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Employment Law Myth Number One: Small Employers Need Not Be Concerned About Employment Laws Or Establishing Employment Policies

Employer & Labor Legal Update

One of the biggest myths I hear perpetuated in my practice is that so-called “small” employers, or for purposes of this article, those with fewer than 15 employees are not subject to the applicable employment laws and need not worry about establishing appropriate written policies. These assumptions are wrong and dangerously so. Small employers (which include homeowners and condominium associations, property management companies, professional service firms, retailers, consulting firms, etc.) and their business and financial advisors would do well to remember the following:

1. There is no safe haven for small employers to discriminate.

Where the employment laws are concerned, there is no such thing as a “small” employer. In order to be subject to certain federal employment laws, employers must have a certain number of employees (i.e., employers must have at least 50 employees to be subject to the Family Medical Leave Act). That said, there are numerous analogous state and local laws to which small employers are subject. For this reason, there is no safe haven for small employers to discriminate or to fail to compensate employees appropriately.

2. Small employers face disproportionate liability.

One of the anomalies of the employment laws is that, often, small employers face disproportionately greater liability than do large employers. For example, large employers are subject to Title VII, where caps are on compensatory damages based upon the size of the employer. Generally, there are no similar caps or ceilings on compensatory damages for small employers that are not subject to Title VII.

3. Employment documents are necessary for small employers.

Small employers operate more informally, at least where interactions with employees are concerned. Accordingly, many employers believe it would ruin their chemistry if written policies were implemented and adopted. Once again, the myth does not match the reality. The fact is that small employers need not have 50 page employment handbooks or 10 page restrictive agreements to be effective. Rather, handbooks in the 12 to 18 page range can be perfectly effective depending upon the employer’s size and industry. The important point is that the existence of sound employment policies followed consistently can go a long way when defending against claims such as discrimination, harassment, and failure to pay overtime. By the same token, the opposite also is true; namely, the absence of these policies can often operate to prevent small employers from successfully defending many types of employment claims.

4. Training for employees on employment-related matters makes good economic sense.

It is no great surprise that small employers that believe there is no need to have written employment policies likewise believe training need not be conducted for such things as harassment or how to discipline employees appropriately. Once again, in my experience, the opposite is true. Increasingly, courts are expecting employers of all sizes to not only adopt sound employment policies but to conduct basic training to ensure the employment laws and the employer’s policies are followed properly. For example, a modest amount of time spent on anti-harassment training can be very effective not only in preventing harassment claims from being filed, but also in positioning small employers to defend such claims if they are filed. Similarly, employers that spend a modest amount of time training managers on things such as how to interview effectively and lawfully, how and when to appropriately document performance issues, and how to handle employment terminations if necessary, can improve employee morale and employee relations. These are all important factors in preventing employment claims from being filed. Further, employers that train managers on how and when employees are to be compensated, including when they are entitled to overtime pay, can significantly reduce the risk of expensive and damaging wage claims.

5. Insurance.

Small employers that would think nothing of insuring their premises or products frequently will hesitate about acquiring insurance to guard against the existence of employment claims that often are excluded from general liability policies. Of course, this is an issue that should be addressed with an experienced agent/broker to make sure the policies which are considered are both appropriate for the business and cost effective. That said, small employers should make consideration of insurance for employment claims a priority, rather than an afterthought.

Business writers and economists believe so-called small employers will have an important role in driving the economic recovery and will be among the most important sources of new jobs. That said, the courts and administrative agencies are cluttered with employment claims made against small employers that incorrectly assumed either that the employment laws did not apply to them or that it was unnecessary for them to adopt sound employment policies and conduct basic training on employment matters. In addition to saving thousands of dollars in attorneys’ fees and costs and untold tens of thousands of dollars in legal exposure, employers that establish sound employment policies and conduct training for employees on employment-related issues will reap the additional benefits of (i) improving the retention of valued employees; (ii) saving hundreds of hours of time that can be devoted more productively to their business and customer needs; and (iii) distinguishing themselves as dynamic, interesting, and rewarding places to work.

Marc Engel is an employment attorney and litigator at Lerch, Early & Brewer who advises employers of all types on employment issues, and provides strategies for preventing, defending, and resolving harassment, discrimination, and wage and hour claims. For more information on creating written employment policies, contact Marc at (301) 657-0184 or


This content is for your information only and is not intended to constitute legal advice. Please consult your attorney before acting on any information contained here.


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