Many highly successful businesses begin in a garage or at a kitchen table, with an employee workforce of one or a small, hard-working coterie clacking away behind laptops. As any business grows, legal complications multiply, along with the number of employees that are hired along the way. That’s because small businesses are often exempt from various legal and regulatory requirements, based upon the number of people employed in the business.

How many employees?

For the small business person, life would be easier if there was only one "magic" number that you need to keep in mind, say 5 or 10 or 15 employees. But of course, that’s not the case. The "compliance threshold," i.e., the number of employees that triggers the application of a particular legal requirement varies, as does the method of counting employees. For example, under some laws all employees, both full- and part-time, are counted, while for others, only full-time employees are counted.

Think before you hire

It is important to keep in mind as your small business expands, and more employees are hired, additional legal requirements can sneak up on you -- even a single hire may move your enterprise out of the "small business" category and into the regulated category for purposes of many federal and state regulatory requirements. When you are trying to figure out how much that new employee is going to cost in terms of salary and benefits, consider whether there may be an additional, hidden cost, in the form of additional obligations that now kick in because you have reached the "compliance threshold" for a particular requirement.

Family and medical leave – federal and state

One requirement that depends upon the number of employees is the federal Family and Medical Leave Act, which generally requires employers to give employees unpaid time off for defined family and medical occurrences. The FMLA applies to an employer with 50 or more employees. The U.S. Department of Labor Web site provides information on complying with the FMLA. While FMLA leave is unpaid, the employer may nevertheless experience additional costs when an employee takes FMLA leave, such as higher pay for a temporary replacement.

But while the federal FMLA requirement may not apply to your small business because you don't meet the federal compliance threshold, it may still fall under similar state laws. In fact, many states statutes require certain private employers to provide employees with various family and medical leave benefits, which may vary from and even exceed the requirements of the federal law. The National Conference of State Legislatures maintains a list of these laws.

The number of employees that triggers these requirements varies widely, as do the benefits themselves. Some states require employers to offer a particular benefit to all employees, but others specify a compliance threshold (from as few as 6 in Massachusetts, to 100 or more in Hawaii). Note that in three states (California, Minnesota and Washington), the benefit involves paid leave, rather than unpaid leave as in the federal FMLA.

Information on compliance thresholds

If you have any questions concerning the application of the federal or state family and medical leave requirements to your business, contact the federal department of labor, your state department of labor, or the attorney who advises you on labor and employment matters.

The posts on this blog reflect the personal views of Jeffrey D. Neuburger, in his individual capacity, and do not necessarily represent the views of his law firm or his clients, and are not sponsored or endorsed by them. The information contained in this blog is provided only as general information for educational purposes, and no warranty or representation is made about the accuracy of the information provided. Blog topics may or may not be updated subsequent to their initial posting. This information is not provided in the course of an attorney-client relationship and is not intended to constitute legal advice. This blog should not be used as a substitute for competent legal advice from a licensed attorney in your state.