The Family Medical Leave Act (FMLA) generally provides eligible employees of covered employers with up to 12 weeks of job-protected leave during a 12-month period for qualifying family and medical reasons. Generally, an employee must have worked for the employer for at least 12 months, worked at least 1,250 hours during the preceding 12 months, and work at a location where the employer has at least 50 employees within a 75-mile radius.

But what happens when the employee taking leave is particularly important to the organization—perhaps a senior executive, highly compensated manager, or other employee whose absence creates a significant operational challenge? The FMLA regulations contain a narrow exception for these key employees.

The FMLA regulations define a “key employee” as a salaried, FMLA-eligible employee who is among the highest-paid 10% of all employees—both eligible and ineligible—employed by the employer within 75 miles of the employee’s worksite. Importantly, being a key employee does not mean the employer can deny the employee’s FMLA leave. The employee is still entitled to take qualifying FMLA leave.

The exception concerns job restoration. An employer may deny restoration to a key employee if returning the employee to work would cause “substantial and grievous economic injury” to the employer’s operations. That is a considerably higher standard than ordinary inconvenience, disruption, or the cost of temporarily replacing an employee. The employer must make a careful, fact-specific determination based on the actual economic impact of restoring the employee.

The procedural requirements are just as important as the substantive standard. When a person is deemed a key employee, the employer should clearly designate such status and explain the potential restoration consequences in its FMLA Rights and Responsibilities Notice given to the employee as soon as FMLA leave commences, if not before. If the employer later determines that restoration would cause substantial and grievous economic injury, it must provide the employee with written notice of its intent to deny restoration and explain the basis for that determination.

Even after receiving that notice, the employee remains entitled to take the FMLA leave. At the end of the leave, the employee may request reinstatement, and the employer must reconsider whether restoration would cause substantial and grievous economic injury based on the facts existing at that time. If the employer continues to deny restoration, it must provide written notice of the denial.

The takeaway for employers: The “key employee” exception is not a shortcut around the FMLA. It does not allow an employer to tell a key employee, “You are too important to take leave.” Instead, it provides a narrow opportunity to deny restoration if returning the employee would cause substantial and grievous economic injury. Employers considering this exception should identify potential key employees early, provide the required written notices, document the economic analysis carefully, and reassess the situation when the employee seeks to return. Because the regulatory standard is demanding, employers should consult their RKW employment law counsel before relying on the exception.