Laws vary by company size

By Bob Gregg

A. The most significant "magic numbers" in employment are 15, 20, 50, 100 and 500. (You can't play those on the lottery, but they can be a plaintiff's "winning numbers" for extra liability.)

One employee generates many of the state and some federal employment law coverages.

•  Fifteen employees: An employer must comply with state discrimination laws. The punitive damages under the Equal Employment Opportunity laws are on a sliding scale depending on the size of the employer.

• Twenty employees: Age Discrimination in Employment Act (ADEA) and COBRA kick in with consequences for noncompliance.

•  Fifty employees: (25 if Congress passes proposed legislation). An employer must follow have policies, notices and special time frames for both laws.

•  One hundred employees: Employers are required to comply with the EEO-1 reports, retirement plan audits and 5500 reports for employee benefit plans.

•  Five hundred employees: Employers are subject to the maximum punitive damages allowed under the discrimination laws. Being "under the line" can have major legal consequences, exempting you from some laws altogether or greatly reducing the amount of possible liability.

If you are close, then think before you grow. If the advantage of adding a couple of employees is only marginal, then go slow. You are buying into more regulation, compliance costs and greater liability, which may outweigh the benefit. If it is a clear benefit to grow, then do so. But be aware of the new responsibilities and adopt employment policies, practices and management training that recognizes and meets those new responsibilities.

A 1997 U.S. Supreme Court decision settled a long controversy over how to count the number of employees. The ruling means that any person carried on the books is counted. They may be absent; they may be on leave; they may be a "ghost employee" who just wasn't removed from the books soon enough. No matter, they are added to the count. This can make the difference between legal liability or none, between some or a lot.

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