5 Common Reasons Small Businesses Get Sued

3 Mins read
  • Small business owners must be aware of the various reasons that they can get sued and try to take the steps to mitigate the risks of lawsuits.

Naturally, starting a business comes with its risks. The amount of excitement you get when a promising idea pops into your mind, and you start to make it comes to life is huge. Sometimes the amount of excitement and progress business owners are making sweeps causes them to overlook the important details, especially when it comes to the legal stuff. As they say, the devil is in the details, and that couldn’t be more true in regard to the law.

You don’t want to fall into the trap of thinking your business can’t get sued. Data from RocketLawyer, SmallBizDaily and Forbes shows that 36% to 53% of small businesses get sued every year.

Businesses can get sued for numerous reasons, however, there are some common ones that many companies fell into. It’s important to understand that your business can be sued for a ton of reasons, but that doesn’t mean that all lawsuits are legitimate.

Loopholes are easy to find in law. So, in addition to making sure you’re not breaking the law, ensure that you have a strong business lawyer in case. You may also need to work with specialized lawyers, depending on the nature of your lawsuit. For example, if you are sued for causing a car accident while driving a vehicle for your business, you might need DUI defense lawyer, just in case you were drinking.

Here are some of the most common reasons small businesses get sued.

1.     Human resources

As a small business, cutting back on costs is a top priority for you. A huge mistake small businesses make is not relying on professional human resource practices to hire employees and regulate rules that protect them. Therefore, they end up googling some interview questions or just putting employee laws that make sense to them or are the very basics.

Although this might seem like the smarter option, it’s definitely not because there are some questions that your business could be sued for if asked in an interview such as questions related to religion, gender, and family status. Business Insider reports that some job interview questions could cost companies up to $1 million in a lawsuit. However, depending on the nature of the job they’re applying for, an employer could be allowed to ask these questions. But you’re better safe than sorry.

2.     Injuries and hazards

Injuries and hazards at certain workplaces are inevitable, especially if the nature of the business exposes employees to more risks. However, that doesn’t mean that an employee with a desk job isn’t at risk of being injured as well. If you believe that safety programs should be implemented in construction sights only, think again. There are many other reasons for employees to get injured, such as if you are providing them with non-ergonomic chairs that they sit on for too long, they could get a back injury.

Make sure to scan the environment very well for any potential hazards, or hire a safety expert to do so. Injuries are prone to happen, and you can’t reduce the probability of them happening to zero, but with some effort, you can significantly decrease it. You can even consider putting up a box for employees to put in any safety complaints.

3.     Biased-decisions

Making biased decisions especially when it comes to incentives will harm your business big time, not to mention how it will affect the work culture and employees’ loyalty to the business. If an employee suspects that they’re being treated unfairly due to discrimination, they might sue you. You want to make sure that employees are treated fairly, incentives, promotions, or bonuses are given according to performance and there’s a clear process for obtaining any of these. If the process is structured and clear to the employees, it ensures that they don’t believe that the decisions are biased.

4.     Not taking harassment issues seriously

Harassment is not uncommon in business places, and several kinds of harassment are possible to happen in the workplace. It is not easy for an employee to sue the company for them being harassed at work, but that doesn’t mean that they have zero chance.

A business owner can’t control everything around the company, especially employee relationships with each other, but harassment should be given strong attention by communicating strict rules against employee harassment. Also, managers should be open to receiving complaints from employees and dealing with issues instead of brushing them off or implying to the employee that their issue is not important.

5.     Fair payment

When you have a small business, it’s common for employers not to pay employees fairly because the job descriptions are a bit mixed up between each other. If someone is good at marketing but works in HR, you can find them doing some marketing tasks as well due to the shortage of employees.

This gives room for unfair payment because employees might find themselves working overtime or having to do tasks that are not relevant to their job description which makes them feel taken advantage of. So, to prevent being sued, and to be a better business owner, makes sure that the employees are paid for the work they do, not for the budget you put in.

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About author
Ryan Kh is a big data and analytic expert, marketing digital products on Amazon's Envato. He is not just passionate about latest buzz and tech stuff but in fact he's totally into it. Follow Ryan’s daily posts on Catalyst For Business.
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