Launching a startup company is an exciting, promising venture. It can also be precarious if you don’t have a firm understanding of what you’re getting yourself into. In addition to the financial risks typical of startups, you could also face legal troubles.
The Startup Owner’s Guidebook To Preventing Employment Lawsuits: 5 Tips for Success
For example, a disgruntled employee could hire legal experts from firms like wh Law amid discrimination or wrongful termination claims and bankrupt the startup before it even gets off the ground.
When a startup gets sued by an employee, the brand image risks tarnishing in its most crucial stage of development.
Startups typically don’t have much of a reputation, to begin with, because they’re new companies. When a new business encounters a lawsuit, it automatically puts a dark mark on its fledgling reputation that will follow it for years.
This stain can make it difficult to attract clients, talent, and investors. Luckily, there are steps you can take to stay between the margins. Here are five tips for preventing employment lawsuits.
Never Make Exceptions That Could Backfire on Management
The bond between a startup and its first employees is exceptional. However, this bond can become a noose when management makes exceptions to policy for favored employees.
This scenario is widespread because of the intimate nature of starting a company with someone, yet it poses severe risks to your viability.
Once you have hired additional employees, you can’t give your friends preferential treatment.
If you make an exception for one employee, you have to make an exception for all. Otherwise, you risk alienating and upsetting the employees who aren’t in your inner circle.
When an employee notices a consistent gap in how you treat them versus other employees, that tension could eventually explode into litigation. Be careful, and if you can’t handle being a boss to your friends, then don’t hire them.
Make It Easy for Employees To Make Complaints Internally
As a startup, you’re constantly growing and learning, so make yourself open to employee feedback. If your employees feel like leadership is a black box that doesn’t listen to them, frustration can simmer and worsen over time.
Employees need an outlet for their insights.
In other words, if an employee can’t talk to you, they’ll talk to someone else, and that someone might be a lawyer.
Virtually no one wants to go to court, including your employees. You, as the company owner, have the power to create an open line of communication. Everyone is much happier when problems can be resolved internally.
Make sure your HR department is open to receiving and processing employee complaints. Lending an ear now can save you an arm and a leg later on.
Don’t Be Hasty When Firing People
Sometimes you reach a fork in the road with your employees, and it’s clear that one or more aren’t contributing to your vision anymore. That said, once you fire someone, you can’t un-fire them.
Consider any terminations carefully before you follow through. The last thing you want is to fight off a discrimination suit because you were a little trigger-happy with the pink slips.
Involve multiple people in the termination process. Having other managers sign off on your decision will act as a checks-and-balances system and lend credibility to your reasons for firing someone.
Develop Safety Training Programs
Regardless of what your startup does, employee safety should be a priority. Incorporate mandatory safety training into your onboarding process. Properly trained employees will have less to work with if they decide to sue for unsafe working conditions.
Best safety practices also extend to cybersecurity. Most of your employees should have some measure of cybersecurity training, so they don’t compromise their personal information or that of your clients.
Get Insurance
Finally, when it comes to preventing employment lawsuits, you’ll be happy you paid those insurance premiums. No matter how many preventative measures you take, there’s always a chance that an employee will try to sue you or your company anyway. Even if you win, the cost of legal proceedings can be a fatal blow to a startup.
The best way to prepare is to enroll in insurance. Basic commercial liability insurance can go a long way. Every startup founder should shop around and speak with several insurance reps to determine which plans suit their needs.
Ask for a risk assessment and see how much insurance coverage would be appropriate. If your startup gets sued without insurance, it could sink the whole ship, including all of the other employees you brought on.
As the founder, it’s your responsibility to safeguard not only your livelihood but your employees’ as well.
Concluding Remarks
Now that you know more about what you can do to help prevent employee lawsuits from drowning your new startup in legal fees, it’s time to put this knowledge into action.
Startup companies move fast, so it’s best to keep on top of everything from the very beginning.
Start talking to insurance companies about commercial liability insurance and ensure your HR department is well-equipped to handle complaints.
Just be sure to cover all your bases, and your startup should be hitting home runs in record time.
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