Small Business Law: Preparing For the Inevitable Employment Claim

Your business is doing well. It is turning a profit and name recognition in your industry is finally where you want it to be. All of a sudden you open the mail to find that your Company has been named in an EEOC charge filed by a former employee of yours. How could this be? Can anyone just file a charge against you? What if the claim is meritless, is there still a risk of adverse consequences and how will you afford to defend it?

For any small business owner, navigating the world of a discrimination or other claim filed with the United States Equal Employment Opportunity Commission or similar state agency can seem like a daunting task. However, a few key points can help save your company thousands of dollars over the long run. Remember these points, and you will go a long way toward keeping your company profitable:

• Make Sure Your Company Has Enough Employees To Be Covered. Not all employers are covered by the federal anti-discrimination statutes which the EEOC has jurisdiction to investigate. For example, Title VII of the Civil Rights Act of 1964, the federal law that prohibits discrimination on the basis of protected characteristics such as race, sex, color, national origin and religion only applies to employer with 15 or more employees. The Americans with Disabilities Act, another federal law enforced by the EEOC, only applies to employers with 20 or more employees. While it is never a particularly favorable strategy to ignore laws simply because your small business may not have the requisite number of employees to be covered, it is still a great defense to a claim, and your small business may be able to short circuit a lengthy investigation by showing at the outset that your business does not have the requisite number of employees to even be considered a “covered employer.”

• Budget Early – It’s the Cost of Doing Business. One of the biggest mistakes that small business owners make is not properly budgeting for legal expenses in the upcoming fiscal year. Time and time again small businesses owners ignore the fact that they may incur legal expenses related to employment claims in the upcoming year and simply ignore this expenses when preparing a budget. As a result, small businesses often are ill-equip to afford to defend themselves from even bogus EEOC charges, so budget wisely and budget early.

• Consider Hiring Professional Help – Your Business Can Actually Save Money in the Long Run. One of the greatest mistakes a small business can make is not hiring counsel to represent the Company in the EEOC process. No matter how meritless the claim might be, if the EEOC finds in favor of your former employee, the headaches, and the price tag will rise exponentially. Trying to defend the claim yourself can be a costly mistake. If there is an adverse finding against your company, and if you want to try to resolve the matter, you can rest assured that the settlement amount that you must pay to resolve the case will be significantly more than if your Company had prevailed at the EEOC stage. And one of the best ways to knock the wind out of your former employee’s sail and keep them from filing suit is to prevail at the EEOC stage. Hiring a lawyer to present a compelling case to the EEOC or other state agency is often a wise business move.

• Secure a Budget at the Start of the Matter. When you do make the decision to hire a small business lawyer to act as your employment counsel, insist on an upfront budget to handle the matter through the EEOC process. This way, you will know the cost up front. Often times the matter can be handled for much less than you think, but only if you discuss the cost upfront with your lawyer or potential lawyer. Leaving it to chance with often result in nothing more than a large legal bill that you did not budget for and were not expecting to incur.

With these basic steps your small business can stand a good chance to protect itself against meritless employment claims and afford and protect your Company’s hard earned assets.

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