When you start a business, you tend to focus more on how to make things work, instead of how they could fall apart. Rarely do business owners stay up at night thinking about all the ways their business could be subject to a lawsuit (we all know it’s the finances that keep business owners up at night).
Too often, new business owners overlook the potential of lawsuits or administrative hearings involving their business, especially when they’re starting out small. It’s easy to understand how and why small business owners feel overwhelmed and overburdened by the legal issues facing their business. A simple misstep can lead to a lawsuit or an administrative claim, and if the business is left unprotected, the results could potentially bankrupt the business.
Protecting a business, no matter what the size, and no matter if it is new or been around for a couple of generations, is important. Below are some of the more common issues/disputes that businesses face and some steps to take to protect against such claims.
1. Customer or vendor contract disputes
Your business interests should be top of mind. Never more so when it comes to the relationship between your business and your customers or vendors. In addition to maintaining a personal touch with each relationship, it is vital to have a written agreement or contract in place to protect your business if that relationship becomes rocky. Never rely on a handshake or verbal agreement because it’s difficult to prove if a dispute has to be resolved in court.
In any business relationship, whether with clients or vendors, miscommunication and/or lack of agreements can easily lead down the path toward costly fees and time spent engaged in litigation. Every business owner, big or small, should have written agreements in place as a reference to building and protecting the relationships established. While stand-alone written agreements are preferable, a chain of emails setting forth certain key details, such as what is being provided, when it is due, the cost of the item, and where the work is taking place, is better than a simple phone call or handshake.
In addition to addressing the things that keep your business protected in a contract, you also want to make sure both parties are aware of, and understand, the exact specifications of the relationship or arrangement – with customers and vendors it is as an independent contractor, not as a joint venture, and with your help, whether they are an employee or an independent contractor. This will minimize any costly or stressful “gotcha” moments down the road experienced in common small business lawsuits.
2. Employment lawsuits
Employees, in today’s age you cannot live with them, and you cannot live without them. Before hiring an employee or independent contract after launching your startup shouldn’t occur without the right workplace agreements in place. Many small and medium-sized businesses lack a formal employee handbook, your first line of defense against any type of claim or lawsuit. Given that there are so many complex laws regarding labor and employment at both the state and federal level, you’ll want to ensure you have the proper paperwork and an employee handbook that aligns with these laws.
One of the common small business lawsuits involving employment is the misclassification of employees. Is your employee an independent contractor, but you dictate the nature of their work and schedule? They’re actually an employee and you could be legally liable for back wages and taxes if you’re sued.
3. Discrimination lawsuits
Small businesses are more vulnerable to employment-related lawsuits than their owners may think. This is largely due to many small businesses lacking a Human Resources professional who can use professional judgment to determine best practices between employer and employee. Business owners can ensure they’re protected against some of the common small business lawsuits involving discrimination by ensuring they and their policies adhere to and follow state and federal laws.
Discrimination doesn’t have to be completely apparent in order for someone to file a lawsuit against a business – and it isn’t restricted to employees. Discrimination lawsuits can be filed from customers or clients, vendors, partners, or anyone who has a connection with the business.
Unrelated to lawsuits stemming from current or potential employees are legal disputes that reveal inaccessibility to particular groups of people. For example, businesses with websites often design these websites to be easily accessible to the masses, but your business could be liable if it’s not designed to be accessible to those with disabilities. Can your website be read aloud to a blind person?
What does this mean? A business with a website that lacks text-alternatives for non-text content (such as videos or photos), content of a website that is easy to see and hear, permitting functionality from a keyboard as opposed to a cursor, etc.
Recently, several businesses have been hit with lawsuits claiming non-compliance of the Americans with Disabilities Act, due to the lack of access to websites by people with disabilities. Unfortunately, there has been much debate regarding what is “accessible” under the Americans with Disabilities Act, and what that particular standard remains unsettled at the moment, you should at least exercise some common-sense when ensuring folks can get into your place of business, move around the public areas of your business, and that a policy is in place to assist those with a reading or vision impairment if you use menus or written material as part of your business.
Despite this lack of formal guidelines, law firms representing private litigants have become increasingly aggressive in pursuing retailers regarding web accessibility. The distinct disadvantage e-commerce businesses may have in this battle is that web-based businesses can be sued anywhere they are regularly performing business, often allowing litigants to “shop” for the forum that can prove most favorable to them in a lawsuit.
The endless ways in which your business can face legal issues can feel stressful or overwhelming to business owners unsure of how to properly protect their business. However, the more proactive business owners become regarding these protections, the more time, money and stress they save in the long-run.