An impending lawsuit is never good news. Not only are they costly, but, perhaps worse, they can permanently damage a company's reputation, an expense no business can easily afford during highly competitive consumer and employee markets like the current. While companies are sued for a range of reasons, there are a few recurring culprits that can be avoided with appropriate planning, clear communication, and due diligence.
Most commonly, companies are sued for:
- Breach of contract: Failing to uphold contractual obligations with suppliers or consumers.
- Misleading shareholders: Knowingly misleading the public about the company's financial status.
- Employee grievances: Can include discrimination, harassment, misclassification, labor law violations, disciplinary action/performance reviews, wrongful termination, and failing to uphold appropriate standards for employees and adhering to the laws dictating those standards.
- Intellectual property infringement: Using the intellectual property of an individual or company without permission.
- Negligence or malpractice: Failing to ensure that the company, its products, and/or its employees perform safely, thus resulting in victim damages or injury.
Once a lawsuit is filed, a company has two options: settlement or defense. While the burden of proof rests firmly on the shoulders of the plaintiff. Circumstances related to the current social climate, area of the country where the lawsuit is filed and tried, leanings of the judge, and nature of damages - among a host of other factors, can impact lawsuit outcomes, so companies should be prepared to either settle or aggressively defend their actions with a well-documented defense.
Regardless, it's important to consult with a corporate litigation attorney before making this decision. It may be advisable to settle, irrespective of culpability, to avoid negative publicity or the expense and unpredictability of a trial. An attorney can provide expert advice based on similar cases and their outcomes. If settling is determined to be the best course of action, a settlement agreement will be developed and will generally include some form of financial restitution and sometimes an admission of guilt.
Obviously, the best way to deal with a lawsuit is to avoid it in the first place by minimizing risk and liability. Transparency, integrity, and honesty in business practices might cost a bit in the short term, but the long-term benefits pay those fees in spades. Additionally, developing legally solvent policies and well documented procedures that set clear expectations, are concisely communicated, made readily available to employees, and applied consistently by well-trained supervisory personnel mayhelp circumvent most employee complaints. Finally, if a concern does develop, consulting an attorney for guidance at the outset may prevent an arduous legal battle from ever materializing.
For any business insurance questions, call or contact Robins Insurance today.