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By Ted Schneider, Esq.

It is impossible to predict every lawsuit that a small business might possibly face. There is nothing to prevent angry vendors, entitled customers, or disgruntled employees from filing a lawsuit, even if there is no legitimate basis for it. The more a business owner delegates responsibilities to employees, the greater the risk that an employee makes a mistake and exposes the business to a lawsuit. Even the most vigilant, hands on business owner could make a mistake that can lead to a complaint filed against the business.

The most common lawsuits brought against businesses are brought by employees – typically discrimination, wrongful termination suits or claims for wage and hour violation. The impetus for such a suit can be anything from a fired employee feeling slighted to an employee being demoted or passed over for an advancement opportunity. If the employee or candidate believes that the action was taken for a reason related to race, gender, religion, sexual orientation, gender identity, or another protected classification, that employee might file a lawsuit. It is important to document any sort of negative or positive behaviors at work, so that if an employee does complain of discrimination, the court can see the employee’s work history and the real reason why he or she may have been terminated or passed over for a promotion. Disparaging remarks made about any of these protected classes have no business in a work place as they can create a hostile work environment and lead to lawsuits as well. In the event that an employer is faced with a lawsuit, or threat of a lawsuit by an employee or former employee, it is advisable that the employer seek counsel immediately from a knowledgeable attorney experienced in employment law and employment litigation.

Other common lawsuits brought against businesses concern overtime pay. Many employers deny their employees overtime pay in the interest of saving money, often through misclassifying the employee as “exempt” and paying the employee on a salary basis. This can be significantly more expensive in the long run because, if an employee sues, he or she may be entitled to back pay (potentially up to four years), penalties, and applicable attorneys’ fees. It is a good idea to discuss the new federal overtime rules with an experienced employment law attorney and to have contracts or offer letters clearly establishing the relationship between an employer and an employee to minimize confusion. Working with an experienced attorney is the best solution for drafting these agreements and avoiding these types of lawsuits.

It also makes sense to put agreements with vendors and customers in writing. The contracts should include a general description of the work to be performed, a list of any items to be delivered, a project schedule with deadlines, the fee, and the circumstances under which additional fees might be charged, warranties included with the work, indemnification, how long the contract lasts, how it can be terminated, and how disputes will be resolved.

Personal injury lawsuits against businesses are also common. In addition to keeping a place of business in safe condition, it is important that employees are properly classified as employees or independent contractors, and that the business carries the correct worker’s compensation insurance. Most states require employers to carry insurance in case of a workplace injury. Additionally, employees who are injured at work are usually precluded from suing their employer and are instead referred to worker’s compensation courts; however, an employer may be responsible for an injury and associated damages of an employee that has been misclassified as an independent contractor, and therefore no workers’ compensation insurance coverage was in place for the employee.

The attorneys at Schneiders & Associates L.L.P. are well versed in the areas of employment law, contracts, and litigation. For more information on any of the above, please contact us at www.rstlegal.com, info@rstlegal.com, or 805-764-6370.

About the Author
Theodore J. Schneider practices in the areas of business and corporate transactions, employment law counseling, municipal and public law, real estate and land use, and homeowner associations. Ted began his legal career in 2002 when he joined the Los Angeles office of Gibson, Dunn & Crutcher, L.L.P. before relocating to Ventura County to join his father in practice.