Eight common small business lawsuits you may face – and how to avoid them
Running a business is riskier than ever, and the possibility of a legal problem arising is always present. Discover eight common small business lawsuits you may face.
Statistics show that small businesses are sued more often than large ones. So if you are a small business owner, it is important to be aware of the types of lawsuits you may face, and how you can prevent them by avoiding simple business legal mistakes.
Keep in mind that legal compliance is vital to protect your business. Laws and regulations vary by industry, state, and even city, so it is important to consult with a qualified law firm to ensure that your business operates within the legal parameters of your jurisdiction.
Read on to learn to discover eight of the most common types of small business lawsuits and how to protect yourself from them.
1) Breach of contract
A contract breach occurs when either party does not fulfill its obligations as outlined in an agreement. This often happens if goods are delivered late, services are not completed properly, or prices have gone up without being agreed upon by both parties.
Small business contracts can be complex, and disputes may arise from disagreements over the terms of the agreement, performance issues, or violations of contract rules.
To prevent contract disputes, ensure that all your contracts are clear and specific and that you read them carefully before signing. You can even have an attorney review your contracts to give you an extra layer of protection.
2) Employment lawsuits
As a business owner, you must comply with many federal and state laws regarding your employees.
These include things such as setting work hours, providing vacation pay, paying minimum wage and overtime compensation, workplace safety standards, and more. If you fail to comply with these laws, you may be sued by employees or the government.
To avoid employment law violations, familiarize yourself with the relevant laws and regulations in your area and educate your staff about them.
Keep records of employee agreements and document all performance reviews, training sessions, salary increases, and other important notes regarding each employee’s record. This will help you verify that you’re treating all employees fairly and in compliance with the law.
3) Intellectual property infringement
It is important to know the intellectual property laws protecting inventions, trademarks, copyrights, and other creative works.
If someone believes their intellectual property rights have been infringed upon, they may bring a lawsuit against your business.
To protect yourself from intellectual property infringement, make sure to register trademarks and copyrights, create non-disclosure agreements and pay close attention to licenses associated with any third-party materials you use in your business operations.
If you have any questions about protecting your intellectual property, consult an experienced attorney to ensure your business is protected.
4) Product liability
If you manufacture, distribute, or sell products, you may be liable if those products cause harm to customers. If a customer believes they have been injured by your product and decides to sue, your company could be liable for damages.
Product liability lawsuits are the most common type of lawsuits filed against small businesses.
To protect yourself, take the necessary steps to ensure your products are safe and compliant with all applicable laws.
Additionally, have a comprehensive insurance policy in place that covers any product liability claim. This will help cover legal expenses and any judgments or settlements arising from a product liability lawsuit.
5) Unsafe premises
As a business owner, you have an obligation to ensure that your premises are safe for employees, customers, and other visitors. If a person is injured due to unsafe conditions on your property, you may be liable for any damages.
Studies show that workplace injuries cost small businesses billions of dollars every year. To avoid unsafe premises claims, follow all applicable safety codes, inspect your premises regularly and take steps to address any issues that may arise.
It is also important to have a comprehensive insurance policy that covers any accidents or injuries on your premises. This will help cover legal expenses and any judgments or settlements arising from an unsafe premises lawsuit.
6) Wrongful termination
The truth is that many employees are usually “employed at will.” However, it doesn’t mean you can fire your employees for any reason. Certain laws, such as discrimination and whistle-blower protection laws, protect employees from wrongful termination.
If an employee believes they have been wrongfully terminated, they may bring a lawsuit against your company. To protect yourself from wrongful termination claims, document all performance reviews, training sessions, and other important notes regarding each employee’s record.
It is also important to abide by all applicable laws and regulations and provide equal employment opportunities for all employees. Finally, have a comprehensive insurance policy in place that covers any wrongful termination claims.
Such a policy can help cover legal expenses and any judgments or settlements arising from a wrongful termination lawsuit.
7) Cybersecurity breaches
In today’s digital age, cybersecurity breaches are becoming increasingly common. If your business collects customer data, it is important to take the necessary steps to protect that data from potential cyberattacks.
You may be liable for damages if a breach occurs and customer data is stolen or compromised.
One of the best things you can do to yourself from cybersecurity breaches is to encrypt sensitive information, implement robust password policies, regularly update software, and invest in cyber liability insurance.
Additionally, ensure that your business complies with applicable laws and regulations.
8) Unpaid wages
Unpaid wages remain one of the most common complaints from employees. The law requires that employers pay all wages to their employees on time, and failure to do so can lead to a lawsuit.
To protect yourself from unpaid wage claims, ensure you comply with all applicable laws and regulations.
You should also keep detailed records of hours worked and other relevant information regarding employee payments.
Make sure you protect your business from claims
Running a small business comes with many risks and challenges. To protect yourself from potential lawsuits, comply with all applicable laws and regulations, implement appropriate safety protocols, and have a comprehensive insurance policy.
Doing so can help cover legal expenses and any judgments or settlements that may arise from a lawsuit.
Legal Giant can help with product liability claims.