HR for Massachusetts Startups: Be Prepared When Employment Laws Affect Your Growing Company

Workers at a communal table with laptops. Photo by Marvin Meyer on Unsplash.
Photo by Marvin Meyer on Unsplash

Fenway Law provides compliance advice for growing tech startups. Most employment and benefits laws apply once a company meets a minimum headcount.

In this advisory, founder Michael Loconto provides a general guide for growing Massachusetts startups and small businesses.

So you founded a tech startup — seizing on a world-changing idea that has consumed every waking minute of your existence over the last few years. You may have been joined by a few partners, and maybe even hired a few independent contractors or direct employees. You may have even taken steps toward seed capital and series financing, with a crash course in business funding to keep your developing business in growth mode.

People Often Come Before Policy

As many small businesses and startups grow, particularly in those frantic and kinetic first few years, the need for headcount can quickly materialize. What often sneaks up on a company are the compliance requirements that accompany staffing growth.

The good news is that there are plenty of outsourced benefits and human resources management options available to companies. These outfits can help with assuring that your staff gets access to a health insurance plan and paid on time — and may even help your company sort through the new leave laws popping up, like in Massachusetts where paid family and medical leave and the celebration of Juneteeth have taken effect in 2021.

What can be less obvious to employers are the legal requirements that impact operations in the workplace. Certain employment-related laws cover even to the smallest of workplaces, while other requirements kick in with a minimum FTE headcount. To further complicate matters — particularly in the era of remote work — the location of those employees across the country and the globe can also affect FTE counts in litigation or a regulatory review (for instance, consider the Equal Employment Opportunity Commission’s “integrated enterprise” standard). Small businesses and startups need to be aware of these triggers in order to maintain legal compliance and minimize workforce risks.

This guide is written to provide Massachusetts businesses with some practical tips and a reminder to consult with experts for legal advice and planning. While we hope you find it helpful, this primer is no replacement for direct legal advice. Startups are urged to consult with an attorney to assure compliance.

Congratulations on Your Company — Now Comply

Your legal obligations as an employer begin with the first employee (in fact, it may be you!). Employment obligations for companies with one or two employees include:

  • Common law theories governing issues in contracts, speech (e.g., defamation) and accidents (“torts”)

While federal COBRA regulations governing health insurance continuation for terminated employees do not impact a business with less than twenty employees, Massachusetts companies should also be aware of the Commonwealth’s “mini-COBRA” law (M.G.L. c. 176J, §9) that applies to businesses with at least two employees.

With Continued Growth Comes Added Responsibility for Employers

The scope of employee protections expands in an enterprise with six or more employees, and employers are also required to develop and adopt certain policies. The six-employee threshold is a good time to consult with a labor and employment attorney for specific and to consider issuing an Employee Handbook.

Where many leave requirements are unpaid, HR consultants can also help companies operating in a competitive labor market to consider adopting enhanced paid time off (beyond minimum legal requirements) as a recruitment and retention strategy.

Companies at or above this size should also consider purchasing employee rights posters in order to comply with any applicable legal requirements and to keep employees informed about benefits and basic rights. Posters are simple and inexpensive, available from numerous vendors, and can be displayed in breakrooms or some other central employee space within a physical office space.

Consider the following:

  • The Mas­sachusetts Fair Employment Practices Act (M.G.L. c.151B et seq.) expands upon the Commonwealth’s Equal Rights Act by specifically prohibiting discrimination in the employment context (hiring, preemployment criminal record and mental health inquiries, promotions, termination and other aspects of the employment relationship). Chapter 151B, as it is often referred to by lawyers and advocates, expands prohibitions on discrimination in the workplace to include race, color, religion, national origin, sex, ancestry, age, sexual orientation, veteran’s status, genetic information, or disability, and also forbids employers from retaliation against employees for complaints about discrimination or for participating in the investigation of a claim.

There are practical risk mitigation steps that an employer can take at this stage. First, employers are strongly urged to to conduct sexual harassment training — an ounce of prevention can mean a pound of cure. Second, employers can be proactive and adopt a respectful workplace policy to help inform the individuals across the company about many of the rights and responsibilities addressed above. The Society for Human Resource Management (SHRM) offers a respectful workplace policy template (Note: link will open a Word document) that businesses may adapt to create a policy.
And finally, given these additional risks and affirmative policy obligations, startups are strongly urged to consider working with an attorney or an HR consultant to adopt an Employee Handbook. A written, shared understanding of the basic terms and conditions of employment, the benefits available to employees, and the grievance procedures that employees may use to address problems in the workplace, can reduce uncertainty and promote clarity for staff and for organizational leaders.

With eleven or more employees, Earned Sick Time becomes a paid benefit under Massachusetts law. A business of this size must allow all employees (full-time, part-time and temporary) to earn at least one hour of paid sick time annually for each 30 hours worked.

With fifteen or more employees, federal discrimination laws also become applicable in a workplace. Specifically, the federal laws prohibiting dis­crimination on the basis of race, color, creed, national origin and sex (Title VII of the Civil Rights Act of 1964) and disability (Americans with Disabilities Act) cover workplaces with 15 or more employees. Practically speaking, however, employers in Massachusetts should already have compliant practices in place given that the state-level companions to Title VII and the ADA (Chapter 151B) are applicable to workforces of at least six employees.

Where Did All These People Come From? And Other Concerns for the Mid-Sized Workplace

Once a company’s headcount reaches twenty or more employees, most employment-based laws and regulations will apply to the workforce. At this stage, hiring a human resources professional to help oversee hiring, benefits, and workplace conflict resolution can be a practical (and perhaps necessary) step to maintain compliance and mitigate risk. Consider a few of the additional workplace benefits and protections that now apply:

  • Most people are familiar with COBRA (the federal Consolidated Omni­bus Budget Reconciliation Act of 1985), which requires employers to provide employees (and their spouses and dependent children) who are leaving a group health or dental insurance plan with the opportunity to continue group insurance coverage at the employee’s own expense. Recall that Massachusetts includes a “mini-COBRA” requirement for companies with as little as two employees.

A number of other well-known provisions apply to employers with fifty or more employees:

  • From a strict perspective, the federal Affordable Care Act (ACA) requires businesses with 50 or more employees to provide health insurance options for employees. As a practical matter, most employers begin offering health insurance as a recruiting and retention strategy well prior to reaching the 50-employee threshold. Companies with smaller workforces may be eligible for additional tax credits (salary restrictions apply). Consult with an insurance agent or broker for more information.

At one hundred or more employees:

  • An employer becomes covered by the federal WARN (Worker Adjustment and Retraining Notification) Act, which requires notification to employees sixty cal­endar days in advance of plant closings and mass layoffs as defined under the law.

Concluding Thoughts

This brief summary is intended to focus small business and startup leaders on the key Massachusetts and federal employment laws that become relevant at progressive intervals while a workforce expands. Human resources and legal support can mean the difference between effectively managed risk and disruptive claims and litigation. Rather than viewing these requirements as obstacles, effective leaders can integrate these requirements in plans for growth and avoid surprises.

Please consult a professional for support when growing your workforce. With risk managed through effective planning, your company can focus on its core mission.

Michael Loconto is a Boston-based attorney and consultant with Fenway Law, a Boston-based firm that can help your business think through key workforce operations planning. If you like what you read here, follow Mike on Medium and subscribe through Substack.

Boston, MA attorney and consultant specializing in labor and employment law, dispute resolution and government relations.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store