Hello, @Beth Deaton,
Welcome to the Microsoft Q&A platform!
Based on your description, I understand that you are unable to add a new employee as a new user although your organization still should have one more seat available when you log in to M365 as an administrator.
Please make sure you have the correct administrator privileges, as shown in the official documentation, you must be a global, license, or a user admin to add users and assign licenses. At the same time, make sure your license does not appear to have expired and that you have not reached your maximum number of users.To check your administrator privileges, you can try using PowerShell to try to add the new employee as a new user according to Create Microsoft 365 user accounts with PowerShell - Microsoft 365 Enterprise | Microsoft Learn.
If the result shows that the add failed, I suggest you check your permissions by deleting and re-adding. Also, can you provide a screenshot of the error report of the failed to add a new user, it can help us to find a new solution as soon as possible. If you have successfully added the new user, you can try to fix the grayed out option by clearing your cache and updating your browser.
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Thank you for your support and understanding.
Best Wishes,
Alex Zhang