As an owner of a small business, the danger of crippling litigation should be at the top of your priorities. Legal headaches can take you by surprise and severely hurt your bottom line. Here are some common legal issues facing small businesses:
1) Disgruntled Employees
If you terminate a non-performing employee, make sure he or she signs documents carefully drafted by an attorney upon termination to make the terms of dismissal crystal clear. Letting an employee go without any final termination forms leaves the door wide open for legal actions.
2) Misclassification of Employees
It is critically important to recognize who among a workforce is an independent contractor subject to 1099 rules and who is actually an employee. Misclassifying employees as independent contractors and failing to provide W-2 forms can subject a business owner to back taxes of as much as 41.5% of the contractor’s wages, and penalties can go back for three years. Make sure you know how to properly classify your workers.
3) Discrimination Cases
During the hiring process, make sure you are prepared with all the applicants’ resumes should allegations of discrimination arise, to prove that you hire the most qualified individuals, regardless of gender, ethnicity or age. Hold regular meetings to oversee co-worker relations and insure that discrimination on a smaller scale is not occurring between office cliques, or influencing the decisions of middle and lower managers.
4) Immigration Audits
You should make sure that all your company’s employees can legally work in the United States. Do top down sweeps off your company’s staff, using background checks, to identify illegal immigrants with falsified documents. The U.S. government has been known to conduct extensive surprise immigration audits that can cripple a company if it is found to be using illegal labor.
5) Dissatisfied Customers
Customers who are dissatisfied can file class action lawsuits against your company, in which they gather in large consumer groups and attack your company over faulty products, services or promises. With enough dissatisfied customers, class action lawsuits can do more damage than any individual or corporation and irreparably tarnish your brand’s image. Again, be proactive and keep a finger to the pulse of your customers through tech support, online message boards and e-mails. Promptly issue recalls for flawed products and be prompt to address customer issues.
Other Legal Issues
These are only some of the most common legal issues facing small businesses today. Other ones include tax litigation (a whole other topic) and legal disputes with competitors and contractors. Make sure you are proactive in solving these problems before they start, and make sure you have solid legal support to back you up should you get sued. Good communication in the workplace and a hands-on approach to management is the best deterrent to legal issues.
Each case is different so remember, Bagla Law is always here to help you with your business needs because
You Know Your Business – We Know the Law!
If you have any questions about these issues or other topics please feel free to give us a call.