3 Lawsuits That can Have Drastic Consequences For New Business

New business owners face many obstacles in their efforts to establish and maintain a new business. A few of these obstacles are controlling spending, making good hires, and fighting for market share with competitors. However, lawsuits from customers, former employees, or other business owners is a significant obstacle that is often overlooked.


Wrongful Termination


New hires are an important part of the growth strategy of any new and expanding company. However, business owners much take time to assure they make excellent hires for a variety of reasons.


Employees who feel they have been dismissed of job duties without a fair cause can seek legal redress against your company through a wrongful termination lawsuit. Both state and federal laws are in place to prevent employees from being terminated due to discrimination, as retaliation for whistleblowing, or as a final act in a pattern of harassment or mistreatment. Companies can also face disciplinary or punitive actions when not properly documenting issues regarding employees who do not adequately perform job functions.


Some important acts are as follows:


Civil Rights Act Title VII - Prohibits employees from termination based on factors such as race, sex, religion, or nation of origin.


Pregnancy Discrimination Act - Protects the employment of women who are pregnant or affected by issues related to a pregnancy.


Equal Pay Act - Provides equal pay for both genders when performing equal work.


Age Discrimination Act - Protects the employment opportunities of individuals over 40 years of age


Americans With Disabilities Act Title I - Protects the right to work for disabled workers with proper qualifications.


Small businesses are sometimes more vulnerable to these lawsuits than their owners realize. Business owners should do what is necessary to assure their company is fully compliant with all state and federal regulations.


Violations Of Wage Law


The laws governing wages at the local, state and federal level are collectively referred to as wage and hour laws. Each year, many businesses are sued by workers who claim the employer violated one of these laws.


The minimum wage in the United States is established by the Federal Labor Standards Act. The Act also maintains standards for overtime pay, record keeping, and child labor laws. There are two classifications for workers under the Act: exempt and non-exempt. Non-exempt workers are usually eligible to receive overtime pay. Exempt workers do not receive this pay.


Failure to pay minimum or overtime pay is the most likely reason a business is hit with a wage and hour lawsuit. Workers also lodge complaints against employers that classify them as independent contractors to avoid paying all money deserved.


It is important that business owners understand that suits regarding wage and hour laws are normally not covered by insurance. These lawsuits can have devastating consequences for new businesses.


Breach Of Contract


A breach of contract occurs when a business owner does not comply with the terms of a signed contract. For example, one company agrees to install the lighting in a building that is being constructed by a second company. The two companies then seal the agreement with the signing of a contract. When the first company fails to install the agreed upon lighting, they are said to be in breach of the contract.


A breach of contract claim is not normally covered by company insurance policies. However, the injured company in the example above could have protected itself by requiring a surety bond to be purchased by the company agreeing to provide the lighting.


Final Thoughts


The business world is filled with challenging circumstances for the new business owner. Many of these issues like hiring difficulties and problems marketing a new business are well-known to owners. However, many owners will be surprised to know the devastating effects the three lawsuits above can have on their new business.


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