4 Business Red Flags That Could Lead to a Lawsuit


Lawsuits are a risk that all businesses face. While some lawsuits are frivolous and without merit, others may have valid grounds. According to experts, the median cost of litigating a business lawsuit is $54,000. That’s $54,000 less you have to reinvest in your business or use for other purposes.

Of course, not all lawsuits are this expensive. But, even a tiny lawsuit can take up valuable time and resources that could be used elsewhere. To help avoid being sued, be aware of red flags that could lead to legal action against your company.

The following are four common business practices that could get you sued:

1. Not Having a Trusted Legal Counsel

You may not think you need a lawyer on retainer, but not having a trusted legal counsel can be a costly mistake. Not having a lawyer in the middle of a lawsuit could put you at a disadvantage. You may spend more money on the case than if you had hired a lawyer from the start.

Even if you’re not currently facing a lawsuit, having a trusted legal counsel can help you avoid one. An attorney specializing in corporate litigation can help you identify potential risks and take steps to prevent them. By knowing the things that are putting your business at risk for a lawsuit, you can take steps to protect yourself.

If your business is being sued, having a lawyer can help you navigate the legal system and represent your interests. They can do everything possible to minimize the damages you may face and avoid a lengthy and costly court battle. You only need to find a team of highly skilled and experienced lawyers to defend you.

2. Firing Employees Without Warning

There will come a time when you will have to fire employees. It may be for cause, such as theft or poor performance, or because of a reduction in force. Whatever the reason, you need to take care when terminating an employee.

woman in corporate attire tearing a contract

If you’re considering firing an employee, do it correctly. Be sure to have a valid reason and reason out with them. You should also warn them and allow them to improve their performance. If you don’t have a valid reason for firing an employee, or if you don’t follow the proper procedures, you could be sued for wrongful termination.

To protect your business, document the reasons for firing an employee. This can be enough evidence to back up your decision if it’s ever called into question. It also helps to draft contracts that state that employees can be terminated at any time and for any reason.

3. Asking Employees to Do Illegal Activities

Don’t ask your employees to do anything illegal, no matter how small the infraction may seem. An employee doing something illegal at your request is just one way to get in trouble with the law. This includes breaking into a competitor’s office to steal trade secrets or bribing a government official.

Even if you’re not the one asking employees to do something illegal, you could still be held liable. You could be sued if you know that an employee is doing something illegal and don’t take steps to stop it.

Let’s say an employee is embezzling money from your company. You could be sued for not taking steps to prevent it. The same is true if an employee is sexually harassing another employee and you do nothing to stop it.

To avoid being sued, make sure you have policies that prohibit employees from doing anything illegal. Strictly enforce these policies and take action if you learn that an employee has broken the rules.

4. Making Discriminatory Comments or Decisions

Discrimination is illegal in the workplace. This includes making decisions based on an employee’s race, gender, religion, or other protected characteristic.

Your business can get sued if you’re caught making discriminatory comments or decisions. One example is if you refuse to promote employees because of their race. They can then sue you for racial discrimination.

Make sure you’re not making any decisions that could be construed as discriminatory. This includes things like only hiring employees of a certain race or gender. If you’re ever unsure about whether a decision is discriminatory, err on the side of caution and consult with a lawyer.

Discrimination lawsuits can be costly and time-consuming. They can also damage your reputation. Avoid making any decisions that could be seen as discriminatory as a way of staying out of trouble.

There are a few business practices that could get you sued. These include not having the right attorney to back you up, firing employees without warning, asking employees to do illegal activities, and making discriminatory comments or decisions. Keeping a lookout for these red flags can help you avoid a lawsuit.

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