Woodland Hills Business Law Blog

A Stitch in Time … Strategies to Prevent Business Litigation

A lawsuit can damage more than just the bottom line of your business.  In addition to costing money that could be put to better use, a lawsuit is also an unwelcome distraction for the owner, managers and employees.  It can also do irreparable damage to business relationships and reputation.

It may not be possible to avoid any and all legal conflict during the life of your business, but by considering the following advice, you should be able to minimize the resources you have to devote to litigation – which means more time and money available for your business operations and investments.

1. Don’t rely on a handshake.  Reduce all business agreements to writing, even if they are with your oldest and dearest friend.  Be clear about terms and expectations.
2. Keep a written record of all communications.
3. Keep the lines of communication open, especially when a business relationship starts to sour.  Aggressive communication may be able to cure the damage before a lawsuit becomes necessary.
4. Don’t put your head in the sand.  If a threat appears that could lead to litigation, respond quickly, thoughtfully and thoroughly.
5. Check your compliance with relevant government regulations.  Import/export? Check the laws.  Using hazardous materials? Check the regulations. Don’t allow shortcuts.
6. Create a business culture that rewards employees for reporting violations of any laws or government regulations.  Your employees on the ground can be your best resource for uncovering potential hazards that could lead to litigation.
7. Put cure provisions and mediation provisions into your contracts with vendors.
8. Complete a business succession plan to minimize or eliminate disputes over exit strategies.
9. Conduct regular safety checks of the physical premises, including vehicles used for company business.
10. Conduct criminal background checks on prospective employees that comply with the law.
11. Provide regular health and safety training for employees.
12. Provide ongoing training for human resources personnel.
13. Review whether your employees are properly classified as hourly or salaried workers to comply with the Fair Labor Standards Act.
14. Review whether any independent contractors should be reclassified as employees to comply with the Fair Labor Standards Act.
15. Respond promptly and thoroughly to complaints from employees, customers or vendors.
16. Use email, the internet, your company website and social networking media with caution.  Assume that any information shared via these platforms will be publicly accessible until the end of time.
17. Seek outside advice when necessary.  Don’t let your ego be your downfall.  If you don’t understand your legal obligations and rights in a particular circumstance, consult a qualified commercial law attorney.