5 Thoughts on the FMLA’s Key-Employee Exception

Original Date: November 19, 2018

Employers with 50 or more employees in a 75-mile radius from the work location are required to provide Family Medical Leave to employees, under certain circumstances. These rules do not exclude small organizations from offering FMLA. This leave can be taken intermittently (down to the hour) or in 12-week increments, if the employee qualifies and the leave is approved by the doctor, organizations and if necessary additional physicians. During the leave time, the employees’ job is protected, and the employer must reinstate to the same or an equivalent job when they return to work. In New York State, we also have Paid Family Leave with similar expectations, legislation, rules and regulations. However, FMLA has a narrow exception that allows employers to replace employees in certain positions. Organizations can decline to reinstate at the end of the leave period, under this narrow exception. Circumstances such as this are rarely seen in the workplace and organizations are advised to consult with legal prior to declining reinstatement of any key-employee after FMLA leave has been exhausted.

Below are 5 thoughts on the FMLA’s key-employee exception:

Key Employee Definition: “A ‘key employee’ must be ‘among the highest paid 10 percent’ of all the employees—both salaried and non-salaried, eligible and ineligible—who are employed by the employer within 75 miles of the worksite…. Earnings include wages, premium pay, incentive pay, and non-discretionary and discretionary bonuses. Earnings do not include incentives whose value is determined at some future date, e.g., stock options, or benefits or perquisites. The determination of whether a salaried employee is among the highest paid 10 percent shall be made at the time the employee gives notice of the need for leave. No more than 10 percent of the employer’s employees within 75 miles of the worksite may be “key employees.”[i]
Substantial and Grievous Economic Injury: “The regulatory language…is more stringent than the “undue hardship” test under the ADA…Although there is not a specific formula to make this determination, the regulations provide general guidance. Employers should consider whether reinstatement threatens the economic viability of the organization or whether it will cause long-term economic injury.[ii]
Determination and Providing Notice: The organization must first determine if the employee does meet the key employee exception under the narrow FMLA rule, there are specifics regarding the top 10% of the organization, not every employee can be classified in this category, caution should be taken when this determination is made. “An employer must inform the work in writing at the time leave is requested that he or she qualifies as a key employee and might be denied reinstatement…discuss the consequences of denying reinstatement…provide to the employee in person or by certified mail…the determination letter can’t deny FMLA leave, but it intends to deny reinstatement…an employer who fails to provide notice will lose its right to deny reinstatement.”[iii]
Approve the Leave: “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,” according to the DOL’s website. Workers are eligible to maintain their health benefits during the leave period, and employers must continue to pay associated premiums.”[iv] If the key employee wants to return to work at the end of the FMLA leave, the employer must again make another determination regarding restoration regarding substantial and grievous economic injury based on the current time and facts. This determination can be complex and should be taken seriously, show me the data and facts to back up the decision.

State Law Review: “In some cases, state law may provide for additional time off after FMLA leave has been exhausted, or the federal and state leave period may run concurrently. Goldstein recommended that employer policies inform employees that:

State family and medical leave laws may offer more or different protections or benefits to employees than federal law.
The organization will comply with all such laws.
Eligible employees will receive all required leave and benefits.”[v]

There is no key employee provision in the New York State Paid Family Leave legislation.

The Key-Employee Exception under current FMLA law is rarely used in any organizations. I have not used this provision for any FMLA cases managed as a consultant or in previous HR roles. The takeaway from this article is like any other FMLA or PFL case we manage in the workplace; manage the paperwork (follow-up on old FMLA open claims), send the necessary letters, follow-up on questions or concerns, hold the employee accountable and follow the law; federal, statewide and local legislation. Seek guidance prior to deciding on key-employee exceptions and provisions. FMLA has been a federal law since the early 1990’s for work and life balance. We should be working with our employees to ensure they have the work-life balance, while holding them accountable to policies, procedures and legal expectations.

Draft Key-Employee Notification Letter

2019 Paid Family Leave Changes:

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