Regardless of its size, a business is built on the concept of growth and aims to maximize its profits using existing capital and revenue to grow and expand. Sadly though, things do not always go as they were planned, and sometimes your company takes unforeseen financial blows like the costs of a lawsuit.
The legal world is a complex and dense one, and sometimes you can open yourself to potential lawsuits without even realizing it, which is why strategic management and removal of legal risks are so crucial to the long-term sustainability and health of your business. So, take a look at some risk factors you should be aware of when they concern your company.
What Are the Legal Issues?
Simply put, legal issues are problems, concerns, questions, and matters that carry legal implications and have the potential to result in a lawsuit. In the world of business, these kinds of issues arise when a company fails to comply with regulations and laws, and there are many different ones, like registration or employee issues.
You also do not want to confuse ethical with legal issues; even though they may seem similar and overlap at first glance, they are still different worlds. That said, ethical issues are still a concern for many companies and executives, though they are not necessarily related to law but to personal values and right and wrong.
Employment Law Violations
Whether you work with a team across the globe or just locally, you must comply with labor codes and regulations in the respective jurisdictions. There are too many cases where businesses have failed to do so, and employment law violations are one of the most common legal issues in the industry. Of course, whether you currently have legal issues or not, you should still have competent, veteran litigation lawyers on call so potential lawsuits and other problems can be apprehended before they become bigger. Prevention is always preferable to a solution, after all.
Wrongful Termination
Wrongful termination is part of the wide range of employment law violations but because lawsuits regarding wrongful termination of employees are so much more common than companies think, it can and should be mentioned separately. When an employee is fired, it should be done with the utmost care and caution to ensure that the termination is legally valid and that notice periods have been respected. Give them their notice in due time and have an official letter of termination that states the reasons for the termination, and depending on their position in the company, provide severance pay.
Discrimination Lawsuits
In this modern, current culture of outrage and identity problems, discrimination lawsuits have been booming, becoming one of the most common problems for companies, where employees feel like they have been terminated wrongfully based on alleged discrimination. A discrimination lawsuit can be filed by a dismissed worker who feels like they were discriminated against for whatever reason and that is why they were terminated, or by a job candidate who claims the reason you did not hire them was based on things like gender, race, or ethnicity, instead of their relevant skills and abilities or the lack thereof. Be cautious about whom you hire and who you even consider hiring, as there are usually pretty clear red flags when it comes to potential workers; you just have to see them and choose not to engage.
Accidents on the Job
A business is responsible for creating and maintaining a safe working environment for its workers, and failure to do so can very quickly result in brutal lawsuits that carry substantial penalties. You will need to compensate for lost wages, medical bills, and insurance, and endure suffering, and the list just keeps growing, depending on the severity of the injury and how negligent the business has shown itself to be. You neither want to be faced with a lawsuit nor do you want one of your employees to be injured or even die on your premises and worksite, so have regular inspections and maintenance carried out to ensure everything is up to code and safety standards.
Partnership and Succession Risk
Even the very best of business relationships can turn sour; that is a fact and a consequence of doing business sometimes. Add to that disability, death, or other changes in circumstances that are pretty much inevitable with time and in a long-term business relationship, and you quickly realize you need a plan in place should such problems occur.
Ensure there is a plan, drafted and signed buy-sell agreement, for example, that will help the company survive disruptions like the disability or death of a partner. Check whether you have a backup plan and a methodical method of unwinding a business relationship if the goals and values of the participants and partners diverge and go separate ways. Many excellent and seemingly rock-solid businesses have imploded because they did not plan for such contingencies.
Copyright Infringement
Intellectual property infringement is a nasty net that has caught many a business in its tendrils, a frequent problem that often comes seemingly out of nowhere. Intellectual property, or IP, refers not to a physical product but an intangible one that usually sources from someone’s creativity or idea. IP violation lawsuits generally involve patents, copyrights, and trademarks and can become pretty pricey as they tend to last for several years.
Breach of Contract
Breach of contract is quite self-explanatory, breaking your word, going back on an agreement between your company and other parties. A contract can be for employment, service contracts with other companies, agreements with independent, outsourced contractors, and so on. Once you have come to an agreement with another party, and you have committed to something, do not just go back on it for whatever reason. Of course, if you have reason to suspect they may have breached it first, then there is no obligation on you to follow through, but even then, you need to check and make sure first.
There are so many laws, regulations, and risks when it comes to running a business that it can be difficult to manage all the vulnerabilities while also keeping the business afloat and running. Having a team of lawyers on retainer and knowing the basic traps and issues to avoid is essential for survival.
