No small business owner wants to be sued by employees past or present. Unfortunately, it’s a reality of doing business today that’s far more common than anyone wants to believe. The number of employer lawsuits related to wage and hours alone rose 32 percent in 2011 according to theU.S. Small Business Administration.
The best bet for all businesses is to be prepared when and if the time arises. While nothing insulates businesses completely from the chaos and expense of employee lawsuits, these practices can help you avoid many potential lawsuits.
Define Expectations
Employees should never feel blind-sided by a termination. While you may not be legally required to take escalating disciplinary steps before terminating employment, it’s a good practice for business owners to do so.
Don’t just set disciplinary expectations, however, let employees know how to succeed in your business. When you focus your business on reaching higher rather than dragging bottom, your employees will often follow suit.
Know the Law
The best way to avoid being sued is to know every nuance of the law regarding labor and employment both on the state and federal level — especially theFederal Fair Labor Standards Act.
Knowing and understanding the law prevents any misunderstandings or miscommunications. According toThe New York Times, “This includes posting all labor and employment-related materials in the workplace that are required by state and federal governments.”
Establish Company Policies
Create policies. Put them in writing. Distribute copies to every employee. Then have the employee sign documents stating they have read and understand the policies. When policies are updated or amended, get new signatures. Keep all signatures in employee files along with any disciplinary records and concerns.
Document, Document, Document
Document everything. The good. The bad. The ugly. It all goes in the employee file. This way, when complaints are made or improprieties suggested, there is a paper trail to follow when the time comes to defend your small business and management decision.
Deal with Employee Complaints
Don’t ignore sticky situations among employees hoping they’ll right themselves. Investigate. Get answers. Work out solutions that are consistent with company policy.
Prevention is the best cure. Dealing with complaints helps prevent more lawsuits than most small business owners will ever know. It not only prevents lawsuits from unhappy customers, which is more commonly known, but also employees. Most of the time, people just want to know that you’ve heard their complaint and are making an effort to address, if not solve, the problem.
Don’t forget the importance of getting employment practice liability insurance (EPLI) coverage for your small business. With lawsuit numbers steadily on the rise, the odds are not in your favor if you fail to obtain this essential protection.
