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From employee benefits to state laws, hiring that 50th employee creates new responsibilities for a small business. — laflor/Getty Images

While the growth of a business is usually something to celebrate, it’s understandable that many companies fear crossing that 50th employee threshold. Once crossed, there are many federal and state labor laws to comply with. The implications of these laws may cause you to weigh the pros and cons of that 50th hire more than any before it.

Let’s look at some of these laws and their potential impact on your business.

Affordable Care Act

Once a company has 50 full-time or full-time equivalent (FTE) employees, it must follow the Employer Shared Responsibility Provision of the Affordable Care Act (ACA). Failure to do so may result in fines. To comply, you must offer eligible employees affordable health insurance of minimum value as defined by the Act. If you already offer insurance, you need to verify that it meets the ACA standards.

[Read: Employee Health Insurance: How Much Should the Employer Pay?]

Once you begin offering health insurance, you must follow additional regulations:

Reporting

Health coverage providers have reporting responsibilities under the ACA.

HIPAA

Providing health insurance means that you must follow guidelines of the Health Insurance Portability and Accountability Act (HIPAA), which protect the privacy of your employees’ medical information. You may need to train employees who manage this sensitive data.

COBRA

The Comprehensive Omnibus Budget Reconciliation Act (COBRA) requires that employees who lose employer-provided health insurance due to job loss for any reason other than gross misconduct or due to reduction in hours can choose to continue their coverage under the company’s group insurance plan for a limited period. In most cases, the employee pays the premium, but some employers reimburse it as part of a severance package. While this may not impact you financially, at the least, you must implement a process to ensure you notify your health insurance plan administrator of the employee’s COBRA eligibility within 30 days of employment termination. The administrator then notifies the employee. Delinquency in notification can result in the Department of Labor fining your company and the IRS can issue a tax penalty.

Crossing that 50th employee threshold increases required compliance to several federal and state labor laws.

Family Medical Leave Act

The Family Medical Leave Act (FMLA) also impacts companies that have 50 or more employees on the payroll for 20 or more calendar weeks (not necessarily consecutive) in the current or previous year. However, in this case, that number includes part-time employees. Under FMLA, you’ll need to provide eligible employees with up to 12 weeks of unpaid, job-protected leave each calendar year for the birth or adoption of a child, to care for a seriously ill immediate family member or if the employee has a serious health condition that prevents them from working. Group health benefits must be maintained during the leave.

Laws that apply to federal contractors

If your business handles federal contracts, you have additional laws to comply with once you hire your 50th employee.

  • EEO-1 reporting: Under the regulations of the U.S. Equal Employment Opportunity Commission you must submit reports that include a count of employees by job category and ethnicity, race, and gender.
  • Affirmative action: If you also have at least $50,000 in government contracts, you’ll need to implement an affirmative action plan to ensure equal treatment of all applicants and employees throughout your employment process.

State laws

Many states also have labor laws specific to companies with 50 or more employees. These may differ from federal laws and you must follow whichever law provides the most protection for employees. As laws vary by state, investigate the state labor laws that apply to your business.

As you review each law, it’s important to understand their impact on your business. Some businesses find that when they hire a 50th employee, it’s also time to outsource human resources.

[Read: How to Outsource Human Resources]

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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Published December 02, 2019