Protecting Your Business: Contracts and Business Practices

If an attorney ever tells you they have a sure fire way to keep your business from being involved in law suits, turn around and walk away.  It is not possible for a business, especially a successful one, to stay out of a law suit.  The best way to protect yourself is to plan on being sued and prepare accordingly in your contracts and business practices.  As a transactional and litigation attorney I can ensure you that any extra money you spend on an attorney making sure your contracts and business practices are set up in the best possible way to protect you is pennies compared to the money that will be spent on litigation and defending a law suit.

I stated at the start that there is no way to keep you from being sued, but your litigation costs can be mitigated by having good contracts and sticking to proper busines practices.  As an example of penny wise pound foolish I can give you an example from my own practice.   A client, prior to retaining my firm, hired a new employee.  The employee previously worked for a company that was engaged in the same business as our client.  Our client was aware that the competing company routinely had employees sign non-compete agreements.  Instead of talking to a lawyer prior to hiring the employee, our client took the employee’s word that the non-compte clause was not an issue.  Well the non-compete clause was the issue in a 3 year litigation that has cost our client six figures in legal fees and has destroyed his business.  This could have all been avoided by spending a few hundred dollars on an attorney.  The only silver lining, and it’s a small one, is that as soon as we were aware that a claim was going to be made that the non-compete clause was violated, we had our client insist the employee sign an indemnification agreement for any legal fees and judgments arising from the law suit.  This will allow our client the opportunity to get back whatever money has been lost.

As an example of good business practices saving your business money I will relate a story told to me by an acquaintance.  A company had an employee who was routinely being disciplined for poor work performance.  All of the issues were properly documented in her personnel file.  Eventually she was fired at which point she made a claim that she was fired because she was pregnant.  This would obviously violate both state and federal discrimination laws and could lead to lengthy and costly litigation, not to mention possible governmental sanctions.  The company spent a few thousand dollars on an attorney and, thanks to their record keeping, the matter was resolved in their favor much quicker and less expensve than it otherwise might have been.

My firm will be presenting a free seminar on July 28, 2010, that will cover contracts and business practices.  We will provide information that will allow business owners and decision makers to know what questions to ask and what practices to avoid. For more information contact us at info@sobellawpc.com.