Legal compliance is a vital task in small business operations management. The top 10 small business lawsuits often come from unexpected directions. It pays to be aware of them and have good processes in place to prevent them.
The Top 10 Small Business Lawsuits and How to Prevent Them
1. Workplace Harassment
Most employers are not sued directly for harassment, but rather for failing to do anything about reports of harassment or for allowing an environment where there is no recourse for those that are being harassed. You are not responsible for babysitting the behavior of all your employees. You are responsible for providing a reasonable work environment and addressing harassment issues that are brought to you. This means that having a formal policy, process, and procedure in place for dealing with workplace harassment complaints.
2. Traffic Accidents
There are two types of accidents that small business owners may have to deal with. The first is an accident that occurs on the property of your business. Parking lot accidents are bound to happen and as a business owner you need to take steps to help make your property safer. This includes making sure that you have ample traffic signs in place. You can use speed bumps to slow traffic down, and you can also try to get your potholes repaired quickly. This prevents drivers from having to swerve around them and also lowers the risk of a lawsuit for causing damage to a vehicle.
Another safety tip is to make sure the sidewalks and parking bumpers provide a sufficient buffer to an actual storefront. There have been a number of incidents whereby a driver loses control of a vehicle and crashes through a window.
If you have employees driving as part of their work, then you have another aspect of liability that needs to be considered. Typical steps to protect yourself and other drivers should include drug testing employees that operate a motor vehicle. Adding backup cameras and audible alerts to larger vehicles is a second important step that can be taken.
You should also consider using mobile route tracking software that can help your business run more smoothly. One of the benefits of this kind of software solution is that it will often include route tracking capabilities that will tell you if your drivers are speeding.
3. Contract Disputes
These issues come in all forms and one of the most common examples is unpaid contracts due to unsatisfactory work. A contractor is always expected to “do the job right” the first time, but not everyone always agrees as to what it means to get a job done right. Make sure that your final expectations are defined in your contract. You should also define a venue for disputes so that in the event a problem arises there is no question as to where you can seek legal recourse.
4. Unpaid Wages
Unpaid wages are one of the most common lawsuits that occur in the small business world. Overtime disputes and “creative” sales commission deals that can result in below-minimum wage earnings for employees are often at the heart of these issues. Just putting your deal on paper and saying that employees agreed to it is not enough. In this case, the easiest way to prevent a lawsuit is to simply do the right thing and give your employees a fair deal. Ensure that their minimum wage is always met with no exceptions.
5. Unsafe Premises
As a business owner you have an obligation to provide a safe environment. This means that you need to take reasonable precautions on your premises to prevent injuries. This includes taking steps like using warning signs for wet floors, marking emergency exits properly, and ensuring that your building meets all the building code requirements.
6. Delinquent Payments
Most large businesses have a budget allotted for bad debts which are unlikely to be paid. While this is sometimes a part of doing business, there are some steps that you can take to prevent yourself from having to chase down customers.
Start by clearly defining when payments are due. Many delinquent payments are due from customers who simply do not sympathize with your plight. A set of scheduled, firm reminders can also go a long way towards helping you collect payments.
7. Asking the Wrong Hiring Questions
This is part of the basic do’s and dont's of hiring, but for a small business without an HR department this section should serve as a firm reminder of the things that you are not allowed to ask job candidates.
While in some cases you may be allowed to ask about these things, you are not allowed to discriminate or hire based on these characteristics, so asking the questions will inherently put you at risk for potential lawsuits.
Included on the list of topics to avoid are age, race, sex religion, disabilities, and family status. This means that you aren't allowed to ask a woman if she plans to have children, you are not allowed to ask someone if they will need time off for religious holidays, and you are not allowed to ask someone when the last time they were sick was.
8. Discriminating Employee Treatment
This is not as common as some of the other lawsuits that businesses face, but when these lawsuits are brought they can be very damaging even if the lawsuit is defended successfully. If you want to avoid these lawsuits, start by making sure that you have fair, structured, formal processes in place for employee reviews and advancement.
9. Wrongful Termination
Many employees are “employed at will”, however, this does not mean that you can fire them for any reason that you want. The list of reasons that you cannot use to fire someone shares many of the same things that you will find in the “hiring questions that you cannot ask” section above. You can’t fire someone because of their age, race, religion, sex, disabilities, etc.
You also cannot fire someone as a retaliatory act for job safety-related complaints or other similar actions. You cannot fire them for refusing to complete an illegal act at your behest, and you cannot fire someone for any of the other reasons that have been defined by the individual states. Each state has its own laws regarding hiring/firing practices that add to the protections already afforded by federal law.
10. Workplace Injuries
You might think that this is only found in the construction industries, but the truth is that virtually any job can fall into this category. Even a desk job can hurt your back so there is virtually no job that does not have any risk associated with it. You are required to take reasonable precautions where necessary and abundant precautions where it is appropriate. Most importantly, you should be able to respond actively to employee safety complaints.
A civil jury may agree that the status quo of your work environment was reasonable and acceptable, but if employee complaints were ignored they will often start to see you as liable. You cannot anticipate every hazard but taking reasonable precautions regarding employee safety concerns is something that you have to do.
Mark Kaire is a founding partner at Kaire & Heffernan and has been practicing law in South Florida since 1997.
Mark attended the University of Florida Law School and has lived in Miami since 1972.
When he is not advocating for his clients he can be found racing at cycling events throughout the Southeast.