Legal Definitions - key employee

A key employee is a specific designation under the Family and Medical Leave Act (FMLA) that applies to certain highly compensated, salaried individuals. This designation is important because it can affect an employee's right to be restored to their job after taking FMLA leave.

To be considered a key employee, an individual must meet two main criteria:

• They must be a salaried employee.
• They must be among the highest-paid 10% of all employees working for that employer within a 75-mile radius of their worksite.

While the FMLA generally guarantees that an employee can return to their original or an equivalent job after leave, this right can be denied to a key employee under specific circumstances. An employer may deny job restoration to a key employee if doing so would cause "substantial and grievous economic injury" to the employer's business operations. This exception is designed to protect employers from severe financial hardship when a critical, highly paid individual takes leave.

Here are a few examples to illustrate the concept of a key employee:

• Example 1: Small Biotechnology Startup

  Imagine Dr. Anya Sharma, the lead scientist and co-founder of a small biotechnology startup. She is a salaried employee and, due to her equity and critical role in securing patents and investor funding, she is among the top 5% highest-paid individuals in the company. Dr. Sharma takes FMLA leave for a serious health condition. During her absence, a crucial clinical trial faces unexpected complications that only her specialized expertise can resolve, and a major investor threatens to withdraw funding if the issue isn't immediately addressed. The company might argue that restoring Dr. Sharma to her position immediately would cause "substantial and grievous economic injury" because the loss of investment could lead to the company's collapse, making her a key employee whose job restoration could be denied under these extreme circumstances.

• Example 2: Regional Architectural Firm

  Consider Mr. Ben Carter, a senior partner and the principal architect for a regional firm specializing in large-scale commercial projects. He is salaried and, given his extensive client portfolio and revenue generation, he consistently ranks in the top 10% of earners across all employees within the firm's 75-mile operational area. Mr. Carter takes FMLA leave to care for a seriously ill family member. While he is away, the firm unexpectedly wins a bid for a massive, high-profile project that requires his unique design vision and client relationship skills to initiate successfully. No other architect in the firm possesses the specific combination of expertise and client trust needed to prevent the project from being delayed or lost, which would result in significant financial penalties and reputational damage. The firm could potentially argue that restoring Mr. Carter immediately would cause "substantial and grievous economic injury," identifying him as a key employee.

• Example 3: Specialized Manufacturing Plant

  Sarah Chen is the Director of Operations for a manufacturing plant that produces highly specialized components for the aerospace industry. She is a salaried employee and, due to her critical role in overseeing complex production lines and managing high-value contracts, she is consistently among the top 8% highest-paid employees at the plant. Sarah takes FMLA leave for a personal medical issue. During her leave, a critical machine breaks down, threatening to halt production for a major client with strict delivery deadlines and severe penalty clauses for delays. Only Sarah possesses the unique combination of technical knowledge, vendor relationships, and decision-making authority to quickly resolve the issue and prevent a catastrophic breach of contract. The plant might contend that restoring Sarah immediately would cause "substantial and grievous economic injury" due to the potential loss of the major contract and associated revenue, thus classifying her as a key employee.