While major corporations tend to have large, dedicated legal teams to protect them from employee lawsuits, small businesses rarely have those kinds of resources. But small business legal advice doesn’t have to be cost prohibitive just because you can’t afford a full legal team. Here’s what you need to know.
Prevention Is Key to Avoiding Lawsuits
Employee lawsuits are a risk from the moment you hire your first employee, even if that person is your best friend or brother-in-law. Consider hiring an employment lawyer to help you establish policies and create an employee handbook right from the outset. Then follow that handbook. There’s plenty of flexibility in how you want to run your business — just have it down on paper and doubled-checked by an expert.
Having good policies and a legal handbook are especially critical as your business begins to grow. Different laws come into play with the addition of extra employees to your workforce. For example, you’re subject to the Americans with Disabilities Act when you get 15 employees, and to the Family and Medical Leave Act when you hit 50. Your state may have lower thresholds. Make sure you know the law to avoid being sued for violating it.
What Type of Lawsuits Are You Likely to Face?
You might think it would be sexual harassment, but the top charge filed by the Equal Employment Opportunity Commission is actually retaliation. Retaliation occurs when an employee makes a complaint about racial discrimination or some other illegal activity and faces punishment for speaking up. Often, the punishment is subtle — changing a shift, giving them less lucrative clients or simply treating them worse at work. Keep in mind that you can’t punish someone for making a complaint, even if it was against you.
Another type of lawsuit you may face is one involving pay. Simply put, everyone has to be paid for the work they do. Most employees need to be paid by the hour, and that includes overtime pay if they work more than 40 hours in a single week. Some employees can be exempt from overtime pay, but their employment has to meet strict role and salary criteria. This area of the law is complex, so it’s worth doing your research before you make someone a salaried, exempt employee.
Of course, any legal violation leaves you open for a lawsuit. Make sure you provide bathroom access (a potential Occupational Safety and Health Administration violation), let people take time off for religious services (if it’s not a hardship for your business) and have fair consequences for bad behavior.
How Can You Afford Legal Protection?
Getting sued can cripple a small business, but there are steps you can take to lower your costs and reduce your risk.
- Get insured. Enroll in an insurance policy that covers company lawsuits.
- Look for local resources. Join professional organizations, such as your local chamber of commerce, that can help you navigate lawsuits.
- Lawyer up. Hire an employment attorney. Many of them will provide ongoing support for a rather low monthly fee.
- Reach out. When in doubt, ask for help. It’s always cheaper to ask an attorney for advice before making a decision than for the same attorney to represent you in court.
You Can Survive a Lawsuit
If you are served, don’t panic! Most lawsuits go nowhere. Breathe deeply and call your lawyer. If you’ve been following your handbook and treating your people fairly, then you’ll probably come out just fine.
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