannot search for,
recruit,
hire, and train a replacement for a key person in the 12 weeks
allotted for
FMLA leave. Therefore, despite its availability, the FMLA's key
employee exception may be of little real use. In most cases, you may
be
better off just focusing on coping with the employee's temporary
absence. |
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Subscribers to the
Personnel Policy Manual and HR Policy Answers on
can find more information on the key employee exception in Leaves
of Absence, Chapter 703, note 42.
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chapters,
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