In business, lawsuits aren’t uncommon. Many successful executives and business owners will face a lawsuit at some point in their careers. While you may not always be able to avoid litigation, there are steps you can (and should) take to best protect your interests when disputes arise.
1 – Improving Communication is Key to Avoiding Business Litigation
If you want to avoid disputes with clients, employees and competitors, good communication is essential. You should always take time to clarify expectations and make a habit of doing the following.
- Never over promise.
- Keep the promises that you make. However, if you cannot keep your promise for some reason, let the person know. Offer a plan on how you will resolve the issue and make it right. Call first and then be sure to follow up with an email detailing whatever agreement was reached.
- Be proactive. Don’t avoid difficult situations or conversations. Avoidance is more likely to cause the problem to escalate.
- Evaluate how your tone may be perceived. And remember that email can make it difficult to effectively convey your desired tone.
- Don’t be afraid to swallow your pride. Doing so could help you resolve an issue before it becomes a legal matter.
- Evaluate and enforce best practices regarding how your employees should communicate.
2 – Make Documentation a Priority
To help protect yourself and your business, take time to document important communications and commitments. The following suggestions are some best practice tips for keeping up with appropriate documentation.
- Keep all your emails organized in a good filing system.
- Don’t do handshake deals this includes both business and personal agreements.
- Avoid using templates you find via Google search to create your agreements/contracts. Each state has different legal aspects and you don’t know if the templates are accurate or current.
- Be sure to have key contracts, including vendor agreements, reviewed by counsel, in order to help you understand the relevant provisions. It is also best to hire legal counsel for, at a minimum, reviewing and/or drafting of custom deal contracts, settlement agreements, employee handbooks, document retention policies, sexual harassment policies, and non-compete agreements.
- Save what is important, such as contracts, loan documents, key documents underlying contracts and relevant negotiations, proof of payment, calendars, and tax information.
Important note – If you are anticipating business litigation, you must implement a litigation hold (also known as a preservation order or hold order). Once you know of the existence of a dispute or even a potential dispute, hold onto all information so that nothing gets deleted. The loss of relevant evidence because of failure to institute a litigation hold can result in negative sanctions against you by the Court in any related litigation.
3 – Review Your Insurance Policies
Insurance isn’t a popular topic of conversation, but it is an important aspect of risk mitigation. Review the following points to help ensure your business is accurately covered.
- Make sure that all current policies are correct and appropriate for your organization.
- Investigate your options with multiple brokers.
- Determine if the insurance company you are working with focuses on your niche business needs. Are they industry-specific to you?
- Understand your potential need for multiple types of policies, including general commercial liability, errors and omissions, auto, property, workers comp, product liability, and other riders/endorsements.
- Understand the obligations you owe to your insurance company, such as notice requirements, providing documents and cooperating fully in any investigation. Be sure not to settle with the other side without first getting your insurance company involved.
4 – Review Your Business Formation
Occasionally, business owners are surprised to learn their business structure is not appropriate to their type of work. To help minimize liability, you will want to engage counsel to help determine the appropriate corporate entity for your business. You will also want to keep corporate records, annual reports, and minutes if your business formation requires it. Make sure to follow all the formalities in order to ensure protection from personal liability. This step is key in avoiding business litigation.
5 – Work with the Right People
This is easily the most important tip on the entire list. The best way to protect yourself and your business is to make sure you are surrounding yourself with the right people. As the great Albert Einstein once said, “A clever person solves a problem. A wise person avoids it.”
To learn more about business litigation and how you can proactively protect your business, visit https://epiphanylaw.com/practice-areas/litigation/ or call us at 920-996-000.
About the Author
Heather J. Macklin
For nearly 20 years, Heather has focused her practice on complex commercial litigation. She has represented clients from a broad spectrum of industries, including financial institutions, luxury good retailers, real estate developers and small, closely held corporations. Contact Heather here.