Forty Locations With Five Employees Each Is Not Forty Exempt Employers. How OSHA's Recordkeeping Exemptions Are Counted.

A regional operator runs dozens of small locations: clinics, retail counters, service depots, franchise-style storefronts. Each one has four, five, maybe six people on the schedule. Somebody in finance asks a reasonable question during a compliance review: do these sites even need an OSHA 300 log? The local managers have always understood that tiny workplaces are exempt from injury and illness recordkeeping, and nobody has kept logs at most of them. The answer turns on a counting rule that is easy to get backwards. The ten-employee exemption in 29 CFR 1904.1 is not measured at the location. As the rule is written, it looks at the employer, and an employer with many small sites is usually a large employer.

This post is about the two separate exemptions in OSHA's recordkeeping rule, how each one is counted, and why a portfolio of small sites is exactly the structure that makes both easy to misapply. It does not repeat the separate question of what each establishment must submit electronically, which is covered in our post on the establishment trap in electronic recordkeeping.

Two exemptions that sound alike and work differently

Part 1904 contains two distinct ways an employer can be relieved of the routine obligation to keep an injury and illness log. They share a result and nothing else.

The first is the small employer exemption in 1904.1. An employer that had ten or fewer employees at all times during the previous calendar year does not have to keep the OSHA 300 log, the 301 incident report, or the 300A annual summary. The measure is employees, and the period is the previous calendar year. The wording matters in both directions. If headcount ever exceeded ten during that year, the exemption is lost for the following year, even if the company is smaller today. And a company that grows past ten during the current year does not have to start keeping records until the next calendar year begins.

The second is the industry exemption in 1904.2. Certain industries, identified by NAICS code in Appendix A to Subpart B of Part 1904, are classified as partially exempt on the premise that their injury and illness risk is comparatively low. An establishment classified in one of those industries does not have to keep the routine records, regardless of how many people work there. Appendix A has been revised over the years, and the list in force when you read this is the one that controls, so any internal decision should be checked against the current appendix rather than against an old summary.

The two exemptions answer different questions. One asks how big the employer is. The other asks what kind of work a particular establishment does. Because they ask different questions, they are counted at different levels, and that difference is the source of most of the trouble.

The company count, not the location count

The size test counts the employer's employees, and OSHA's rule says that a company with more than one establishment must include the employees at all of them. A business with forty locations of five employees each has roughly two hundred employees for purposes of 1904.1. It does not qualify for the small employer exemption at any location, because the question is not asked location by location.

This is where inherited habits cause damage. A manager who joined from a genuinely small business remembers the exemption as a feature of being a small shop. A franchisee group, a regional chain, or a company assembled through acquisitions can carry that memory into a structure to which it does not apply. Records are not kept at the small sites, nobody notices for years, and the first outside question comes from an inspection, a records request, or the due diligence team of an acquirer who counts the headcount and asks where the logs are.

The same arithmetic applies in reverse during a divestiture or restructuring. A parent that sells most of its locations may fall under the ten-employee line for the following calendar year, but only if its total headcount stayed at or below ten for the whole of the year in question, which a company that held the portfolio for part of it will not satisfy. Do the count on the calendar year and on all establishments, not on a snapshot of the moment someone asks.

The establishment count for industry exemptions

The industry test works the other way. OSHA's rule has you look at each establishment and its industry classification, and an establishment is a single physical location where business is conducted. A company with both a warehouse and a retail counter, or a clinic and a depot, can have establishments that fall on different sides of the Appendix A list. One location is partially exempt, another is not, and the company keeps full records at the second while keeping none at the first.

The practical difficulty is classification. NAICS codes are assigned by activity, and a location that began as one kind of operation can drift into another. A storefront that added a repair bay, a restaurant that added commercial food production, an office that took on a laboratory function: each of these may change the establishment's classification without changing its address or its sign. Corporate record systems often hold a single code for the entity, which tells you little about what each establishment does. The classification decision belongs at the establishment, supported by a note of what that site actually does and the code that follows from it.

What neither exemption does

Both exemptions are narrower than owners and managers tend to assume, and the narrowness is the part that should travel to every site.

They relieve the employer of routine recordkeeping. They do not relieve the employer of the duty to report to OSHA a work-related fatality, an in-patient hospitalization, an amputation, or the loss of an eye. Those reporting obligations in 1904.39 apply to every employer under OSHA's jurisdiction, exempt or not, and their clocks are short. Our post on the severe injury reporting clock covers how that runs across a network. An exempt location whose manager believes that no reporting applies has misunderstood the rule at the worst possible moment.

They are also not permanent in the way they sometimes feel. The rule contemplates that OSHA or the Bureau of Labor Statistics can notify an employer in writing that it has been selected to participate in an annual survey, and the employer must then keep and submit records for that year even though it would otherwise be exempt. A site that has never kept a log is poorly placed to do this at short notice.

Finally, an exemption from Part 1904 is an exemption from Part 1904. It is not an exemption from the rest of OSHA. The standards on hazard communication, lockout, emergency action, training and every other subject apply at the small site just as they do at the large one, and OSHA can inspect it. A location that is exempt from the log and has no safety program at all is still carrying every other obligation.

State plans and the multi-state footprint

Operators with sites in states that run their own OSHA-approved plans have another variable. State plans are required to be at least as effective as the federal program, and many adopt the federal recordkeeping rule as written, but a few have their own wrinkles, and a multi-state footprint means a multi-rule footprint. Our overview of state plans across a multi-state footprint is the place to start, and the state agency's own current rule is the authority for any location in that state.

Where the failure actually happens

The cases that go wrong in practice are rarely a deliberate choice to skip records. They follow a pattern.

A company grows by acquisition, and each acquired site arrives with its own local habit. Some keep logs. Some say they are exempt. The corporate team inherits a map of inconsistency without a rule for resolving it. A site-level decision made years ago, perhaps correctly at the time under a different ownership structure, persists after the structure changes. The relevant fact, that the employer is now far larger than ten, never reaches the manager who made the call. Our post on recordkeeping obligations after an acquisition or divestiture addresses the transfer mechanics; the point here is that headcount is the trigger a company has to watch at the corporate level.

Another pattern is the quiet reclassification, in which a location adds a service line and moves out of an exempt industry without anyone on the compliance side hearing about it.

A way to run the check

The check is short and belongs with whoever owns the corporate recordkeeping policy rather than with individual site managers. First, establish the employer's headcount for the full previous calendar year across all locations, and record whether it ever exceeded ten. If it did, the small employer exemption is closed to every location. Second, for each establishment, record what it does and the NAICS code that follows, then compare the code against the current Appendix A. Third, document the result for each site, with the date and the person who made the determination. Fourth, make sure every site, exempt or not, knows the 1904.39 reporting duty and who to call. Finally, repeat the exercise at the start of each calendar year and after any acquisition, divestiture, or change in a location's activity.

None of this guarantees how OSHA will read a particular fact pattern, and a close call on classification or headcount is worth settling with counsel or with the agency before an inspector raises it. What the exercise does is replace a habit that was inherited with a determination that was made.