Is Your Business A Small Business?

Small business written on paper

How a small business is defined depends on who is making that determination. The Small Business Administration defines a small business as businesses with 500 or less employees. The SBA has a number of size standards — including employee size and revenue size — depending on the industry. For the ACA (Affordable Care Act), it defines a small business as having fewer than 50 full-time employees. According to the ACA only 2% of employers employ over 100 employees, 2% employ between 50 and 100 and 96% of employers employ less than 50. According to the IRS, the size of a business is dependent on individual tax laws.

However you define a small business, as an employer grows the number of employees will require the employer to comply with more regulations and employment laws. Growing your business and hiring more employees sounds great, but as your business grows you need to know what employment laws apply to your business and what is the impact to operating your business.

Employers with one employee need to comply with many laws such as the Fair Labor Standards Act which requires all businesses to pay employees at least the state minimum wage and overtime, and prohibits child labor. Every business in Minnesota with one employee is required to comply with the Minnesota Human Rights Act which prohibits discrimination on the basis of: race, religion, disability, national origin, sex, marital status, familial status, age, sexual orientation, and gender identity. Additional legal requirements kick in as your business grows.  An employer with 15 or more employees must provide reasonable accommodations to an employee for health conditions related to pregnancy or childbirth. An employer with 20 or more employees must provide current employees with access to their personnel records upon written request.

Reaching fifty employees is a significant milestone and employers need to look at the advantages of hiring more employees and disadvantages. As your business reaches fifty employees the number of regulations increase and create more administrative work. Employers are expected to implement new measures to meet FMLA, EEO, affirmative action and other requirements once they reach fifty employees. It is important to evaluate whether you need to hire more employees or whether you can outsource some of the work to vendors and independent contractors. Having good human resource procedures, policies and practices can help you operate efficiently and more profitably with fewer employees and is essential as you begin to hire employees.

Here’s an overview of compliance burdens when an employer reaches 50 employees. 

Compliance requirements at 50 employees

Once you reach 50 employees, you’ll need to meet the following requirements. Even if you already have policies in place, you’ll need to verify that they continue to meet state and federal standards, including:

  • ACA compliance: Any employer with 50 or more full-time employees (or “full-time equivalents”) are considered Applicable Large Employers under the Affordable Care Act. Once your company hires the 50th employee, you’ll need to offer affordable healthcare to all eligible employees. This includes reporting offers on an IRS Form 1094-C and 1095-C, which are delivered to the IRS and employee, respectively.  
  • Affirmative action: Any company with 50 or more employees and government contracts worth $50,000 or more needs to ensure they are complying with affirmative action mandates
  • EEO-1 reporting: Employers with 100 or more employees must require annual Equal Employment Opportunity-1 reporting—unless you have $10,000 or more in government contracts. If you meet the government contract threshold, the EEO-1 reporting requirement drops to 50 or more employees.
  • FMLA: When you have 50 or more employees, your company is subject to the Family and Medical Leave Act. Employers must provide up to 12 weeks of unpaid or paid leave. Employers are required to track that leave and meet additional reporting requirements.
  • Form 5500: If you have 50 or more employees with plans subject to ERISA, you’ll need to complete the annual Form 5500. There is an abbreviated version for employers with under 100 employees.
  • State laws: Finally, employers must comply with all of the Minnesota State employment laws, many of which have employee number thresholds. 

Get the compliance help you need

Holden Law Firm represents individuals and small businesses with employment law matters. Holden Law Firm represents small businesses with under 50 employees to provide comprehensive employment law assistance and represents individuals with negotiations, drafting and disputes related to employment agreements including: non-compete agreements (non-competition agreements), executive and professional employment agreements, severance agreements, non-disclosure agreements and non-solicitation agreements.

Reach out today to schedule a meeting to discuss your employment law needs.