Dealing with litigation as a business owner can be a logistical nightmare. Between spending money on attorney’s fees, taking the time to appear in court, and suffering potential damage to your company’s reputation, this process can significantly hinder your ability to run your business. When it comes to avoiding the perils of litigation, prevention is much better than cure. When you start with a solid contractual foundation and then address potential vulnerabilities, you have a good chance of protecting yourself from litigation in the future. Here’s a look at eight proven strategies.
There’s no single strategy to protect yourself and your business from litigation. The most effective approach combines several proactive tactics that also improve the overall health of your company.
1. Solid Contractual Foundation
Shielding Yourself from Litigation Starts Here
You can’t have a business without contracts — and if you’re like many business owners, your business is based on many kinds of contracts:
- Employment contracts
- Vendor contracts
- Indemnity agreements
- Non-disclosure agreements (NDAs)
- Independent contractor agreements
- Commercial leases.
However, not all contracts are created equal. If the language involved is imprecise or if certain provisions conflict with existing laws, the contract may be unenforceable. And if your existing agreements are not comprehensive, they may not adequately protect your company’s interests. Clear, thorough contracts may not be able to guarantee that you’ll never have to deal with litigation, but they can make the possibility of litigation much less likely.
2. Effective Dispute Resolution Clauses
Even if two entities initially agree on the terms of a contract, disputes can arise — particularly when the parties have different interpretations of one or more provisions. If the contract does not specify how disputes should be resolved, there’s a high likelihood of litigation. Fortunately, when your business contracts specify how disputes should be handled before going to court, there’s a good chance you and the other parties will be able to reach an agreement. Dispute resolution clauses can accomplish a variety of goals:
- Specifying various forms of alternative dispute resolution
- Establishing a clear path for escalation of a dispute before going to court
- Clarifying that mediation, arbitration, or similar steps must be attempted before litigation.
There are many kinds of dispute resolution clauses, and your business attorney can help you select which type is best for your company.
3. Robust Internal Policies and Procedures
Strong contracts can go a long way toward protecting your business from litigation, but so can strong internal policies. Maintaining clear, detailed policies on harassment, discrimination, and other frequently litigated issues is a good place to start.
However, while strong policies are important, they aren’t everything. You also should have clear procedures for dealing with issues that arise. For example, suppose that your business always files written reprimands for employee misconduct or underperformance. In that case, those records may be able to protect you if you fire a problematic employee who later claims they were fired due to discrimination.
4. Employee Training and Education
Policies and procedures don’t do much good if your employees don’t understand them. Make sure that your employees are fully aware of their responsibilities — and how your business handles policy violations. They also should know how to file a grievance or report misconduct. Employees may not always retain this knowledge, so periodic refresher training sessions are a good idea.
Whether you want guidance for protecting your business from litigation or you are already in the midst of litigation and need representation, Weisblatt Law Firm can help. Call (713) 666-1981 for a free phone consultation today.
5. Insurance Coverage
You shouldn’t rely on insurance alone to protect you from litigation. However, if you do find yourself mired in a lawsuit, the right kind of insurance may absorb the financial impact of litigation. Specialized types of insurance, like employment practices liability insurance, can lessen the financial effects of unexpected litigation. Your attorney can help you assess your business’s risk profile and determine which types of coverage may be worth the investment.
6. Regular Legal Checkups
Spot Legal Problems Before They Start
If you’ve been in the business world for any length of time, you know that the regulatory landscape is constantly changing. The fact that your existing policies are legally compliant now does not necessarily mean they will stay that way. To reduce your risk of having to contend with a lawsuit, make sure you conduct regular audits of your internal policies and contracts. Unless you have a legal background, it’s easy to miss potential red flags — so hiring an experienced business attorney to conduct these checkups is a smart investment.
7. Open Communication and Early Intervention
This might sound like an obvious strategy, but all too often, one or both parties in a dispute will shut down communication. In many cases, clearly communicating potential concerns — and communicating about them early on — can help you resolve a problem without litigation.
For example, imagine you have a vendor who routinely delivers incorrect or damaged products. You could let this issue continue until you decide enough is enough and file a lawsuit for breach of contract. However, if you communicate with the vendor about the problem, they may be able to solve it by replacing incompetent delivery drivers or implementing stricter quality control measures.
8. Alternative Dispute Resolution (ADR)
Many kinds of disputes can be successfully resolved without the stress and expense of litigation. Mediation is a common form of alternative dispute resolution where a trained third party helps the involved parties come to an agreement. If communication proves to be impossible, binding arbitration is a more formal option where a third party hears both sides and makes a legally binding decision.
Need Help Making Your Company Litigation-Proof?
No one can spot litigation risks like a business lawyer. Evaluating your business yourself is a good place to start, but if you want to keep your company as protected as possible, you should consult a qualified business attorney. Attorney Andrew Weisblatt has represented businesses of all sizes since 1992, and he strives to build client relationships that last for decades.
Whether you have a quick legal question or need to thoroughly assess your company’s litigation risk, call Weisblatt Law Firm at (713) 666-1981.
Attorney Andrew Weisblatt
Mr. Weisblatt has practiced continuously since becoming licensed in 1992 and has represented businesses ranging in size from one person start-up ventures to multi-national corporations employing hundreds of people in multiple countries. From 2005 through 2009 Mr. Weisblatt was in-house counsel and chief operating officer of a multi-national corporation in the steel products industry. That in-house position provided valuable insight into how businesses work and what they actually need from their lawyers – both in-house and outside counsel. Attorney Bio
