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9 Common Small Business Lawsuits

Startup small business owners reviewing contract terms; small business lawsuits concept.

Small business lawsuits may be based on various factors, including disputes about payroll, contracts, discriminatory practices, injuries, and more. Regardless of the type of claim, these lawsuits can be costly and damage the reputation of a business. If you are concerned about a lawsuit against your business, consider contacting Schwab & Gasparini by calling one of our conveniently located New York offices. Dial (315) 422-1333 for Syracuse, (518) 591-4664 for Albany, or (914) 304-4353 to reach Hudson Valley or White Plains.

Wage and Hour Claims

Small businesses may be held liable in lawsuits filed or claims made against them through a local, state, or federal agency if they do not properly pay workers for the hours they have worked. Common wage and hour violation claims are based on:

  • Not paying the minimum wage as provided under the Fair Labor Standards Act
  • Not paying the minimum wage as provided under state or local law 
  • Refusing to pay overtime rates to hourly employees who worked over 40 hours in a workweek
  • Misclassifying employees as independent contractors to avoid minimum wage requirements
  • Requiring employees to work during unpaid break time or be “on call”

Businesses that do not properly pay employees can face not only lawsuits from employees but also fines from governmental agencies. 

Breach of Contract Disputes

Contracts lay the foundations of many small businesses. Contract terms set out the responsibilities and expectations for each of the parties. They also form legally-binding agreements. If another party to a contract believes that a business has not honored its obligations as described in the contract terms, they may file a breach of contract claim against the business. 

Businesses may have various contracts in place. Any of these can be subject to a breach of contract dispute, including:

  • Employment contracts
  • Contracts with vendors or suppliers
  • Rental contracts with equipment or property dealers
  • Customer contracts 
  • Creditor contracts

Fulfilling the terms of every contract can help avoid these small business lawsuits.

Personal Injury Claims

When a person is injured because of someone else’s negligence, they may seek to file a personal injury claim against the negligent party for their injuries. For example, if they visit a store and slip and fall there, they may be able to seek compensation against the business for their injuries if they can show the owner knew or should have known about the hazard they encountered and failed to take appropriate steps to make the premises safe for legitimate visitors.

Employers may also be vicariously liable for the actions of their employees. Therefore, if a company’s employees act negligently, or negligently fail to act, and their conduct results in injury to another party, the business may be held responsible for the employees’ negligence. 

Employment Discrimination 

The United States Equal Employment Opportunity Commission says that employers cannot legally discriminate against applicants or employees on the basis of certain protected characteristics, including their:

  • Race
  • Color
  • National origin
  • Sex
  • Religion
  • Age (if 40 or over)
  • Pregnancy
  • Disability 
  • Military status 
  • Genetic information

Violating federal equal opportunity or anti-harassment laws can result in lawsuits, as well as penalties from governmental agencies in which fines, corrective actions, reinstatements, and other remedies are ordered.


Harassment is a form of discrimination when it rises to the level of being so severe or pervasive that it interferes with a person’s work. Small businesses should have clear policies and procedures in place so that employees can report harassment and the business can promptly respond to and investigate these reports. 

Intellectual Property Disputes 

Intellectual property is an important business asset. Intellectual property law can protect everything from special processes, inventions, and trade secrets to copyrights and trademarks. When one business holds intellectual property, it has the right to prevent others from using that property without permission. If a competitor business uses a similar mark or name, it could be sued for using another business’ intellectual property. 

Partner and Shareholder Disputes 

Partner and shareholder disputes are common among small businesses. Joint owners of the company may disagree about how the business should be run, who should handle certain responsibilities within the company, and how to disburse earnings among the shareholders or partners. These disputes can sometimes lead to small business lawsuits and potentially the end of the business. 

Workplace Injuries 

If a worker is injured on the job, they may have the right to file a workers’ compensation claim with their employer’s worker compensation insurance. These claims can result from accidents on the job, as well as occupational diseases and repetitive motion injuries. When a worker who is employed by another business is injured while working on your property, they may be eligible to file a lawsuit against your business. 

Wrongful Termination 

Wrongful termination occurs when an employee is fired from their job for an unlawful reason. For example, they may be fired because of discrimination, or because they participated in a legally-protected activity or claim against their employer. An employee could also file a wrongful termination lawsuit if they were fired in violation of their written, implied, or collective bargaining agreement. An experienced New York business law attorney with Schwab & Gasparini may be able to review the terms of your company’s employment contracts and help you determine whether an unhappy terminated employee may have grounds for a lawsuit, as well as advise you on best practices for avoiding wrongful termination lawsuits.

How To Avoid Small Business Lawsuits

Small business lawsuits can disrupt your business. Fortunately, there are ways that you can avoid them. Here are some tips to help you minimize the possibility of a small business lawsuit from being filed against your business:

  • Follow all applicable local, state, and federal laws
  • Adhere to the terms of all contracts, including employment, partner, and shareholder contracts
  • Regularly inspect your property for hazards and promptly correct them
  • Follow regular processes for reporting issues on the job 
  • Maintain regular bookkeeping practices to ensure prompt payment to employees and vendors
  • Follow workplace safety rules and provide proper safety equipment to workers
  • Respond promptly to employee complaints about workplace safety
  • Create strong contracts that protect your interests 
  • Understand intellectual property rights and respect the rights of others
  • Obtain necessary insurance products to protect your interests

Consider working with an experienced business law attorney to review your contracts and workplace policies, as a trained professional may be able to provide tailored advice and guidance about how to prevent lawsuits in your business. 

Reach Out to an Experienced Business Litigation Defense Lawyer

The claims described above represent some of the most common small business lawsuits. There are steps business owners can take to prevent these claims. Business owners who find themselves facing litigation may wish to consider reaching out to an experienced business attorney from Schwab & Gasparini to discuss potential defense strategies for small businesses by calling our nearest New York office to schedule a confidential consultation. Call (914) 304-4353 in White Plains or Hudson Valley, (315) 422-1333 in Syracuse, or (518) 591-4664 to reach a New York business lawyer near you. 

Sun Apr 21 2024, 12:00am