As any business owner with employees knows, there's a welter
of state and federal laws providing employees with certain rights
and protecting them from various forms of discrimination. But not
every law in your jurisdiction applies to every employer. Many laws
explicitly state that they only apply to businesses that have a
certain number of employees or more.
Consider a recent case. Design Group One, a tiny architectural
firm in Chester, Connecticut, fired a pregnant woman. The employer
said the reason was poor performance, but the former employee
claimed it was because of all her doctor appointments. She sued
under the state's Fair Employment Practices Act, which
prohibits discrimination on the basis of sex, including
pregnancy.
In July, the Connecticut Supreme Court ruled that the law in
question did not apply because the firm had only two employees,
while the law specifically applies only to businesses with three or
more. The judges noted that the legislators had clearly stated
their intention to protect businesses with only one or two
employees from lawsuits alleging discrimination.
Content Continues Below
So if your business is quite small, certain laws simply
don't apply to you. The threshold, however, is different for
each law. For instance, consider just the most well-known federal
laws. The Americans With Disabilities Act (ADA) and Title VII of
the Civil Rights Act, which prohibits discrimination on the basis
of race, religion or national origin, both apply to companies with
15 employees or more. The Age Discrimination in Employment Act
doesn't kick in until 20 employees. But OSHA regulates
workplace safety for every business, even if it has only one
employee. The Family and Medical Leave Act, which requires
employers to allow workers to take up to 12 weeks unpaid leave,
covers companies with 50 or more employees.
Even if your business appears to be too small to be covered by a
given law, other criteria may subject you to it anyway. The federal
Fair Labor Standards Act, which regulates wages and hours,
including when you have to pay overtime, applies to every
enterprise with two or more employees if it's a public agency,
hospital, health-care facility, school or business with a gross
income of $500,000 or more. Even if your business doesn't meet
these criteria, the law applies if you engage in interstate
commerce.
Note that the fact that your business is protected from a
federal law in a given area doesn't exempt you from similar
state laws. For instance, a firm in Connecticut with three
employees wouldn't be liable for discrimination under Title VII
of the Civil Rights Act with its 15-employee threshold, but it
would be under the state's Fair Employment Practices Act.
Accordingly, attorneys evaluating a potential plaintiff's
options will look at both the state and federal laws and their
thresholds before crafting a claim.
So should you avoid adding one more employee to avoid going over
some threshold? It's worth a thought, but be guided more by the
needs of your business than by fear of litigation.
Steven C. Bahls, dean of Capital University Law School in
Columbus, Ohio, teaches entrepreneurship law. Freelance writer Jane
Easter Bahls specializes in business and legal topics.