What Is a Small Business?

What Is a Small Business?

Small Business “Main street,” “the backbone of our economy,” “the economic engine of America”… How often do we hear phrases like these bandied about regarding small businesses?

Sometimes, small businesses are given a pass when it comes to certain employment regulations.  Opportunities for contracts and set-asides are created especially for small businesses in order to level the economic playing field.

Have you ever wondered, “Is my business a small business?”  There’s a good chance that it is, and then again, there’s a good chance that it isn’t.  Unfortunately, there’s no consistent answer!

Disparities in state & federal government definition of small business:

Every elected official enthusiastically voices their love and support of small business.  So wouldn’t you think that, if asked, they’d be able to consistently define what exactly a small business is?  Unfortunately, it takes only one glance at legislation aimed at small businesses to realize there’s little consistency in the government’s definition of small business.

Just looking at some of our employment laws, both state and federal, highlights the disparity in how government defines small business.  As you will see, when it comes to regulations, there is enormous variation in what is classified as a small business.

Washington’s regulations for small businesses:

  • Washington’s Protection from Discrimination Law applies to employers with more than 8 employees, as long as you’re not a religious non-profit
  • The state’s Family Leave Act covers employers that have more than 50 employees within a 75 mile radius in Washington State (get out your map!)

Federal employment laws & small businesses:

All employers know that they must also comply with federal employment laws.  Does small business get a break?  Again, it depends on how a small business is defined.

There are a chunk of laws that apply to businesses regardless of their size.  These laws include:

  • Anti-discrimination laws, such as the Civil Rights Act and Equal Pay Act
  • Laws pertaining to safety and working conditions, such as the Fair Labor Standards Act, National Labor Relations Act, OSHA, and the Uniformed Services Employment and Reemployment Rights Act

But then Congress started exempting small businesses from certain laws, which is where it gets confusing:

  • If you have 14 or fewer employees, you are exempted from Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Pregnancy Discrimination Act, and the Genetic Information and Nondiscrimination Act (GINA).
  • If you have 19 or fewer employees, you are exempted from the Age Discrimination in Employment Act, COBRA, and the Older Worker Benefit Protection Act.
  • If you have 49 or fewer employees, you are exempted from the Family and Medical Leave Act, as well as the new Personal Protection and Affordable Care Act.
  • If you have 99 or fewer employees, you are exempted from the Worker Adjustment Retraining and Notification (WARN) Act and the Employee Retirement Income Security Act (ERISA).

Small business needs a consistent definition:

Wouldn’t it be helpful if our elected officials could devise a definition for small business that everyone could agree on?

Small business owners and managers have a lot of balls to juggle.  Their lives are made much more complicated by the fact that employment law compliance varies by their headcount, something which has been very volatile in the last few years.

Even the government entity designated to assist small businesses, the SBA, does not have just one definition for small business!  Instead, you must look at a chart by NAICS Code to find out the official size definition for your small business.

The wrap-up:

It’s clear that legislators don’t want to overburden “small business” with regulations.  What doesn’t seem clear is just which businesses are small.

It’s time to bring some conformity to our laws for small businesses, so those that the people who own and manage them can do what they do best, which is create jobs and grow our economy!


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