3 Ways To Protect Your Start-Up And Its Employees From Litigation

3 Ways To Protect Your Start-Up And Its Employees From Litigation
The Siliconreview
17 Decemebr, 2020

A key part of launching a successful startup is preparing for the worst and protecting your business. This includes taking steps to protect your business and employees from litigation. According to recent statistics, as much as 36-53 percent of small businesses enter into litigation every year. Furthermore, estimates by Fullbright show that 90 percent of businesses enter into litigation at any time in their operation. With such high incidences of legal action against businesses from customers, competitors, and even employees, taking the first steps to protect your business from the consequences of such action can save your startup a lot of money - and even its reputation. 

Implement Regular, Through And Mandatory Worker Safety Training On-Site

The number of workers suing their employers declined in 2019, but that does not mean the risk is not prevalent. In fact, employers face around $21 billion of lawsuits due to the current health crisis. This is in addition to the billions of dollars that are paid out annually in employee safety and employment lawsuits like premise liability lawsuits. According to The King Law Firm, premise liability lawsuits (slip and fall accidents) are some of the most common, and can be filed by both customers and employees. In this case, being proactive is the best route, and it begins with understanding the common reasons employees and customers may sue employers. Amongst the most common reasons cited in employee lawsuits are wrongful/ unjustified termination and poor health and safety workplace practices.

Legally, all businesses must provide adequate training and knowledge to enable employees to perform their roles. The Occupation of Safety and Health Administration recommends that employers take a four pronged approach, starting with regular program awareness training for all employees, including supervisors. Topics that should be covered include actions in an emergency, hazard and accident reporting protocols, and the company’s safety and health policies. OSHA also states that each employee and supervisor should be trained on their specific role in the business’ safety program, to avoid confusion if the event occurs. This should be reviewed and readjusted annually to account for changes in the organizational structure.

Get Your Employee Classification Right When Recruiting

Another potential legal battleground for businesses is the incorrect classification of their employees. With the rise of remote working and the gig economy, more startups are enjoying the benefits of using contractors in their business. Misclassifying your employees and contractors can leave the business vulnerable to not only legal action from employees, but also federal litigation for the mispayment of taxes and employee benefits. 

To get employee classification right, ensure you follow the Fair Labor and Standard Act guidelines. Businesses can also rely on the IRS’s guidelines and control classification for employees, which includes financial control and the nature of the working relationship. Also, clarify whether your employees are exempted (not entitled to overtime wages) or non-exempted (entitled to overtime wages). Each state will have its local regulations when it comes to employee classification, so it is worthwhile checking with your state’s business bureau as well.

Craft A Tailored And Well Rounded Business Insurance Policy

Finally, build a comprehensive insurance policy package for your business from its launch. While some of the most common insurance policies include property and auto insurance, a business should also consider the additional risks it faces in its initial launch years, particularly if your startup is launching its own product or service. Professional indemnity and product liability insurance cover your business if a customer sues you or your product is faulty. To provide for legal action from within the workplace like employee lawsuits, consider getting liability insurance. Whilst most businesses consider these additions an optional extra, they should be considered an essential overhead expense from the first day of operations.

While you may not be able to completely remove the chances of litigation against your business or employees, these moves can drastically reduce them. If left unaddressed, you risk damage to your startup’s profits, future goals, and reputation. The good news is that most of these can be implemented immediately.