Reducing the Risk of Employee Lawsuits

Reducing the Risk of Employee Lawsuits

Reducing the Risk of Employee Lawsuits

Employee lawsuits are a very real threat to small and mid-sized businesses, with one in five facing litigation. The average expense of defending such action is $125,000 for the company. However, when it comes to the impact of employee lawsuits, there are many grave implications. Negative publicity generated by the litigation or trial may potentially harm your company’s reputation.

Even if the trial is judged in your favor, merely having a lawsuit against you will have a negative impact on your business. For the benefit of your business and your employees, you must make an effort to avoid such litigation. Here are four ways to make your employees comfortable in the workplace and avoid employment lawsuits.

Equal Employee Treatment

It is impossible to overstate the significance of treating all employees fairly and without bias . This will help ensure the employees feel safe and not subjected to inconsistent leadership.

Employee Training

It is important to train both management and employees to make sure they are familiar with all business operations and employment laws. Yearly training may be a good practice as  employment laws are always changing. In this situation, creating an employee handbook can go a long way toward reducing the possibility of a lawsuit.

Protect Personal Assets by Incorporating Business

To protect your personal assets, consider incorporating a S or C corporation or a limited liability corporation (LLC). In the event of an employee lawsuit, a company structure will protect your personal assets. Operating as a sole proprietorship or partnership without a corporate framework puts your personal assets at risk in the event of a lawsuit filed by an employee. The formation of a company will serve as the first line of defense, shielding the business owner’s personal assets.

Update and Publish Company Policies

Finally, you should routinely distribute and update corporate policies. For the best interest of the business and employees, ensure that everyone is aware of policies concerning equal employment opportunities, anti-retaliation, and anti-discriminatory actions.


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