Small-employer thresholds: what applies at 1, 5, 15, 50

Federal law is a floor — states set their own, often lower, thresholds

Every threshold in this article is a federal number, and federal law is the floor, not the ceiling. Most states run their own employment-law regulator — a state department of labor, a fair-employment-practices agency, or both — and it is common for a state's anti-discrimination or paid-leave threshold to sit well below the federal ones, sometimes covering an employer with a single employee. Treat every number below as "the federal rule kicks in here," and check your own state's agency before assuming a small headcount means no law applies.

This matters most in the gap between one employee and fifteen, where a practice can wrongly assume it is unregulated because none of the well-known federal statutes have phased in yet, while a state-specific law already applies in full.

The practical habit worth building now: whenever you check a federal threshold, check the matching state one in the same sitting. The two rarely line up, and treating the federal number as the whole answer is the single most common way a small practice underestimates what actually applies to it.

One employee: wage-and-hour law already applies

There is no employee-count exemption from the Fair Labor Standards Act. From your very first hire, federal minimum wage, overtime at time-and-a-half over 40 hours a week for non-exempt staff, and the recordkeeping the statute requires all apply 1Ref 1U.S. Department of Labor (2026).Fair Labor Standards Act.That the FLSA sets federal minimum wage, overtime, and recordkeeping with no employee-count exemption, applying from the first hire.. This is the one federal employment law with effectively no floor tied to headcount — it is where most solo practices' first real compliance exposure lives, because it is easy to assume "employment law" means discrimination law and overlook wage-and-hour entirely.

Many states also set their own minimum wage above the federal one and their own overtime rules; where state and federal law differ, the employee generally gets whichever number is higher.

Recordkeeping deserves its own attention here, since it is the part most likely to be skipped at very small size. Hours worked, pay rate, and pay date need to be documented from the first paycheck, not reconstructed later if a question ever comes up — the habit is cheap to build early and expensive to retrofit after the fact.

Five employees: where states typically start layering on

Five is not a meaningful federal threshold, but it sits inside the range where a number of states' anti-discrimination and paid-leave laws already apply, well before the federal 15-employee line arrives. A practice with five employees that has never checked its state's own thresholds is a common way a real compliance obligation goes unnoticed for years, precisely because nothing at the federal level has changed yet to prompt a second look.

The honest posture at this size: do not wait for a federal trigger. Confirm directly with your state's labor department or fair-employment agency what applies at your actual headcount, since the range across states is wide enough that no single number here would be accurate for all of them.

Fifteen and twenty employees: the federal anti-discrimination line

Fifteen employees is where the core federal anti-discrimination protections — Title VII and the Americans with Disabilities Act — apply to an employer, and twenty is where the Age Discrimination in Employment Act adds age as a protected category 2Ref 2U.S. Equal Employment Opportunity Commission (2026).Employers.That federal EEO laws phase in by employee count — 15+ for Title VII/ADA, 20+ for ADEA — the core federal thresholds this article is built around.. Below those counts, the federal statutes themselves do not reach the employer, though a state law covering the same ground frequently does at a lower number, as covered above.

Crossing 15 is also when a written anti-discrimination and complaint-handling process stops being optional best practice and starts being the difference between a defensible response to a complaint and an undocumented one. Many small practices adopt the policy earlier than the law requires it, precisely because retrofitting it after a complaint arrives is a worse position to be in.

Non-competes and restrictive covenants: a separate, unsettled layer

Restrictive covenants do not follow the same headcount logic at all — they are governed by state law regardless of employer size, and the landscape shifted recently at the federal level. The FTC issued a 2024 rule to ban most non-competes, but a federal district court set it aside, so as of July 2026 employer non-competes remain a matter of state law while appeals proceed 3Ref 3Federal Trade Commission (2024).Noncompete Rule.The FTC's 2024 non-compete rule and its being set aside by a federal court, so employer non-competes remain governed by state law as of July 2026 regardless of employer size.. Enforceability ranges from broad to nearly none depending on the state, independent of whether you have one employee or fifty.

If your handbook or offer letters include a non-compete, non-solicitation, or confidentiality clause, have counsel confirm it against your specific state's current rule rather than a template — this is one of the few employment-law questions in this article where the answer does not move as you add staff.

Past twenty: more federal mandates keep phasing in

Employee-count thresholds do not stop at 20. Additional federal leave, benefits, and coverage mandates phase in further up the headcount range, including obligations tied to the 50-employee mark that this article does not itemize — the specifics change with rulemaking and are worth confirming directly with the Department of Labor rather than relying on a secondhand number. What is worth planning for now: crossing a threshold is rarely a surprise if you are tracking headcount deliberately, so build a habit of checking your current count against DOL's published thresholds each time you add staff, rather than discovering a mandate after you have already crossed the line.

One mandate that does not wait for headcount: if you sponsor a self-funded group health plan at any size, ERISA — not your state's insurance law — governs its claims-and-appeals framework 4Ref 4U.S. Department of Labor (2026).ERISA.That self-funded employer health plans are governed by ERISA's claims-and-appeals framework rather than state insurance law, regardless of headcount.. Benefits-related law follows the plan you sponsor, not just your employee count.

Where to check your state's actual numbers

Because every threshold above is federal, and states routinely go lower, the reliable move at any headcount is to check three things directly rather than infer them from a general article: your state department of labor's wage-and-hour rules, your state's fair-employment-practices agency (often separate from the labor department) for its own discrimination threshold, and your state's paid-sick-leave or paid-family-leave law if one exists. Bookmark all three rather than one, since they are frequently administered by different state agencies with different thresholds from each other.

A short annual check — ideally the same month you review your handbook — catches most of what a growing practice would otherwise miss.