When faced with a legal issues, small business owners have a lot on their plate. With limited funds, employees, and customers, small business owners are often in a position where the cost to fight legal battles is beyond what the budget will allow. However, it is inevitable that a small business owner will face legal challenges at some point. Therefore, it is necessary to be cognizant of the issues and have a plan in place to tackle a lawsuit.
First and foremost, do not ignore a lawsuit or a potential suit. When any legal document is served upon a business or a letter from an attorney threatening suit arrives, there may be a tendency to forget about it hoping it will go away. However, legal documents, such as complaints when not responded to in a correct fashion, can create more problems. When served with a legal document, it is essential to prioritize it by thoroughly reading the allegations and contacting an attorney immediately. Also, when a threat of a lawsuit arrives, it may be the first, and in come cases the best, opportunity to eliminate exposure caused by the threatened litigation.
Ideally, before confronting a lawsuit, the business should have an attorney that works for the business either on payroll or a retainer so that they can be contacted immediately. The attorney should be knowledgeable of business operations, culture, and management so that they can quickly acquaint themselves of the issues and formulate a response. Most small businesses may not have a lawyer on retainer or payroll. Therefore, it may be necessary to rely on referrals from other businesses, friends, and family to request a legal consultation. It is very important that the owner seek legal counsel and follow expert legal advice when responding to a lawsuit or threat of litigation.
Some business owners may already have business insurance that provides coverage for business-related lawsuits. Employment matters, errors and omissions coverage, cyber liability, and general liability coverage are among coverages that should be considered. It is crucial to provide notice of the lawsuit so that the insurance company can act on the business owner’s behalf. Often, when coverage is triggered, the insurer will appoint an attorney to defend the lawsuit.
Small business owners can be sued by their employees, customers, competitors, or even by state and local governments. It is important to know the type of lawsuit one is facing to retain the appropriate attorneys. From employment litigation to intellectual property litigation, practice types can vary, and it may be necessary to consult an attorney that has specific expertise required for a specific lawsuit.
Contract-Based Lawsuit. Small business owners may face a lawsuit from a disgruntled vendor, supplier, or customer. Businesses operate on the basis of various contracts and agreements. Failure to abide by contract terms can be the basis of a lawsuit. When preparing contracts, it is a good idea to make sure that the terms are spelled out in writing and that both parties agree to the terms. This can avoid issues going forward.
Employment-Related Lawsuit. Employees may sue small business owners for employment-related issues, such as discrimination, harassment, and missed wages. Businesses should be aware of federal and state laws regarding these issues and it is essential to have Workers’ Compensation insurance for work-related injuries. A review of policies regarding overtime pay, harassment and anti-discrimination, and termination or disciplinary procedures are all important preventative measures small businesses should undertake regularly.
Intellectual Property Rights Violations. Small business owners may also face a lawsuit for violating intellectual property rights, such as the usage of a competitor’s trademark or patent, or copyrighted work without a license.
Personal Injuries. Personal injuries on the premises of a business are also cause for a lawsuit. For example, someone may slip and fall, or an object may fall on them due to a defect on the premises resulting in injuries.
The legal team at MacMain, Connell & Leinhauser serves as general counsel to businesses of all sizes and provides a wide range of services for small business owners. If you need legal counseling regarding business formation or defense of a lawsuit, we can assist you with daily compliance, employment, and human resource matters, as well as litigation representation. For more information regarding these services, please contact us online or call us at 484-318-7106. Located in West Chester, Pennsylvania, we serve clients in and around Philadelphia, Chester County, and across Pennsylvania and New Jersey.