3 Different Lawsuits Your Small Business Could Face – And What You Can Do To Avoid Them

Being a business owner comes with both rewards and risks. Statistics from past research show that 36 to 53 percent of small businesses face at least one litigation case each year. Small businesses can face lawsuits from employees, contractors, customers, and the general public. As a result, lawsuits can end up costing the small business community up to $100 million every year. However, having lawsuits filed against your small business does not only erode your profits, but it can also damage your brand reputation and destroy valuable customer trust. Even if you do win the lawsuit, it can take your business years to recover from the costs. While you may not be able to remove your chances of facing a lawsuit, you can reduce them and take steps to prepare your business for these eventualities. To get started, we take a look at some of the most common lawsuits small businesses could face, and what you can do to avoid them.

Personal Injury Accident Lawsuits

Whether it is a customer visiting your business premises or an employee finishing off their daily work shift, an accident on your business premises could place you at risk for a personal unjust accident lawsuit. Negligence on your business’ part that results in injury or death could lead to a slip and fall lawsuit or even worse, a wrongful death lawsuit. Victims that experience injury on your commercial property can sue your business for compensation. The cost to your business can vary greatly too. Based on the steps in a wrongful death lawsuit, plaintiffs will need to provide documentation to evaluate their claim including medical bills.

Employee Injury Or Sickness Lawsuits

Another lawsuit your small business could face is an employee injury or sickness lawsuit. This is the key reason why most states mandate workers’ compensation insurance for all businesses. The policy aims to protect both workers and employers if their employees are sick and unable to work. So if your employee is ill, you would get help in paying their medical expenses and their paychecks until they return to work.

Employee Discrimination Lawsuits

In recent years, some of the major companies like McDonald’s and Amazon faced employee discrimination cases. This has highlighted the shift in employees speaking up and becoming more confident to seek legal action where they believe discrimination exists. Combating employee discrimination is a multi-pronged process and starts from the recruitment process. The best way small businesses can avoid employee discrimination lawsuits is to follow federal and state equal employment opportunity laws. It is recommended that you focus on your state’s equal employment opportunity guidelines as most federal equal employment laws are only effective for businesses with 15 or more employees.

Protecting Your Business Against Lawsuits

When it comes to business lawsuits, prevention is better than cure. Taking steps to prepare your business to face relevant lawsuits means you could mitigate the impact on your business if you are sued. One of the first practices that can help you avoid lawsuits is to implement great HR practices for your employees. A company that listens and prioritizes employee wellbeing is much less likely to face legal action from its workers. Similarly, operating robust customer reviews and feedback are key to keeping your customers happy. However, it is not enough to solicit customer feedback on your business’ shortcomings. You must demonstrate a steadfast commitment to taking responsibility and correcting any errors on your part.

Finally, spending time creating a comprehensive insurance package for your business is also important. Insurance policies are designed to protect you against the risks you face as an entrepreneur. The key to designing a suitable insurance portfolio is to assess your business’ unique insurance needs and the risks it faces. As a general rule of thumb, most small businesses should consider getting workers’ compensation, general liability, and employment practices liability insurance.

Also, remember to reassess the risks that your business may face regularly. You cannot eradicate the chances of facing lawsuits as a business, but you can ensure you are prepared. Knowing the risks your small business faces is the best way to ensure you mitigate the impact.