4 Common Ways Small Businesses Get Sued by Employees in the U.S.

In the United States, small businesses are sued every day. See how you can reduce the risk of being sued.
REMOTO WORKFORCE Team I Updated on - March 4, 2022

When you think about to stay in business, immediately come to mind: intense competition, supply chain issues, finding the right marketing strategy, and more. But there’s one more relevant than you might think: lawsuits.  

In the United States, small businesses are sued every day. 

We take a quick look at the common ways U.S. employees sue small businesses and how you can reduce the risk of being sued. 


Wage Disputes  

According to Marianne Bonner, the most recurring lawsuits against small businesses are based on allegations related to violations to federal, state, or local wage law.  Any of these laws are commonly renowned as wage and hour laws.  

For instance, violations of the Fair Labor Standards Act, which sets the federal minimum wage and governs child labor, record-keeping, and overtime pay, are frequent.  

Many employees argues that small business cannot pay minimum wage or overtime pay, or event worst, classify them as “independent contractors”, violating the LFSC.  

You can avoid wage legal disputes by installing a standard system to record time and requiring supervisors to check that employees’ performance meets the federal, state, and local wage and hour laws. 


Illegal Interviewing Questions  

In your enthusiasm to find the right person, you may not think about what you should and should not ask. 

In the United States, it is illegal to ask about age and genetic information. Additionally, it is illegal to interrogate the place of birth and citizenship.  

It is equally illegal to ask about gender identity, sexuality, marital status, race, ethnic identity, disability, family composition, and pregnancy.  

Although it is not illegal to ask about these matters, it is preferable that you do not ask about weight, financial information, and medical tests. Remember that conditioning getting a job within your business on any of these issues is illegal in the United States. 

To avoid conflicts emerging from illegal questions, you can incorporate procedures into your human resources plan for job interviews that consider legal questions.  

In this blog article, Milo Goodman explains methods for creating the right questions. Also, you can hire an human resources lead for managing wages and payrolls following the U.S. laws.     



Ignore Federal and State Employment Laws 

Whether you are a business owner or you are in charge of an HR department, you can’t ignore federal and state employment laws.  

It is essential that your company complies with everything related to the establishment of an employment contract in accordance with the law.  

First, it’s important for you to completely understand the Fair Labor Standards Acts. Then, you can achieve a comprehensive knowledge of the legal documents in the list below for attending essential matters, such as health and safety, workers compensation, and unions:   

Occupational Safety and Health (OSH) Act: this act regulates safety and health standards in the U.S.   

Workers’ compensation program: in each state, this program intends to order matters regarding compensation in business and public institutions.   

Employee Retirement Income Security Act: this act regulates issues regarding pensions and welfare benefit plans for American workers.   

Labor-Management Reporting and Disclosure Act: deals with the interactions between unions and its members.   


If you need further advice on labor legal matters in the United States, a legal assistant manager would be helpful in your company. Likewise, in this video, Peter Tragos will teach you how to avoid lawsuits stemming from illegally firing employees by not practicing discriminating against protected populations for their diversity. 




Inadequately documenting terminations  

Usually, companies lose labor lawsuits for not properly documenting all their processes. 

You can use software and creative cloud platforms for documenting all process unfolded in your business. For example, Lesley Chen explains that Adobe Creative Cloud can help you with records daily and enhance collaborations between employees. The proper record of an entire business operation can support any defense action against a labor lawsuit.  

If you need special support in documentation process, you may consider to hire a business analyst for anticipating requirements and gathering critical information for your company. 



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