NFIB

Stay Out of Court
09/ 27/ 2005
by Beth Gaudio

There’s no denying that civil litigation costs individuals and small businesses billions of dollars each year. It’s no myth that small businesses take the brunt of punishment in this out-of-control litigation game. To protect your business, know what to look out for and how to prevent claims. These are the top three reasons small-business owners find themselves in court:

REASON:
1. Harassment and Discrimination: Lawsuits accusing small-business owners or their employees of harassment or discrimination can be found nationwide. These cases vary from accusations of physical or sexual harassment to discrimination based on color, religion, sex, age, veteran status, national origin or disability.

PROTECT YOUR BUSINESS:
To prevent lawsuits, establish and practice a non-discrimination policy. A strictly enforcedanti-harassment policy will go a long way in avoiding and defending harassment claims. A good policy will investigate all claims of harassment, take disciplinary action when possible and maintain claimant confidentiality. Require employees to report any incidents of harassment to management immediately, and train managers to handle the claims appropriately. If a suit appears likely, contact an attorney.

REASON:
2. Wrongful Discharge: Terminated employees often bring suits because they are unclear about their position with the business.

PROTECT YOUR BUSINESS
Be explicit about the role that employees have with the company. For “at-will” employment relationships, explicitly state that the company reserves the right to terminate employment at any time. Maintain the at-will status by not promising employment for any length of time or otherwise, making employment appear permanent. Include this information in all employment manuals and signed employment agreements. Document all incidents, counseling sessions, warnings or meetings that occur. Employers can avoid suits by showing a pattern of insubordination or other misconduct leading to the termination.

REASON:
3. Unpaid Overtime: Every employer is required to comply with the Fair Labor Standards Act, which regulates employee overtime. In addition to the federal law, state laws can regulate overtime as well.

PROTECT YOUR BUSINESS
Avoid suits by making sure that your employees are correctly classified as either exempt or non-exempt from FLSA rules. Contact the Department of Labor for more information (and learn more on pg. 46). Prevent overtime confusion by prohibiting employees from volunteering for overtime without permission. Keep accurate records of all overtime hours worked and publish overtime rules in the employee handbook.

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