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Ways for Businesses to Avoid Lawsuits

By: Thomas W. Hartmann
The Hartmann Law Firm LLC; 908-731-6976
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  1. Contracts Should be in Writing. We often think that initially friendly and positive business relations will stay that way. Unfortunately, this is not always so, and when trouble begins, the absence of a written contract only causes confusion. Also, memories fade and versions of fact diverge. So write down the business agreement at the outset when both sides have the clearest idea of the transaction.
  2. Review and Draft Your Contracts Carefully.  Whether you consider the contracts you write with your customers or those that third parties write with your company, review them carefully.  Contracts are the core of your business and your operations.  We all hope nothing goes wrong, but if it does, you want to be able to fall back on a contract the carefully spells out your rights and obligations.  If you have questions, ask them in the beginning.  Do not be afraid to negotiate and resolve contentious issues at the outset. It is better to resolve such matters before battle lines are drawn
  3. Protect Your Business from Departing Employees.  One of the simplest and most comprehensive tools you can have is an employee confidentiality, non-compete and non-solicitation agreement.  Each employee should sign something like this on the first day of employment. It protects you from employees who learn your business and, when departing, want to take your confidential information, your employees or your customers – all of which you have allowed the departing employee to learn about during his tenure with you.
  4. Make Sure You Tell Your Employees They are At-Will. You can hire employees under contract, but more commonly, you hire them “at-will.” This means the employee has no contract and can be terminated at will with no termination consequences to the business, as long as the termination does not violate civil rights statutes, whistle blower statutes or similar laws.  It also means that you can generally alter the terms of employment without risking a contract violation. But, you should be clear and explicit with the employee that he is at will. Make sure this is clearly and boldly set out in offer letters, job applications or in any policy letters on employment, such as an employee handbook.
  5. Develop an Employee Handbook. This is a relatively inexpensive and efficient way to put all of your significant policies in one place. Provide it to the employee on the first day of employment and require the employee to sign it acknowledging that he has received, read, and understood it. This helps set the standard for employee performance and can provide a number of helpful defenses should difficulties arise in the future.
  6. Do Not Ignore Business Formalities. You form an LLC or a corporate structure, at least in part, to protect you or other company founders and officers from personal liability. But, in forming those entities, you are required to have meetings, file reports, elect officers, and handle accounting and other matters in a way that draws a clear line between personal and business matters.  If you commingle business and personal matters, the court may “pierce the corporate veil” and deprive you of the protections of the LLC or corporate protection you initially sought.
  7. Do Not Assume Bad Things Will Go Away. If a problem is brewing with a supplier, contractor, employee or governmental body, do not ignore it and assume others will, too. Whether you approach the issue aggressively or with a conciliatory attitude, come up with a plan.  That could involve a demand letter, a meeting, a lawsuit or just a threat. Treat the matter seriously and assess the risks of the various courses of action available to you.

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56 Ellison Rd
Watchung, NJ 07069
Telephone: 908-731-6976 
Toll Free: 877-223-9930
Fax: 908-462-3808
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