Estefan Encarnacion, EBL Law Group Managing Partner, appeared on the Podcast de Negocios en Español, where he talked about the three most common lawsuits against businesses. Keep reading to learn more and discover how to protect yourself and your business.
To listen to the podcast in full, click here.
1. Lawsuits Filed by Employees
There’s a basic principle you should always keep in mind when running your business: “Employers must always look after their employees’ wellbeing,” Encarnacion explains.
“Obviously, having employees is expensive,” he says. “But if you want to cut costs and operate outside of what the law allows, you are exposing yourself to lawsuits.”
“The relationship between employer and employees can be friendly. But if someone gets hurt or suffers an accident, things can get complicated. If you’re not legally compliant, you’re going to have a difficult time, so you have to protect yourself.”
Asked about employers who pay their employees in cash, Encarnacion responds: “The Law requires employers to give their employees proof of payment with information about how many hours the employee worked and how much they are being paid per hour, as well as the amounts paid toward taxes.”
“You can pay your employees in cash, but you have to provide this proof of payment. If you don’t comply with this requirement, you can be fined for every payroll period where you don’t comply with the rules.”
2. Lawsuits Filed by Clients
No two legal cases are the same, and lawsuits filed by the clients of a business are no different.
“There are two types of clients and businesses: you can sell a product or provide a service,” Encarnacion explains.
According to the attorney, there’s a third factor at play: “It also depends on whether you have a location where you receive your clients.”
“If you sell a product, the product must meet certain expectations and norms associated with it,” Encarnacion says. Lawsuits can arise when “clients are not satisfied with the product or hurt themselves using the product.”
“When it comes to services, again, you have to keep expectations in mind. If you are offering some kind guarantee, you have to honor it. If you guarantee something for six months and then something happens within those six months but you don’t honor the guarantee, that’s a reason for a client to file a lawsuit against you.”
Then we come to the location factor. “If you have an establishment where you provide a service such as a restaurant, for example, and a client gets hurt in the premises, then the business owner is responsible. That’s why I always say that if you have a business, then you should have general liability insurance.”
Encarnacion offered specific advice for business owners with establishments open to the public: “You have to make sure that your establishment can receive all clients. Because if a person with a disability can’t access your business, that is also grounds for a lawsuit.”
2. Lawsuits Filed by Business Partners
Encarnacion offers a simple way to limit the potential for lawsuits filed by other business partners: “Be sure to do your due diligence and understand how you benefit from the partnership.”
“Don’t shy away from difficult questions just because you are friends or you’ve known the person for years,” he says. “Ask questions like: How financially stable are you? What amount of debt do you have? Who do you owe money to? Does the person have a problem or addiction that may harm the business? All those things happen.”
“If you don’t know who you are partnering with, you are running a risk,” the attorney warns.
Remember that the scope of your due diligence should also include the people around any current or potential business partner. “Maybe my business partner is married to a person who has completely different values,” Encarnacion says.
“We don’t have control over third parties who affect the life of a business partner, that’s why it’s important to communicate openly about each other’s personal lives.”
DISCLAIMER: The material on this website is for general information only and is not to be construed as legal advice or opinion, and does not constitute or create an attorney-client relationship between you and EBL Law Group.
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