How Do You Count Employees… to Determine Which Laws Apply?

Got fewer than 50 full-time employees? Better pay close attention to the rules.

Dear Rita:

We are a small nonprofit that provides summer day camps for youth.

We have six full-time employees, and hire about 40 or so seasonal workers who staff our summer camps. We also hire a few administrative workers through a temporary agency to help us with enrollment before the summer.

We occasionally have a few interns and casual employees that develop our curriculum, and hire independent contractors to provide specialized classes at our camps, like dance or photography.

It seems crazy, but I can’t figure out how many employees we have in terms of which employment laws apply based on this staffing pattern!

Signed,
Happy But Can’t Count Camper

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Dear Happy:

Great question — and an important one, because many employment laws are applicable only to employers with a specific number of employees. Figuring out whether your nonprofit has enough employees to be covered by a particular law can be complicated primarily because each law has different rules, some of which I will describe below.

It’s easy if your nonprofit regularly has more than 50 full-time employees, as most of the federal and state employment laws will apply. It’s only employers with less than 50 full-time employees that need to pay particular attention to these rules. In fact, counting those proverbial angels on the head of a pin may be easier.

For your situation, you will need to calculate the paid hours of all staff members, so if interns are paid employees that don’t meet the legal definition for unpaid interns, their hours should be counted. Casual and temporary employees should be counted, and for some laws, they are counted proportional to their hours paid, so you’ll need to refer to payroll for that.

Independent contractors would not count, but make sure that they are properly classified. Depending on the employment law, temporary agency employees are also included in the employee count if you direct and control the temp’s work.

Federal Civil Rights Laws

The federal civil rights laws, which prohibit discrimination in employment, include Title VII of the Civil Rights Act (applies to employers with 15 employees), the Age Discrimination in Employment Act (20 employees) and the Americans with Disabilities Act (15 employees).

Under these laws, an employee is counted if an employer has an employment relationship with that individual for each working day in 20 or more weeks in the current or preceding calendar year. The weeks need not be consecutive.

According to the federal Equal Employment Opportunity Commission (EEOC) guidance for counting employees, workers should be counted whether or not they are actually performing work for or being paid by the employer on any particular day.

Rather than the number of hours regularly scheduled, you  need to focus on when the employment relationship begins and when it ends. Employees are counted as long as there is a reasonable expectation that the employee will return to active employment, such as those on approved paid or unpaid leaves of absence.

You would not count employees indefinitely or temporarily laid off for any workweek. You would also not count the first and last week of work for an employee, unless they worked the entire workweek.

So! This means that part-time and temporary employees are counted just like full-time employees for any week in which they are on the payroll. You are essentially looking at the date of hire and date of separation, and counting any week between those dates, even if no hours were worked.

Federal Family Medical Leave Act (FMLA)

The FMLA applies to employers with 50 or more employees. The FMLA, enforced by the Department of Labor, counts employees using the same method as the EEOC, which is to count those employees who are on the payroll during 20 or more calendar weeks in the current or preceding calendar year.

The FMLA regulations specifically state that “any employee whose name appears on the employer’s payroll will be considered employed each working day of the calendar week, and must be counted whether or not any compensation is received for the week.”

However, you would not count employees in the first or last week of employment if they were not on payroll for the full workweek. Additionally, the FMLA regulations count an employee from a temporary help agency if your nonprofit shares control, directly or indirectly, of the work performed by the temporary employee or day laborer. And AmeriCorps participants are also counted and potentially eligible for leave.[45 CFR 2540.220]

The fact that an employee is counted to determine if your nonprofit is covered by the law, does not mean that the employee is eligible to receive FMLA leave. The FMLA also has minimum eligibility requirements that employees must meet to be entitled to leave.

Affordable Care Act (ACA)

In 2014, the IRS and Treasury Department issued final regulations on the Employer Shared Responsibility provisions under the ACA, commonly known as “Pay or Play” which go into effect January 1, 2015. These rules require “large” employers to provide acceptable health insurance coverage to eligible employees or pay a penalty.

The ACA defines a large employer as one that has employed during the previous calendar year an average of at least 50 full-time employees or a combination of full- and part-time employees that equals at least 50 employees.

To count employees under the ACA, an employer first identifies its full-time employees based on each employee’s hours of service. For purposes of counting employees, an employee is considered a full-time employee for a calendar month if he or she averages at least 30 hours of service per week or 130 hours of service in a calendar month.

Part-time employees count proportionally based on the hours of service per month divided by 130. For example, a half-time employee who works 80 hours a month would count as .62 of an employee (80/130) when counting to see if the number of employees adds up to 50 or greater.

Seasonal employees working fewer than 120 days per year are excluded from calculations of whether an employer is an ACA-covered large employer.

Without question, the ACA is the most complex employment law when it comes to the rules for counting employees, and also for determining which employees are considered full-time employees and thus subject to the Pay or Play provisions.

If you have any questions about application of the ACA to your nonprofit workplace, I recommend consulting your employee benefits insurance broker to assist you with coverage and eligibility determinations.

COBRA

COBRA law requires group health plans to offer continuation of coverage on a self-pay basis when coverage eligibility ends due to certain qualifying events. COBRA applies to employers with 20 or more employees. For purposes of COBRA, the rule is that the employer must have at least 20 employees on more than 50% of its typical business days in the previous calendar year to be covered by the law.

Both full- and part-time employees are counted to determine whether a plan is subject to COBRA. Each part-time employee counts as a fraction of a full-time employee, with the fraction equal to the number of hours that the part-time employee worked divided by the hours an employee must work to be considered full-time.

State and Local Laws

Remember to check your state and local laws, many of which have lower employee thresholds for coverage and may have broader rights for employees than federal law.

For example, in California, the Fair Employment and Housing Act prohibits discrimination in employment on various protected characteristics. This law applies to employers “regularly employing” five or more individuals, which means having more than 5 people for each working day in any twenty consecutive calendar weeks in the current calendar year or preceding calendar year, regardless of the number of hours worked in the week (2 CCR 7286.5).

While independent contractors, as defined in Labor Code Section 3353, are excluded from this count, employees of temporary agencies working under the direction of your nonprofit staff are included.

In New York City, the Human Rights Law prohibits discrimination in employment based on a number of protected classes and applies to employers with more than 4 employees. Under this law, independent contractors that are not themselves employers are counted as employees for purposes of determining coverage under the law (Section 8-102(5)).

Most recently, special districts are also jumping on the employment regulation bandwagon. The Bay Area Air Quality Management District in California is requiring employers with 50 or more full-time employees to provide commuter benefits to employees. Employees are counted if they are on the payroll and work within the geographic boundaries of the District for at least 30 hours a week.

The employer is covered if the average number of employees per week carried on the payroll for the most recent three-month period is over 50. Seasonal employees working less than 120 days per year are excluded.

Clear as mud?

Is your head spinning? As you can see, there is no one-size-fits-all standard for determining whether your nonprofit has the requisite number of employees to be covered by the various employment laws. The take-home lesson here is if your employee count is anywhere near the threshold for coverage, take a close look at the enforcement agency regulations to determine the method for counting employees to determine if your nonprofit must comply with a particular law.

If in doubt and you’re close to the threshold, the safe practice would be to follow the law.

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