5 Tips for Protecting Your Business This Year: The Best Offense Remains a Good Defense

Whether you are starting a new business in 2017 or gearing up for another year with an existing company, the New Year brings the excitement of fresh opportunities.  That enthusiasm, however, should not overshadow employment related legal pitfalls that commonly befall companies and can impact the bottom line through unnecessary litigation.  Outlined below are five areas where employers can take proactive measures in 2017 to protect their business.  Entrepreneurs and business owners would be wise to take advantage of the energy of a new year to evaluate these areas, reduce the potential for future disputes, and place themselves in a good defensive position should an issue arise.

• Proper Worker Classification and Compensation

Business owners both large and small routinely confront issues relating to the accurate classification of workers as “employees” or “independent contractors”, as well as setting the correct compensation for employees’ hourly and overtime work.  These determinations are particularly important for employers in 2017, with the anticipated updates to the Fair Labor Standards Act set to take effect, as discussed in more detail previously here.  While the enforcement of these new rules remains in limbo due to pending litigation, employers should be prepared to address the impact of the updated wage requirements, both from a financial and practical perspective, in 2017.

• Workplace Policies and Procedures

A formal handbook or collection of written corporate policies helps protect a company when disputes arise and ensures uniform application of the company’s expectations for all workers, even in at-will employment situations.  Some common policies that employers should strongly consider adopting (or revising) in 2017 include paid vacation and sick leave policies, anti-discrimination rules, equal opportunity employment policies, medical and family leave procedures, social media and/or internet usage guidelines, “bring your own device” parameters, and a company code of conduct, just to name a few.

• Adequate Documentation of Business Relationships

Although the “handshake” agreement may be easy to enter and inexpensive, it can create uncertainty and result in arguments down the road.  To ensure clarity of expectations for both parties’ duties and obligations in 2017, owners should document relationships among the company’s founders or investors, as well as with customers, executives, vendors, employees, and other service providers.  Not every situation calls for an onerous, formal written agreement; sometimes a confirming letter may do the trick.  But, executives should avoid the temptation to close any business deal based only on a verbal discussion.

• Protecting Valuable Intellectual Property and Confidential Information

One of the largest assets in many modern businesses is intellectual property, “know-how”, technological advances, or other “secret” information that the company exploits for profit.  Protecting such valuable information can be done effectively and efficiently through mechanisms such as Confidentiality Agreements, Non-Competition or Non-Solicitation Agreements, and by registering trademarks and other intellectual property.  Formally safe-guarding these assets will not only maintain their value for the company, but it will provide the business with means to prohibit others from utilizing those assets without permission and block former employees from taking those resources with them should they chose 2017 as the year to make a career move.

• Insurance Coverage

While some insurance coverage may be required, such as workers’ compensation or disability insurance, other types of insurance may be beneficial to protect a business in the event a dispute arises in 2017.  For example, Employment Practices Liability Insurance (EPLI) can cover the costs of defending losses incurred in discrimination, wrongful termination, harassment, and/or retaliation lawsuits.  Likewise, Directors and Officers Insurance indemnifies corporate executives for claims brought against them in their corporate capacity.  In addition, Key Employee Insurance may lessen the burden of the loss of a high performing or important individual employee in a small business.  Employers should consider implementing or expanding the scope of insurance coverage in these categories for 2017.

By starting the New Year on the right foot through adopting or revising these and other areas of habitual discord, business owners may avoid costly and unnecessary litigation.  Where a dispute does arise from a venture gone wrong, employers will be happy they invested in these defensive measures as they will be equipped with ammunition to protect the company’s interests.