5 Lawsuits that Can Land Your Small Business in Hot Water (and How to Stay Afloat)

Owning a small business can lead to mountainous triumphs, though tragedy may strike at an unexpected moment. Getting your small business successfully off the ground and turning a profit is a considerable accomplishment. Still, a single lawsuit can awake a ringing death bell and rob you of the fruits of your labor.

Litigation can be time-consuming and costly, not to mention it can have a lasting negative effect on your business’s reputation, should the dispute be made public. In layman’s terms, legal disputes can cause your business’s sales to decline, value to plummet, and even lead to the untimely shutting of your doors.

What’s worse, COVID has skyrocketed employment lawsuits in the wake of reckless endangerment and poorly-executed COVID-19 protocol. While large companies have the resources to handle workplace safety, personal injury, and even wrongful death suits filed amidst the COVID-19 era, small businesses can financially collapse even if they end up on the winning end of a costly legal dispute.

If you’re worried about becoming tangled up in potential legal disputes, here are a few tips to help ensure your business doesn’t sink.

Don’t panic. Act fast.

The first act of protection for your business is implementing the necessary prevention-oriented strategies, specifically liability insurance. Acquiring general liability insurance coverage will help protect your business from various broad claims, such as slipping on a wet floor, which subsequently causes an injury.

Consulting with a qualified attorney when hit with a legal business dispute and navigating the nitty-gritty details of your insurance can make or break your business. Fortunately, attorneys experienced in employment and business law, such as these, can protect your interests and help insulate your business from financial devastation.

When workers’ compensation isn’t enough

If an employee injures themselves at work, the most common response is to file a worker’s compensation claim. Worker’s compensation typically covers the employee’s lost wages and any necessary medical costs, though employees can choose to take another, more expensive route.

Personal injury suits can land employers in the boiling hot water of financial ruin. How? Employers must offer compensation for damages from pain and suffering and loss of future earning potential for starters.

Because worker’s compensation insurance can help pad financial blows, you need not fear your impending doom. Take note that implementing and monitoring adequate safety policies to prevent these devastating suits from happening in the first place is your best bet.

Keep track of time cards

Small businesses may get smacked with a wage violation suit if they don’t correctly pay their employees’ overtime wages. The Federal Labor Standards Act (or FLSA) covers recordkeeping and overtime pay, which specifies that in most cases, nonexempt employees qualify for overtime while exempt employees do not.

These distinctions can be understandably confusing, as many small business owners don’t specialize in business law in their free time. Thoroughly reviewing the FLSA may help you understand how to classify your employees, and consulting an attorney before a wage violation suit even happens can help better protect your business.

Handling wrongful termination

Have you ever had an employee who just didn’t meet your expectations or your company’s needs? Letting them go of an employee, no matter how much time they’ve spent at the company, is time-consuming and stress-inducing. Unfortunately, some employees may choose to make the process more tumultuous by filing a wrongful termination suit.

Wrongful termination cases require the former employee to prove that the reasoning behind their termination was illegal, as most employers can let their employees go at any given time if needed. Performing quarterly employee evaluations and keeping detailed records of performance, exchanges, and issued warnings will help build an impenetrable defense and provide tangible evidence that you let the employee go according to local employment laws.

Avoiding discrimination

Employees that feel mistreated may turn to a discrimination lawsuit. To offer support to minority groups, the federal government enacted anti-discrimination laws to protect employees from unfair treatment based on their race, gender, nationality, skin color, disability, religion, pregnancy, or veteran status. As an employer, the best way to avoid a discrimination suit is to prevent discrimination from occurring in the first place actively.

Providing employees with accessible resources on company policies and procedures can foster an open and communicative business environment. Educating supervisors on federal and local discrimination may prevent discrimination from occurring in upper management.

Wrap up

As a small business owner, preventing lawsuits before they happen is the most efficient way to ensure your brand’s financial and personal success. Reviewing insurance options and keeping an experienced attorney on retainer to answer even your most obscure questions can be outstandingly helpful at preventing costly litigation from coming your way. One final thought to keep in mind, even if a financially-straining lawsuit occurs after you’ve undertaken all methods of prevention, it doesn’t mean that your business is doomed to go under.

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