Company Culture

What changes for companies, legally, when they hit 50 employees?

The milestone means new regulations. Morgan Lewis associate Timothy Durbin breaks it down.

Your business is growing. Are you ready?

(Photo by Fauxels Pexels)

Growing your business to 50 employees isn’t quite like reaching your golden age of life, though you might celebrate all the same. You’ll just need to pair that party with some legal updates.

Companies need to meet different requirements at different stages. Small businesses with fewer than 15 employees aren’t required to offer benefits or comply with certain labor acts involving things like discrimination. But as you grow, your business will need to adapt. One of the biggest milestones? Fifty employees.

“There’s both a legal and a cultural shift,” said Timothy Durbin, an associate at the law firm Morgan Lewis and an employee benefits specialist, in his Introduced talk. “There’s an entire compliance regime under federal and local labor and employment laws that kicks in at the 50-employee mark.”

Workplace anti-discrimination laws 101

First, here’s what is required for businesses with zero employees and up; additional state laws may apply as well:

At 15 employees, anti-discrimination workplace laws start to kick in:

At 20 employees, additional regulations kick in:

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  • Age Discrimination in Employment Act of 1967 (ADEA), which protects employees aged 40 and older. ADEA “both prevents discrimination in the context of hiring or taking employment actions against people, but also has some complicated components related to terminations that can be a little tricky,” During said. “It’s a little bit of a thorny legal regime that you want to be aware of before you’re hitting the 50 mark.”
  • Consolidated Omnibus Budget Reconciliation Act, aka COBRA, which offers a continuation of health benefits when those benefits end due to job loss or other life events

The big 5-0

At 50 employees, the level where a small company legally becomes a large company, benefits generally become more substantial. That’s both by law and because they can often afford to give more voluntary benefits to stay competitive.

Legally, at 50, responsibilities include:

Voluntary benefits — which a company can start doing at any time, but often become so ubiquitous at 50 employees that not offering them means not being competitive — include:

  • 401(k) retirement savings, with employer matching; some states have mandatory retirement savings laws, but for most, it’s voluntary but regulated (for example, it can’t only benefit the most highly compensated)
  • Stock options
  • Cash awards
  • Annual bonuses

As the company grows and its legal responsibilities increase, some of that growth may be in adding an internal legal and HR team to keep on top of it all.

“Building out your internal legal team is an important concept before hitting the 50 mark,” Durbin said. “Some businesses rely on chief operations or chief financial officer type of roles to sort of ‘dual hat’ and [work with] external lawyers to satisfy things.”

Our takeaway? Don’t wait until you hit 50 employees to start thinking like a large company.

Watch the whole conversation with Technical.ly CEO Chris Wink:

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