6 Common Reasons Small Businesses Get Sued

Many small businesses are put up with limited capital and spend the first few years of operations with a tight cash flow to work with. Considering the fact that lawsuits can be as expensive as they are damaging to a business’s reputation, it is imperative that small business owners be proactive in avoiding legal trouble.

The first step in avoiding lawsuits is learning what causes lawsuits in the first place. Here are some of the most common reasons why small businesses get sued, as well as the best ways to avoid them:

1. Discrimination claims

As any commercial law attorney will tell you, one of the most common reasons why businesses, regardless of size, get sued is because of discrimination claims during the hiring process. You should already know that it is illegal to discriminate against an applicant based on their sex, gender identity, religion, or disability. Moreover, you should be aware of the consequences if you happen to commit any acts of discrimination during hiring, or even after you hire an employee.

One of the best ways to avoid this type of claim is to fine-tune your interview questions in such a way that you don’t ask anything that could be construed as attempting to get information on an applicant’s disability, children, religion, etc. Instead, stick to questions that focus on an individual’s education, skills, experience, and other factors that are relevant to the job you’re hiring for.

2. Copyright infringement

Even if you’re a small business that is barely on the radar, there is always a chance of getting caught if you use someone else’s intellectual property. If you steal another person or business’s photos, logo, name, or any other type of IP, you could get sued and have to spend more than what you would have spent to create your own stuff.

Of course, the only way to avoid a copyright lawsuit is to never steal anyone else’s intellectual property ever. If you want to use someone else’s intellectual property, obtain permission in writing and secure the rights first. Similarly, protect your own intellectual property through copywriting, despite the size of your business, you never know if someone out there will steal your hard work.

3. Spur-of-the-moment disciplinary actions

In an intense moment, you may be tempted to take disciplinary action against your employee for violating the company rules, especially if it is a repeated case. However, avoid making emotional decisions in the heat of the moment. No matter how angry or frustrated you are, follow the company protocols for disciplinary actions as stated in your employee’s legally binding contract.

Moreover, make sure that you have solid proof that they knowingly broke the rules, such as receipts, video evidence, and other documentation. In case your employee sues you, you have proof to defend yourself and show that disciplinary action is warranted.

4. Harassment

Very few small businesses have a large HR team to keep up with best practices in the workplace. However, the lack of HR personnel will never stand in court if you are sued for not doing anything about harassment incidents in the workplace. With that in mind, it is crucial that your company has comprehensive HR guidelines and policies to ensure that every employee knows what is expected of them, as well as what can happen if they commit inappropriate acts.


Similarly, your HR team should take any allegation of harassment seriously and act upon it as swiftly as possible to avoid getting sued. If the alleged harasser continues to engage in inappropriate behavior despite your actions, the victim is likely to sue the harasser solely.

5. Property accidents

The reason why businesses obtain general liability insurance is to protect themselves in case someone gets injured on their property as a result of the business’s negligence. However, getting coverage is not enough; you should also take proactive measures to avoid accidents as much as possible, such as conducting regular safety inspections, making necessary repairs immediately, maintaining the building properly, and more.

6. Wage disputes

It is easy for some small business owners to get confused about U.S. wage laws, but this is never an excuse for shortcomings in paying your employees, even if it is unintentional. To ensure that you don’t commit any violations against wage laws and get sued for it, hire a business lawyer to guide you.

On top of maintaining a reputation, increasing revenue, and working with limited cash flow, a small business doesn’t need a lawsuit to deal with. To keep protect your business from unnecessary expenses, or in the worst case, complete financial ruin. Be proactive in avoiding these lawsuits and any other grounds for a case against your business.

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