To safeguard your business from potential legal challenges, it’s essential to proactively avoid legal pitfalls. Establishing clear dispute-resolution agreements, understanding litigation risks, and implementing crisis-response plans are key steps in fortifying your business against legal complexities and promoting long-term stability. To learn more about how to avoid legal pitfalls in your business, continue reading.
1. Have Clear Dispute Resolution Agreements
When people start a business—whether it’s a corporation, partnership, or limited liability entity—they usually have a common vision and, potentially, tight funds. It can be tempting to skimp on partnership and operating agreements, but contacting a law firm and seeking legal advice from an attorney to think ahead about how disagreements get resolved can contribute to the stability of the company.
Inclusions like pre-dispute resolution clauses get parties talking before launching into costly litigation. Once you have your agreements, create clear employment policies to prevent future disagreements over issues like intellectual property, paid leave, and maintaining an ethical workplace.
Have everyone agree to an employee code of conduct and perform regular trainings to ensure policies are followed. While clear policies are not a panacea, resolving disputes becomes more efficient when compliance is easy to prove or disprove.
2. Know Your Litigation Risks
There is no one-size-fits-all approach to the handling of litigation on behalf of businesses or assessing risks businesses reasonably face or anticipate in carrying out their practices. Some businesses are heavily regulated, while others aren’t. Publicly traded businesses face challenges and litigation risks that other, privately-held businesses typically do not.
Assessing a client’s exposure and what is likely to be disclosed during the course of the discovery phase of litigation is of utmost precedence to determine how to best approach and handle litigation. The same is true for assessing business risks.
If a policy is in writing, it should be clear, unambiguous, and followed. On the other hand, not having a written policy on a particular issue may allow for more explanation but does not necessarily shield a business from a lawsuit.
3. Have a Crisis-Response Plan
I frequently represent companies in the aftermath of an engineering failure. Many companies are not prepared to respond to a major crisis. Effective crisis management requires prompt decision-making regarding the investigation of the accident; the preservation of privilege, key data, and documents; disciplined internal communication; and appropriate public communication.
I am fortunate to represent companies that want to do the right thing. In the chaotic rush to respond, however, the risk arises of creating or increasing liability. Before an accident ever occurs, I work to educate my clients about these risks and to develop appropriate policies and systems so that a crisis can be effectively and efficiently managed.
4. Adopt a Mentoring Program
From Socrates and Plato to Obi-wan and Luke, the apprentice-protégé relationship has long been an integral part of society. Yet, in the business world, mentoring programs might begin with great gusto but are abandoned as workloads increase.
A mentoring program need not be elaborate or formal and will vary based on need and company size, but it is essential and should be consistent. After all, who will lead and guide the business when management is ready to pass the torch? Who will fill critical roles with clients and strategy when the CEO goes on a two-week vacation?
Managers must ensure that their younger associates will be ready to competently assume leadership roles. Young associates should feel ready and sufficiently seasoned to confidently accept the torch when it is passed. Concentrating on mentoring as part of an overall succession plan will greatly enhance longevity and prosperity.
5. Review Enforceability of Online Standards Terms and Conditions
In order to avoid potential disputes, smart e-commerce companies invest the time and resources to have experienced counsel regularly review the enforceability of their online standard terms and conditions of sale or purchase.
The law addressing the enforceability of common key provisions in terms and conditions is fairly well developed but may vary from state to state.
6. Know What Is And Isn’t Confidential, And How to Protect It
Nearly all employers utilize restrictive covenants prohibiting the use or disclosure of “confidential information,” both during and after employment. However, many employers typically fail to ask themselves, “What is confidential information?”
Not every piece of business information is confidential. Another key inquiry is whether that information is actually protected. Many companies believe their customer lists are confidential but provide lists of prominent customers on their websites. Employers need to actually protect their confidential information by keeping confidential files in secure locations or password-protected folders or maintaining a written policy or handbook addressing how such files should be kept.
Failure to protect the information can lead to a loss of proprietary protection for information at the cost of tens of thousands of dollars in litigation expenses.