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Family and Medical Leave Act Advisor

Key Employees and Their Rights

Under certain circumstances, an employer may deny job restoration to "key employees." A "key employee" is 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.

In order to deny restoration to a key employee, an employer must determine that the restoration of the employee to employment will cause "substantial and grievous economic injury" to the operations of the employer, not whether the absence of the employee will cause such substantial and grievous injury.

  • An employer may take into account its ability to temporarily replace or do without the employee on FMLA leave. If permanent replacement is unavoidable, the cost of then reinstating the employee can be considered in evaluating whether substantial and grievous economic injury will occur from restoration.
  • A precise test cannot be set for the level of hardship or injury to the employer which must be sustained. However, minor inconveniences and costs that the employer would experience in the normal course of doing business would certainly not constitute "substantial and grievous economic injury."
  • FMLA's "substantial and grievous economic injury" standard is different from (and more stringent than) the "undue hardship" test under the Americans with Disabilities Act (ADA).

An employer who believes that reinstatement may be denied to a key employee, must give written notice to the employee at the time the employee gives notice of the need for FMLA leave (or when FMLA leave commences, if earlier) that he or she qualifies as a key employee. At the same time, the employer must also fully inform the employee of the potential consequences with respect to reinstatement and maintenance of health benefits if the employer determines that substantial and grievous economic injury to the employer's operations will result if the employee is reinstated from FMLA leave.

As soon as an employer makes a good faith determination that substantial and grievous economic injury to its operations will result if a key employee is reinstated, the employer must notify the employee in writing of its determination, that it cannot deny FMLA leave, and that it intends to deny restoration to employment on completion of the FMLA leave. This written notice may be served in person or by certified mail.

The determination notice must explain the basis for the employer's finding that substantial and grievous economic injury will result. If leave has commenced, the notice must provide the employee a reasonable time in which to return to work, taking into account the circumstances, such as the length of the leave and the urgency of the need for the employee to return. An employer who fails to provide timely notice will lose its right to deny restoration, even if substantial and grievous economic injury will result from reinstatement.

If an employee on leave does not return to work in response to the employer's notification of intent to deny restoration, the employee continues to be entitled to maintenance of health benefits and the employer may not recover its cost of health benefit premiums. A key employee's rights under the FMLA continue unless and until the employee either gives notice that he or she no longer wishes to return to work, or the employer actually denies reinstatement at the conclusion of the leave period.

After a key employee has been given notice that substantial and grievous economic injury will result if the employee is reinstated to employment, an employee is still entitled to request reinstatement at the end of the leave period even if he or she did not return to work in response to the employer's notice. At that time, the employer must again determine whether there will be substantial and grievous economic injury from reinstatement. If the employer determines that reinstatement would result in substantial and grievous economic injury, the employer must notify the employee in writing (in person or by certified mail) of the denial of restoration.

Continue to Key Employee Qualifications or Return to Employee Rights and Responsibilities Menu.

For more information on this aspect of the FMLA, see the FMLA regulations: § 825.217, § 825.218, § 825.219