Current litigation process on small and mid-size business
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Current Litigation Process on Small and Mid-size Business
Over the years, Small businesses and middle-sized businesses face several issues compared to large businesses. For instance, due to COVID-19, most businesses have failed litigation due to failure to pay workers Hissing, 2020). Small businesses go through issues, such as money management, fatigue, balancing quality of services, growth, client dependency, and litigation. Litigation is the main issue faced by small businesses, especially due to a lack of financial management and dependency. Litigation has been an issue for years, where small seized and mid-sized businesses are working to preventing business litigation, hence avoiding bankruptcy and loss of competitors (Beach, and Pringle, 2020). The paper is a deep insight into the impacts of litigation on small businesses and middle-sized businesses. The paper uses four sections to discuss the issues, including the cause, the impacts, laws, and business prevention of litigation (Cates, et,al.,2018). The first part of the paper discusses the scope of the issue, business security, laws, and regulations. The second section discusses the main causes of small seized business litigation; the third part discusses the impacts of business litigations. The fourth part discusses control and recommendations of various business strategies and policies in preventing small-sized business litigation.
The Scope of the Problem
Small business is always classified as small due to the business’s nature, such as the number of employees and the show of the business. For instance, a small business has less than five hundred employees and annual revenue of million dollars, to twenty million dollars (Beach, and Pringle, 2020). . On the other hand, the total annual sale in business is different in many organizations. Where employees in small businesses may work from home, part-time, or employ minimum wage employees. The annual sale of small businesses depends on the infrastructure in the nosiness, the accounting function, and human resources. Litigation is more impactful on small businesses due to a lack of infrastructure and funds to take care of or act as a back-up in case of a case. On the other hand, for insurance companies in the united states, the direct cost of tort litigation for small businesses is approximately two-hundred and thirty-three billion dollars (Wheeler, and Benz, 2020). On the other hand, most small businesses are insured, while others are underinsured, so most businesses directly use business finances in a business case (Cates, et,al.,2018).
Small business litigation is very common and requires a business owner to understand various laws and security regulations. However, small business owners should prepare in case of litigation, especially on issues that deal with breach of contract. Three major business legal, and ethical disputes affect small businesses: the conflict between employers, employees, intellectual properties, and contract breach (Mboga, Amin, 2019). People sue business owners, especially small business owners, for many reasons, especially when owners cannot hire a lawyer. Businesses are based on securities, regulations, and laws, which have various implications in small businesses. For instance, the aspects impact growth and development of small businesses. The laws and regulations are the ones that govern every business been in their early stages of business (Beach, and Pringle, 2020). Corporate security and laws do not necessarily focus on the size of the business, such as the amount of revenue or the market power but focus on the firm’s value ownership and the nature of distribution, on whether it favors the customers.
According to research, companies go to the extreme of using business assets and business savings to settle business cases, especially cases that involve the settlement of damages. Small business gets affected, especially after settling business damages for long periods, where getting back to business becomes challenging the business. Litigation cause direct and indirect cost of the business that affects business decision making, small business administration advocacy. Small businesses try their best to avoid being taken to court, make sacrifices, and behave in the right manner to avoid financial losses, emotional hardship, and business tone changes, which affects overall business performance (Beach, and Pringle, 2020). Additionally, small businesses lack the funds to hire a good lawyer to represent the business in court. According to attorneys’ rate, hourly, lawyers are paid one hundred and fifty dollars to three-hundred and fifty dollars per hour. Mostly affording a lawyer can be cost-effective or the business instead of legal staff, which is pricy. Most lawyers find it challenging to deal with business cases since most do not understand its scope. Most lawyers work in handy with the business owner, and sometimes the small business owners prefer working on their cases (Cates, et,al.,2018). Mostly, employees have to take a loan from banks to settle a business case that has risen; also, business reputation gets damaged due to various causes, especially a case that involves poor services towards a client in a business. Some of the federal regulations that govern small businesses include COBRA, HIPAA, ADA, mental health Parity Act (MHPA)
Causes Business litigation
Breach of contract
The common types of small business litigation involving, breach of contract, employee complaints or conflicts, customer satisfaction cases, intellectual property rights cases, and other business-specific cases. Breach of contract is the most common type of litigation among small businesses because most businesses choose to form implied contracts that do not involve legal personnel. Breach of contract cases can occur to any business, caused by several legal disagreements. For instance, partnership agreements, contracts with customers, landlord-tenant disagreements, breach of employment contracts, such as severance disagreements, or non-disclosure disagreements. The most common legal claim concerning breach of contract is a claim from one party that the contract still exists under the underlying circumstances (Spears, Gotham, 2020).
On the other hand, failure to undertake the legal duties, terms, and conditions of a contract is a main cause of litigation. For instance, failing to deliver products per the agreed time or delivery of spoilt products late than agreed. Also, the business can reveal a trade secret, especially in partnership, or conduct other businesses without the knowledge of the contracting party; on the other hand, failing to pay for goods in a contract is another legal issue that affects businesses, where a business can be sued for contract breach (Beach, and Pringle, 2020). Only contracting businesses do not carefully read the contract term before signing a contract, such as a sales contract. When an issue arises, most small businesses find out about the breached contract term and whether it existed.
Employee Employer Disputes
The conflict between employees is another legal issue that leads to litigation in small businesses (Cates, et,al.,2018). Small business owners have to deal with employment law issues, such as issues concerned with wages and working hours, Safety and health standards of employees, whistleblower protection, retirement and workers compensation laws, and many other laws. Laws and regulations governing employees at the workplace are many and keep increasing to ensure employees work under good conditions. On the other hand, under the wages and hours cases, the workers with a disability are protected. In the case of discrimination in terms of pay and accommodation, the business can be liable for equal employment (Beach, and Pringle, 2020). On the other hand, the most common type of employment laws includes discrimination against employees, discrimination against customers, harassment from employers, such as sexual harassment, employees’ injuries, and sicknesses, and many others (Hardee, 2017). According to the equal protection act, employees should not be discriminated against based on ethnicity, race, or color. On the other hand, in case of sickness or injuries, employees should be compensated, where compensation should cover the damages caused, which is most common in construction industries (Spears, Gotham, 2020).
In case of discrimination based on various factors, such as age, gender, and so on, the small business employee can file a lawsuit with the employment equal opportunity commission (EEOC), where the body, however, starts an investigation, where the individual should file a case in court before ninety days. The civil rights act of 1964 protects employees from discrimination in hiring, pay, promotion, and termination (Cates, et,al.,2018). Also, employees are protected by the pregnancy discrimination act of 1978, the equal pay act, the discrimination in employment act of 1967(ADEA), and the disability act of 1990(ADA). On the other hand, the federal Occupational Safety and health act protect (OSHA) employees and contracts business parties from compensation in poor health conditions. On the other hand, the employee or the business requires a notice of right to sue before filing the case instead of going directly to a court called age discrimination lawsuits (ADEA) (Beach, and Pringle, 2020). A notice of the right to sue is granted when the business or the individual wants to file a lawsuit in court before the investigation is complete. On the other hand, when filing an equal-pay lawsuit (EPA) in court, employees or businesses should go directly to the court within two years from the day the discrimination took place.
Additionally, customers can sue a business for discrimination in satisfying the customer’s needs due to their color, gender, sex, religion, identity, and disability. For instance, refusing to se3rve customers, such as plan a wedding even for same-sex couples, is a form of customer discrimination (Cates, et,al.,2018). Also, harassment is the main issue in the workplace. Most employers can discriminate against employees, use discriminative jokes, and flirts, such as racial jokes, psychological and physical attacks, sexual harassment, and other kinds of harassment. On the other hand, employees can cause business litigation, such as slip-and-fall accidents, auto accidents, premises liability, and many other types of business accidents. For instance, an auto accident example involves an employee causing an accident while driving a business car, and the small business does not have an insurance cover. A type of slip-and-fall accidents includes tumbles and falling on a wet floor. Such Safety and health conditions protect employees from injuries caused by business machines, vehicles, fires, falls, and exposure to several health conditions. OSHA act requires employers or small business owners to comply with the laws and requirements to avoid litigations (Beach, and Pringle, 2020). Also, the OSHA act conducts frequent monitoring and inspection to ensure employees’ Safety and health. On the other hand, in case of stolen valuable goods in the business, or someone is killed in the business premises, the business can be held liable for the tort of negligence in failing to lock, put guards, place security cameras and lights.
Intellectual Property Lawsuit.
Another type of business lawsuit includes intellectual property rights cases. Intellectual property rights are a broad area that deals with copyright, patent, stolen goods, and trade secret cases (Mboga, Amin, 2019). Intellectual property cases do not have to be big and complicated cases; mostly intellectual property cases take place from minor cases of use of a name that another company has already used. Most small businesses ignore intellectual property laws, especially laws on trade secret and that of copyright rights. In case a business has stolen a business property, the business can be sued, maybe for stealing a logo hence held liable. Intellectual properties Are the most expensive litigations for small businesses and the easier cases to avoid getting into (Beach, and Pringle, 2020). The litigations are expressive to handle because small businesses require an intellectual property lawyer to deal with the case, which is expensive.
Litigation does not only occur from employees or contracting parties but also from the government. The government has the right and authority to sue a small business for incompliance, such as failure to follow the OSHA requirements, for instance, a restaurant operating under unhygienic conditions. Also, the government can impose fines and mediate conflicting employees. For instance, failure of small business administrative enforcement of regulations to impose business regulations, especially safety regulations, may lead to litigation (Beach, and Pringle, 2020). The federal, and state government in the united states gives the law the authority to investigate businesses, especially in small businesses. Small businesses may face low litigation fines compared to large businesses. Mostly, small businesses find it risky for business growth and development to take various legal actions. Some legal sections may affect the organization’s ability to invest, such as reducing working hours or increasing pay to balance the level of work done. Mostly small businesses conduct more work under low or average payments since the company employs under-qualified or train their employees.
Impacts of Small Seized, and Middle-Seized Business Litigation
By nature, small business firms are in a high position to face litigation, bankruptcy, breach, and other legal vulnerabilities due to a lack of finances and preparedness (Cates, et,al.,2018). Mostly small businesses are in a position to undergo issues of trade secrets. Small business is expected to enforce a contractual form that limits employees from unlawful behaviors such as customer discrimination, leading to litigation. Small businesses face challenges in enforcing some restrictions, and the business, however, undergoes losses if the business undergoes business litigation. According to economic theory, small-sized businesses’
use of lawsuits affects small businesses compared to large businesses. On the other hand, the worker’s compensation, especially the undocumented worker’s compensation, has huge implications for all-seized businesses. To avoid compensation and financial downfall, Companies must have a business insurance cover in place (Beach, and Pringle, 2020). Compared to large companies, small and medium-sized companies may fail to secure an insurance cover, hence going through workers compensation losses. The workers’ compensation insurance is considered very expensive because the firm’s insurance value is less than the premiums paid by the company. For a fair deal, experience rating is conducted to balance the insurance value with the premiums, which is expensive to small firms. However, small business firms tend to receive a worker’s experience rate compared to large firms; hence small firms’ workers compensation insurance tends to be higher than large companies’ workplace compensation insurances (Cates, et,al.,2018). However, small companies’ inability to place high quality and consistent safety measures, the employees are prone to getting more and fatal injuries, hence ending up losing business resources on litigations and insurances. Payment of premiums in small business firms involves using a part of an employee’s payroll, for instance, two percent of the overall payment.
The unemployment insurance system plays a vital role in business UI systems that protect employees from litigation or causing, leading the business into various lawsuit cases. Small firms face challenges adjusting to overall economic changes, such as business demand and supply, mostly small business losses, damages that lead to litigation, and business ability to pay taxes (Beach, and Pringle, 2020). Businesses go through financial emotional, loss of competitors, and changes in business firm structure (Nieman, 2020). Loss of business competitors is caused by loss of business reputation due to various litigation cases. For instance, customer discrimination, employer-employee conflict is a major cause of loss of business competitors. Many small businesses lose competitors bonding due to failure to fulfill contractually; agreements or compensate workers for damages caused. On the other hand, small business firm structure changes due to litigation, especially inappropriate employee allegations (Beach, and Pringle, 2020). Respond to most unexpected and random lawsuits leads to disruption of the actual business structure, such as management and allocation of funds. Mostly, litigations make small businesses spend a lot of time and resources on litigation, especially compensation hence changing the business structure, including the number and quality of workers (Wheeler, and Benz, 2020).
Prevention and control of Business litigation
Small businesses can avoid litigations or develop ways of dealing with litigations. For instance, small-sized businesses should have strict control of the firm on business assets and employees. The control policy ensures business processes run smoothly without disruptions and in promoting how businesses run daily (Nieman, 2020). On the other hand, small businesses should invest in a good insurance cover, especially on workers’ compensation insurances and assets insurances. Insurances help reduce business losses, where the business does not have to sell business assets to cover damages caused.
Additionally, small businesses should control intellectual properties and follow all property rights requirements, such as patent protection and copyright laws (Chambers, and Guo, 2018). A small business should also address all conflicts as they arise within the business to avoid lawsuits. Mostly business conflicts are minor, hence can be solved using a mediator instead of taking the issue to court. For instance, use conflict between employees or contracting parties. To avoid litigation, small businesses should be less trusting of customers, employees, and other companies in a contract. Over trusting employees, customers, and companies may engage the business in problems, especially business lawsuit cases, such as contract breaches (Beach, and Pringle, 2020). However, the businesses should be extra careful when it comes to handling everyday business operations, such as sales, deliveries, and other business contract agreements. The business should adhere to all security laws and regulations that control the business’s formation and operation. Small-sized businesses should ensure every business contract and activity is documented to avoid the lawsuit, especially on contract breach. The business should document everything, no matter how the case is small or minor, to avoid future legal issues (Nieman, 2020). Small businesses should also have an in-house counsel, handle minor cases within the business, and an attorney in place, especially to deal with property rights cases.
Conclusion
Litigation has been the leading cause of emotional challenges in businesses; litigation is way costly for small businesses, especially on finances and time. On the other hand, litigation is enhancing or changes the way a business conducts its activities positively (Cates, et,al.,2018). Despite litigation being impactful on an organization’s time and finances, litigation also causes emotional impacts that change the scope and tone of small businesses. Mostly small business and middle-sized businesses manage to settle business cases before going for trial. Still, according to a survey carried out during research, small businesses cannot settle disputes and deal with cases through negotiation. According to research, most small businesses work on making sure they are out of court, which is not easy due to litigation costs (Beach, and Pringle, 2020). Financial impacts are common to litigation in small businesses, especially where legal cost is about three dollars to one hundred and fifty thousand dollars. Small business owners have to go to the extreme of reducing operating and investment costs to get ready and account for a business conflict. To avoid the losses, the businesses can develop various policies and strategies that help prevent litigation cases, such as adhering to various business compliance laws, regulations and investing in insurances and training programs.
References
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