At North Pole Enterprises, the company’s entire existence is dependent upon a single delivery on the night of December 24. On December 23, Santa Claus, the only licensed delivery driver at North Pole Enterprises, injures his back while loading packages in his “truck.” Later that day, Mr. Claus contacts the Human Resources Department at North Pole Enterprises and requests FMLA leave because his chiropractor has placed him on bed rest for two weeks. Can North Pole Enterprises deny Santa Claus’ request for FMLA leave under the key employee provision?

The simple answer to this question is no, North Pole Enterprises cannot use the key employee provision to deny the leave request. One common misconception under the FMLA is that leave can be denied to a key employee. In reality, the key employee provision in the FMLA allows an employer to deny reinstatement under certain very limited circumstances, but does not serve as a basis to deny the leave request. In fact, the FMLA regulations indicate that an employee who chooses to remain on leave after receiving notice that reinstatement will be denied under the key employee provision is still entitled to the other benefits of being on FMLA leave. 29 C.F.R. § 825.219(c).

While the key employee provision would not provide North Pole Enterprises with a basis to deny Santa Claus’ requested leave, it may allow the company to deny reinstatement to him. However, the requirements of the key employee provision are very stringent. First, the employee must be a “key employee,” which means a salaried employee in the highest paid 10 percent of all employees within 75 miles of the worksite. 29 C.F.R. § 825.217. Second, the employer must determine that the reinstatement of the key employee following FMLA leave will cause “substantial and grievous economic injury” to the operations of the employer. 29 C.F.R. § 825.218. Importantly, as the Department of Labor notes in its publication on Key Employees and Their Rights, the substantial and grievous economic injury must result from the reinstatement of the employee and not the employee’s absence from work. Finally, the employer must strictly comply with the written notice requirements set forth in 29 C.F.R. § 825.219 or will lose its right to deny reinstatement to the key employee.

Employers faced with a request for FMLA leave from a key employee must carefully analyze the economics of the situation before denying reinstatement under the key employee provision. In doing so, it is important to keep in mind that (1) the FMLA regulations clearly state that the “substantial and grievous economic injury” standard is more stringent than the undue hardship test under the ADA (29 C.F.R. § 825.218(d)) and (2) should litigation ensue, the employer will have the burden of proving that reinstatement of the key employee will result in such substantial and grievous economic injury (Kephart v. Cherokee County, North Carolina, Case No. 99-1789 (4th Circuit, Aug. 4, 2000)).