Opening a business always means taking on risks. Anytime a business holds itself open to the public and hires employees, it creates a risk of litigation. Below are nine of the most common lawsuits small businesses face. If you own and operate a small business, it is important to be able to protect yourself from these risks, and, in the worst-case scenario, defend your business against lawsuits. The trusted and experienced New Jersey business lawyers at the Law Offices of Jonathan Fleisher, Esq. are here to support you and your business, whether it is a new startup or a long-standing corporation. Call our office at 732.360.6409 for a free consultation.
Employment Discrimination
Federal law prohibits discrimination against employees based on sex, race, color, national origin, or religion. Under Title VII of the Civil Rights Act, unlawful employment practices include:
- Failing or refusing to hire an individual
- Discharging an individual
- Limiting, segregating, or classifying employees that would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee
- Otherwise discriminating with respect to compensation, terms, conditions, or privileges of employment
This law applies to employers with 15 or more employees, so some small businesses may be exempt, but many small businesses that the law applies to must be careful not to take any actions or enact any policies that might constitute discrimination against one of the protected classes.
Wage & Hour
Owning a small business means handling a huge range of responsibilities, from keeping customers happy to managing your books. One of the biggest responsibilities is to pay employees properly. State and federal laws set a mandatory minimum wage, as well as guidelines about when employees are owed overtime pay. The Department of Labor Wage and Hour Division advises small businesses to ensure that they:
- Pay employees properly
- Maintain records
- Adhere to requirements if they employ minors
- Provide eligible workers with unpaid family or medical leave
- Notify employees of their rights in the workplace
Failure to properly pay employees creates a serious risk of litigation and the penalties can be costly.
Harassment
Like employment discrimination, harassment is also a significant issue in the workplace, for large and small businesses alike. Though employers are not always liable for the comments and actions of their employees, businesses must make sure they have policies and procedures in place to detect and correct harassment that is going on in their workplace. Ensure that supervisors are trained on appropriate workplace behavior, and ensure employees know where to report instances of inappropriate or unwelcome conduct.
Discrimination Against Customers
The first three of the nine types of common small business lawsuits pertained to lawsuits by employees. While employment litigation is certainly a big risk for employers, what about suits by customers? While federal law only protects private individuals from discrimination from the state, state laws often prohibit discrimination in places held open to the public. The New Jersey Law Against Discrimination, for example, prohibits discrimination or harassment based on perceived race, national origin, gender, sexual orientation, gender identity or expression, disability, and other protected characteristics. This law subjects businesses to liability for discriminating against customers based on any of these characteristics. Be sure that your employees are trained on proper customer service and aware of applicable laws prohibiting discrimination.
Slip and Falls
Businesses will always be the subject of personal injury litigation. The classic example of a personal injury suit against a small business is a slip and fall. Any brick and mortar shop that is open to the public must ensure that its premises are safe for its customers, including regular inspections for dangerous conditions.
Breach of Contract
A small business is also at risk of contract litigation. Businesses rely on contracts as a regular part of their operation, whether it is a lease of your office space, a contract with a supplier, or sales contracts with your customers. Though contract management can be expensive, it is critical for business owners to ensure they are complying with all of the terms of their contracts. Late deliveries or payments, substandard goods, or breaches of a lease can lead to costly lawsuits, which seriously outweighs the cost of investing in a contract management system.
Intellectual Property
Intellectual property will continue to grow as an area of small business litigation. Many startups are founded on a really great idea, such as an invention or a software concept. Business owners should consider early on how to protect their IP. The risk is two-fold: not only do startups need to be on the lookout for infringement of their own patents or copyrights, but they also need to be wary of “patent trolls.” Patent trolls are companies that purchase and develop patents solely for the purpose of suing businesses using similar technology. Small businesses are especially vulnerable to this tactic, so consider consulting with a New Jersey business attorney at Law Offices of Jonathan Fleisher, Esq. to find out how to defend your business against these non-practicing entities.
Disputes with Partners or Shareholders
Unfortunately, small businesses also run the risk of inner turmoil. In a small business, leadership is usually made up of a small group of close partners or shareholders, depending on the form of your business. This allows for quick and agile decision-making, but it can also lead to disputes when the leaders of the business are split. Make sure to adhere to the terms of any partnership agreements or bylaws, and when in doubt, consult with an attorney to help settle disputes before litigation disrupts the business’s operations.
COVID-19
It is no surprise that COVID-19 caused an uptick in lawsuits against small businesses. The pandemic created numerous new employee claims related to work-from-home policies, leave policies, retaliation, and others. In addition to claims by employees, many customers and members of the public have raised lawsuits against businesses related to COVID-19 exposure. There are many new legal questions in light of coronavirus, so consider speaking with an experienced attorney to help protect your business’s rights.
Let Us Advise Your Small Business
These are only nine of many common types of small business lawsuits. If your small business has been sued or you are concerned about a risk of litigation, consider speaking with an experienced New Jersey business lawyer. At the Law Offices of Jonathan Fleisher, Esq., we have years of experience representing small businesses across New Jersey. We have the knowledge necessary to defend small businesses against litigation. Call our office at 732.360.6409 to set up a free consultation and tell us more about your business.