June 17

Avoid These 3 Frequent Causes of Small Business Lawsuits

It’s challenging enough to run a successful business without having to worry about getting sued. But in today’s highly litigious society, lawsuits are all-too-common, and you should take every necessary precaution to protect your company from unnecessary litigation.

One of the worst aspects of lawsuits is that even if you win, you’re still on the hook for exorbitant attorney’s fees and court costs, not to mention all of the precious time and energy you spent defending yourself. Indeed, even the most favorable settlements can cost your company months, if not years, of lost productivity. 

There are all kinds of different reasons why your business might be sued, but here are 3 of the most common sources of litigation. By understanding the root causes of potential legal trouble, you’ll hopefully be better able to prevent such situations from happening in the first place.

1. Employment-related lawsuits

While you might not like to think of your team as a likely source for potential lawsuits, the employee-employer relationship is actually one of the leading catalysts for litigation. Even if you consider your employees family, it’s likely that at some point over your business life someone is going to feel you treated them unfairly. In fact, nearly one in every five small businesses will eventually get sued by an employee.

A majority of these lawsuits are based on allegations of discrimination, wrongful termination, harrassment, and retaliation. Federal and state laws protect workers from discrimination of all kinds, including on the basis of race, sex, religion, national orgin, age, disability, and pregnancy. It’s also important to remember that anti-discrimination laws not only protect your employees, but also applicants for employment.

Lawsuits alleging harassment, wrongful termination, and retaliation are frequently based on discrimination. For example, an employee may allege he was harrassed (subject to unwelcome conduct) by a co-worker based on his race, and after he reported it, you did nothing to stop it. Furthermore, if the employee alleging harassment is eventually fired, he could sue for retaliation, alleging you terminated him in retaliation for his harassment complaint. 

From creating sound employment agreements, advising you on the appropriate insurance coverage, and helping you establish workplace policies and procedures that comply with federal and state laws, we can dramatically reduce your chances of getting sued for employment-based claims.

2. Breach of contract

Beyond lawsuits originating from within your company, you’re also at risk for suits generated from outside entities for breach of contract. Whether it’s a client, vendor, or contractor, you face a breach of contract claim whenever a third-party alleges that you failed to meet the promises outlined in the terms of a legal agreement you’ve entered into. 

Common bases for breach of contract include failure to meet a deadline, failure to complete the entire project, failure to meet the quality standards of the agreement, or failure to complete any work at all. You’re particularly vulnerable to breach of contract suits if you rely on generic, fill-in-the-blank contracts you find online.

It’s far better to pay a little more upfront for a solid contract than to spend a fortune in legal fees down the road to fight a lawsuit. We can help you avoid breach of contract claims by carefully creating and/or reviewing every agreement you sign to ensure they are legally sound and offer you the most favorable terms possible.

3. Third-party injuries

If you one of your team members is injured on the job, that’s typically covered by worker’s compensation insurance. But if a client, vendor, or some other third party is involved in an accident in your place of business, you can be sued for negligence. These are often called slip-and-fall lawsuits.

If your business welcomes members of the public onto your property, you have a duty to provide for the safety of those visitors. If a visitor can prove that you didn’t take the proper precautions and he or she is injured as a result, that individual can sue your business to pay for their medical bills and lost wages. Depending on the severity of the injury, personal injury claims can be among the most expensive of all lawsuits. 

The best protection against personal injury suits is to have adequate liability insurance coverage in place. We can recommend the best types and amounts of liability insurance for your particular operation. General liability insurance will cover personal injury claims, but in some cases, it may be a good idea to have an umbrella policy to cover any damages that exceed your general liability coverage limits.

Keep your company out of court

The potentially ruinous effects of litigation can be far more damaging to small businesses than larger ones, which often have in-house legal teams defending them. However, with us, you’ll have your very own trusted legal counsel by your side.

Meet with us to discuss the specific legal safeguards you should have in place. Whether it’s investing in the right insurance coverage, reviewing and updating your agreements, or helping you navigate the complexities of employment law, we have you covered. 

We offer a complete spectrum of legal services for business owners and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer you a LIFT Your Life And Business Planning Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Schedule online today.

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