Common Mistakes Companies Make That Lead to Legal Trouble

With the Department of Labor constantly updating and changing its regulations, it creates an environment for businesses to regularly break the law without intent. However, ignorance is not a defense that will hold up in court. The best way to defend your business from unwanted legal trouble is to remain abreast of ongoing changes, and to hold your company to the highest legal and moral standards.

Improper Employment Practices

The legal landscape of employment law can be complex for new business owners to navigate, and contains many easy-to-make mistakes, such as hiring employees too soon and not allocating enough capital for payroll or not firing employees soon enough. Unfortunately, some of these situations can arise unintentionally, but can still lead to expensive court cases or fines. A simple solution to avoid many employment-related legal issues is to create and maintain an updated employee handbook. This will act as a strong legal defense in an employment-related lawsuit, as the book will clearly outline the rules of the workplace.

Young businesses that are eager to expand should carefully consider whether or not it is a good idea to hire a new employee. Expensive, potentially business-ending lawsuits can quickly trouble a small business if payroll issues arise. Not paying employees for their hard work will damage your business as well as your company culture.

A frequent, costly mistake is when businesses misclassify an employee as an independent contractor. While some companies do this intentionally to skirt the law and reduce costs, this mistake can happen unintentionally to a new business owner. Independent contractors are a great business resource, but only if handled appropriately. Not only will misclassifying employees hurt your workers, but your business will also find trouble in the form of stiff IRS penalties.

Regardless of intent, many mistakes can easily be made leading to the potential for significant harm to your business. The best way to avoid unwanted legal consequences is to remain fluent with local, state and federal laws that pertain to your business, and to maintain strong business practices. However, unwanted legal complications can still arise. Keeping legal counsel on retainer can be an invaluable business and legal asset, as they will have the knowledge and expertise to help guide a business away from legal trouble and towards success.

This guest post is courtesy of Cole Sadkin. They are a Chicago-based, business law firm specializing in business law, intellectual property, labor and employment and venture capital. They are dedicated to representing individuals and small- to mid-sized companies across the country by acting as in-house counsel, providing peace of mind and strategic legal counsel at reasonable costs.


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