If you run a business, you should be expected to follow the law.
This statement seems like such a no-brainer, doesn’t it?
However, sticking to the rule of law is easier said than done if you don’t know the law like the back of your hand.
Considering how many rules and regulations any given business must face on a day-to-day basis, having a pulse on all of them is impossible. Even more confusing is the fact that such laws vary across state lines, meaning there is rarely a “one-size-fits-all” strategy for following business regulations in the first place.
This is exactly why business owners are constantly scrambling for legal advice wherever they can get it.
All of this begs a bigger question, though: what exactly are businesses doing to put themselves in legal hot water? Below we’ve defined eleven shockingly common reasons why companies get tangled in legal battles. Each of these can represent huge headaches but are likewise easy to avoid if you know what to look out for.
Failing to Stay Compliant
From employee safety to the fine details of physical products, staying in line with industry regulations isn’t an option, it’s a must-do.
No matter how you slice it, business compliance is oftentimes complicated. More and more companies are relying on compliance and risk management software to ensure they’re not breaking any proverbial rules that could result in being shut down.
When conducting an interview with employees, HR must tread lightly when it comes to what sort of questions they ask potential hires. Personal quotes about someone’s family or background might be seemingly innocent, but aren’t necessarily appropriate for the workplace. When in doubt, keep it professional.
Shaky Grounds for Firing
It’s important for businesses to get just about everything in writing, especially when it comes time to terminate an employee. Some states reserve the right for employees to fire workers without a single, concrete reason; however, having justifiable evidence when letting an employee go is always a good idea.
Whether it’s budget constraints or an allegation against your former hire, having proof handy is always a plus.
From how you classify your business from a legal standpoint to paying appropriate state taxes, having an accountant you can trust on deck is invaluable. Business taxes are inherently complex and open you up to a slew of problems if you take a DIY approach to handling them.
Misuse of Investor Capital
When an investor injects cash into your business, there’s a personal and legal expectation for you to use those funds to grow your company. Pocketing the money or putting it aside for anything else is obviously underhanded, but could also raise a red flag for anyone putting money into your projects.
Defining Employees Versus Contractors
Making workplace roles crystal clear is essential to keeping your workers happy, but also avoid potential misunderstandings when it comes to taxes and benefits. When hiring and onboarding workers, make sure they understand the distinction between salaried employees and independent contractors.
Failure to Follow Copyright Law
While there’s tons of information floating around the blogosphere and the web at large, businesses must be careful when it comes to sourcing and licensing materials online. Especially when it comes to publishing content, make sure you own the rights to anything you put on-site.
Obviously you can’t pay workers whatever you want, but also bear in mind that pay needs to be clearly defined in any and every worker agreement. Failure to pay appropriately spells bad news and could really damage your reputation as an employer. For this reason, getting together with a lawyer to draw up airtight employee contracts should be a top priority prior to hiring.
Improper HR Training
If there’s a department that’s perhaps most entangled in the ins and outs of regulations, it’s HR. Proper HR training does double duty as you have peace of mind when handling employee relations but also know you aren’t skirting any workplace rules in the process.
Not Paying Overtime
Just because someone wants to burn the midnight oil and put in excessive hours doesn’t mean you should allow them to. For those who want to stick around the office or even work on their own time, you better know if you’re expected to pay overtime for their efforts.
Dealing with Severance Pay
Last but not least, sometimes it’s employees on the way out that can cause the most problems.
That said, some states require employers to provide severance pay if a worker is laid off; however, others leave it up to the discretion of the employer. It’s standard for existing workers to receive a payout of their sick days, for example, but severance packages often vary on a company-by-company basis.
Understanding the details of this list is just part of doing business these days. By knowing the common legal pitfalls of companies of all shapes and sizes, it’s much easier to run your own business by the book.