Lawsuits Are Expensive – You Should Try To Avoid Them
Small to mid-size businesses and their owners are frequently the targets of lawsuits because they are new and tend to make “rookie mistakes.” The following is a brief summary of the various types of claims that those businesses confront and how best to handle them.
1. Employment/HR Claims
How This Happens:
The laws surrounding employer-employee relationship are so complex that it is easy for employers to make mistakes, even when they do their level best to do right by their staff. Common mistakes include misclassification of employees as independent contractors, failure to pay overtime, failure to provide meal/rest breaks, failure to provide proper paystubs, failure to issue a timely final paycheck, wrongful termination, harassment/discrimination and retaliation.
How To Prevent HR Claims:
The Green Firm has handled many cases such as these on behalf of our employer clients and we have the tools to fight them effectively. However, it is less expensive to hire a Human Resources consultant to do an internal audit of the company’s payroll and HR processes before a lawsuit is filed. We work with several excellent HR consultants and are happy to refer our clients to them for preventative action.
2. Piercing the Corporate Veil
How This Happens:
Individual owners can potentially be liable for the debts of their business (such as a by way of a judgment lien on their house) if parties suing the business are able to “pierce the corporate veil.” This typically occurs when business owners commingle (mix) personal funds with business funds, such as when a business owner pays for personal expenses out of their company account. Veil-piercing can also occur when owners forget to update their corporate records or fail to pay their corporate taxes.
How To Prevent Veil-Piercing:
Business owners should be careful to pay for business expenses with business funds, and personal expenses with personal funds, and never mix the two. Owners should also have their corporate records (often stored in a corporate binder) reviewed by an attorney for a “tune-up” to make sure they are accurate and up-to-date.
3. Allowing Cases To Go to Default
How This Happens:
When they are served with what they deem to be frivolous lawsuits, some business owners mistakenly believe that since they think the case is weak, the court will dismiss the matter on its own and the business does not need to do anything. Unfortunately, the legal system does not work that way. The judge is an impartial referee of the dispute between the parties to a lawsuit and will not act as a free lawyer to defend the business. Rather, if the business ignores the lawsuit it generally results in the person bringing the lawsuit getting a default judgment in their favor. Once that happens, it is too late for the business to defend itself.
How To Prevent a Default:
If your business is served with a lawsuit, call a lawyer as soon as you get served and do not try to “do it yourself” or wait until the eve of trial to contact counsel when it is already too late. The Green Firm has handled countless frivolous “shakedown” cases and can defend them effectively and efficiently if retained at the outset.
4. Trying to “Fire” Business Partners
How This Happens:
The stronger partner in a business can sometimes lose patience with the other partner or discover that the other partner is guilty of negligence or stealing from the business. In those cases, the stronger partner might mistakenly believe that they have grounds to “fire” the other partner and lock them out. However, they cannot fire their business partner and keep the business any more than they can fire their spouse and keep the marriage. Instead, either one partner has to buy out the other partner, or the business must be dissolved by way of agreement or court action. This is what is known as a “business divorce.”
How To Deal with a Business Divorce:
Rather than trying to informally cut the failing partner out of the business, the stronger partner should retain counsel to formally negotiate the lowest possible price for a buy-out while preparing to either run the business without the weaker partner or starting a new business. If the weaker partner refuses to come to a reasonable resolution, the stronger partner can seek relief in court. The Green Firm has handled many business divorces and can offer strong legal counsel to owners who find themselves in this predicament.
5. ADA Violations
How This Happens:
Many small businesses are located in older buildings that pre-date the Americans with Disabilities Act (“ADA”). As such, their parking lots, bathrooms, and counters are often not ADA-compliant. Similarly, their websites may not be ADA-compliant (e.g., they cannot be read by the visually-impaired with appropriate devices). In either case, there is almost no “grandfather clause” or other defense that the business owner (or the landlord) can rely on to avoid liability.
How To Prevent ADA Claims:
Before such claims are filed, businesses should consult with ADA-access specialists in regards to both their physical facilities and websites. The Green Firm works with several excellent consultants in these fields and can refer owners to them. If a case has already been filed, we can represent the owner in court while working to reduce costs and resolve the case as efficiently as possible.
Conclusion
Understanding and protecting your legal rights across varied domains is fundamental to stability and success.
Whether it’s safeguarding your creative inventions with intellectual property laws, ensuring a balanced and lawful workplace environment, recovering from unexpected injuries with the aid of competent legal counsel, confronting fraudulent activities and contract breaches head-on, or navigating partnerships and securities with precision, the paramount importance of expert legal guidance cannot be overstated.
The Green Firm stands ready to equip you with the necessary expertise, offering robust protection and strategic solutions tailored to your unique circumstances.
Our unwavering commitment not only defends your current interests but fortifies your future endeavors against potential legal challenges.