HR MATTERS E-TIPS
THIS WEEK'S E-TIP: FMLA and the Key Employee Exception
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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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