Business owners in Tennessee have enough on their plates, and a lawsuit adds time, stress and expense. To avoid one in the first place, owners should take certain steps.

Sometimes it is impossible to prevent someone from taking legal action. To minimize damage, business owners need to have protections in place.

Treat employees properly

According to Inc. there are numerous situations in which an employee may sue the employer. This may be due to improper firing, discrimination or discrepancies in wages. To avoid issues with employees, employers need to follow federal and state laws as well as document all communication and disciplinary action. For example, employers should:

  • Classify workers correctly
  • Pay overtime
  • Follow discrimination laws
  • Base pay on job requirements and market demands
  • Write a thorough and detailed employee handbook
  • Clearly communicate and document policies

When it comes to wage disputes or employee misclassification, the employee does not have to be the one to file the lawsuit. The government can be the one that takes legal action.

Be wary of business clients and partners

FindLaw discusses that it can be risky to do business with someone who has a poor reputation. Employers should choose to work with, and for, those who are trustworthy and ethical to avoid legal issues down the line. If there are business partners, there should be a contract that outlines aspects such as pay, responsibilities and what happens if someone wants out of the partnership.

Limit liability

In the event there is a lawsuit, there are certain acts that can limit financial liability. One is to set the business up as a separate entity, such as a corporation. It is also important to have the right type of insurance coverage. The specific kinds depend on the nature of the business, but some examples include construction liability, workers’ compensation, professional liability, general liability and commercial property insurance.