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Tips for Protecting Your Business from Employee Litigation

June 11, 2019



It is hard enough to get your business off to a good start. It is even harder if your business faces a lawsuit when it is first getting off the ground. Unfortunately, one in five small businesses faces the risk of litigation with an employee, and these lawsuits cost on average $125,000. Not only will your business take a hit financially, but its reputation could take a hit due to negative publicity.


Even though the outcome of a trial may find in your favor, going through a litigation can make your business suffer. That is why you should be certain to take proactive measures to reduce your risk of employee litigation. Here are a few critical tips you can implement to prevent a lawsuit that could hurt your business:


  • Ensure Equal Treatment of Employees – Treating your employees equally is not something that can be overemphasized. You should never show any type of favoritism among your employees. In today’s business climate, this may seem like common sense, but the owners of a business often engage in behavior that may appear as favoritism among certain segments of employees. As a business owner it is extremely important that you are very careful even when enforcing the equal treatment of employees. Be sure that both the minority and majority segments of your workforce receive equal opportunities and benefits without any type of bias.

  • Train Employees and Management – One of the best ways to avoid the risk of an employment lawsuit is to train both your employees and management. Employment laws change frequently, so you should consider holding training events annually. Keeping yourself, your management, and your employees abreast of the changes in laws will ensure that everyone is on the same page and understands and follows all company policies. You should also create an employee handbook to reflect these concepts and laws. A handbook can go a long way in minimizing your risk of litigation.

  • Convert to a Corporation to Protect Your Personal Assets – Consider converting your business to a C or S corporation or a Limited Liability Corporation (LLC) to protect your personal assets. These business structures will ensure that your personal assets are not at risk in the event that your business does face an employee lawsuit. Operating as a partnership or sole proprietorship leaves all of your personal assets at risk. A corporation or LLC status is the first line of defense for protecting your personal assets as a business owner.

  • Update and Circulate Company Policies – Your last line of defense to protect your business from litigation is to circulate and update your company policies regularly. Be sure that everyone knows about the policies your company has relating to anti-retaliation, equal employment opportunities, and anti-discriminatory practices.


Contact an Experienced Business Law Attorney Today


These tips can greatly help reduce your business risk of employee litigation. However, even the best-prepared businesses can still face litigation. If you are facing any type of litigation from an employee, you need to seek the assistance of an experienced business law attorney. Contact the attorneys at Verhagen Bennett LLP today and let us help ensure that your business assets, as well as your personal assets, are protected from litigation.


(image courtesy of Austin Distel) 


© 2019 Verhagen Bennett LLP — This article is for general information only. The information presented should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.


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