Running a small business is a big responsibility. While your primary responsibility is to attract clients to your business and grow your profits, you
Running a small business is a big responsibility. While your primary responsibility is to attract clients to your business and grow your profits, you also have to be aware of the legal implications of running a business.
Unfortunately, small businesses are often targets for lawsuits due to their limited resources and lack of knowledge about the law.
Common small business lawsuits can include disputes over contracts, intellectual property infringement, labor and employment issues, breach of fiduciary duty, unfair competition, and consumer protection violations.
This article discusses each of them in detail while offering valuable tips on preventing them. Read on to learn more:
Contract Disputes
Contract disputes are among the most common types of lawsuits for small businesses. Most arise when one or both parties fail to fulfill their contractual obligations.
When entering into any contract, ensure you fully understand all the terms and conditions and that both parties agree to them.
Before signing a contract, ensure it is written in plain language with no ambiguities and that both parties understand all the legal terms.
Furthermore, have a qualified attorney review any contracts before signing them to make sure your interests are protected.
Lastly, keep detailed records of all transactions and correspondence related to the contract in case a dispute arises later.
Intellectual Property Infringement
Any use of someone else’s intellectual property without their permission could put you at risk for a lawsuit. This includes using copyrighted material such as written works, music, videos, or photographs without the copyright holder’s consent.
Similarly, using trademarks or patented products and processes without permission could also lead to a lawsuit.
To protect yourself, ensure you have the right to use any material on your website or in any advertising campaigns. If using someone else’s work, obtain written permission from them and be sure to include their name and relevant credits whenever you use it.
Moreover, if your business has unique intellectual property, including logos, brand names, and products, consider registering them with the U.S. Patent and Trademark Office to ensure no one else can use them without authorization.
Workplace Harassment
This is another common type of lawsuit for small businesses. Harassment in the workplace can refer to any form of unwanted behavior, such as physical or verbal abuse, that interferes with an employee’s ability to do their job.
To avoid this type of lawsuit, ensure your workplace is safe by having clear policies and procedures that make it clear that harassment will not be tolerated.
You should also conduct regular training for your employees on recognizing and reporting harassment or discrimination in the workplace. Take any reports of harassment seriously by investigating them and taking appropriate action to address the issue.
Labor and Employment Issues
If you have employees working for your small business, it’s important to follow all federal and state labor laws to avoid potential lawsuits. This includes paying employees the minimum wage, withholding payroll taxes, and providing them with their required benefits.
You should also create comprehensive employment policies that outline any rules or restrictions for employees, such as acceptable working hours, overtime pay, and leave policies. Additionally, make sure your hiring practices comply with anti-discrimination laws.
If an employee believes they have been wrongfully terminated or suffered any other type of discrimination, you could be sued.
To prevent this, always ensure your decisions are fair and unbiased and that you can back up any disciplinary action taken against employees with documented evidence.
Unpaid Wages
Unpaid wages are one of the most common lawsuits faced by small business owners. All federal and state laws require employers to pay their employees the correct wages for their work hours.
To avoid this lawsuit, ensure you comply with all wage and hour laws, including minimum wage requirements and overtime payments. Also, keep accurate records of employee working hours and payroll information in case any disputes occur.
If an employee believes they have been shorted on their wages, investigate their allegations, and take corrective action if necessary. Doing this promptly could help you avoid a lawsuit down the line.
Breach of Fiduciary Duty
Fiduciary responsibility is an obligation to act in the best interest of another person or entity, such as a corporation. If you are a director, officer, or shareholder of a company, you may have a fiduciary responsibility and could be liable for any damage caused by a breach of duty.
To protect yourself from this type of lawsuit, always ensure that your decisions are made with the company’s best interest in mind and that you are not benefiting personally from them.
Ensure you keep detailed records of all decisions made on behalf of the company to demonstrate that they were reasonable and in the organization’s best interests.
Summary
In summary, lawsuits can be costly for small businesses, so it’s important to do what you can to protect yourself from them.
This includes protecting your intellectual property, ensuring your workplace is free from harassment and discrimination, complying with all labor laws, and understanding your fiduciary responsibilities as a company director or officer.
Taking the necessary steps to prevent lawsuits can help you protect both your business and personal assets in the long run.
COMMENTS