Protecting your business from employment lawsuits

Protecting your business from employment lawsuits

young business people discussing in office talking about HR compliance

Few words strike fear in the heart of a business owner like “lawsuit.” Unfortunately, employment lawsuits are an ever-present threat to companies, especially those with limited HR compliance knowledge. If you conduct business in the U.S., you’re working in the 5th most litigious country on the planet. Running your business without the right policies and processes is like hanging a “sue me” sign in your break room. So what can you do to protect your organization from lawsuits? 

Small businesses, in particular, often find themselves vulnerable to lawsuits. That’s less an issue of ethics and more an issue of resources. How can a small business with little to no HR or legal support possibly keep up with the highly skilled HR departments in larger firms? 

Sure, big companies have their share of employment snafus, but they also have the resources to prevent or combat legal action. Additionally, these organizations have the funds to withstand damages. An employment lawsuit against Best Buy is not the existential threat that a lawsuit against your local electronics retailer would be. 

Still, small businesses can take steps to protect themselves from employment-related lawsuits. In this blog, we’ll take a look at the threat of these legal actions and how in-house or outsourced HR insulate your business from them. 


Businessmen discussing employment lawsuit on office balcony


Examining the threat of lawsuits

Lawsuits happen all the time. In fact, over the last 20 years, they’ve risen in frequency by 400% and wrongful termination suits by 260%. 41.5% of lawsuits target businesses with less than 100 employees. Additionally, between 2010 to 2017, one million employment discrimination complaints were filed. All of those numbers are staggering. 

Although most lawsuits fizzle out before much damage is done, plenty leave businesses with expensive settlements or severe damages owed. That can derail the momentum of a small business that’s already low on resources, to begin with. So when the threat of lawsuits against SMBs is nearly a coin flip, shoring up your policies and procedures is mission-critical. 

However, we also urge you to remember that these laws and regulations exist for a reason. Developing compliant employment practices creates a safer environment for your employees. In doing so, they’ll be more productive and engaged at work. Considering only 21% of employees are engaged with their work globally, this presents a chance at a real edge for small businesses. 

Overall, compliance leads to a better work environment for your employees and protects your business from the existential threat of employment lawsuits. You understand the need; now let’s discuss how to get you there. 


Hire in-house HR support

If your business can spare the headcount, hire in-house HR staff. Most likely, you’d want someone with an HR manager title or higher, and this person must have expertise in policy creation and HR compliance. Then your company gets to enjoy the security of HR on hand.

Though this option is straightforward, it may only be feasible for some businesses out there. For starters, HR managers are expensive. In Chicago, where ADDA is based, the median HR manager salary is $120,015, and that’s just the base. The total compensation across benefits, bonuses, and more ratchets that number up significantly. Of course, you could hire a less experienced professional for less money, but that could cost you down the line due to shoddier compliance work.  

Then, you run the risk of turnover in that role, leaving you uncovered for a period. During that time, it could cost you 6 to 9 months of that former HR manager’s salary while trying to replace them. If your business has the budget for internal HR staff, however, it really is a great option. But if margins are slim, it’d be worth looking elsewhere. 


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Find an HR outsourcing company

HR outsourcing companies, typically an HRO, ASO, or PEO, give your business the same expert knowledge as an internal HR professional at a fraction of the cost. Crucially, outsourced HR consultants protect your business from lawsuits just as well as an internal department could. That’s why 36% of employers outsource part or all of their HR functions, and that number is growing. Human resources consultants provide a strategic and practical advantage for smaller companies. 

They implement HR best practices across payroll, benefits administration, compliance, and talent that sustain businesses while they grow. If you work with an HRO like ADDA, you get consultants who will act as a proper internal HR department for your company. Our consultants communicate directly with your employees and management to develop strategic initiatives that improve your company and culture. 

You have important work that you want to focus on, but regulations wait for no one. By outsourcing HR, you and your employees can spend time on the projects you care about while maintaining a safe, compliant business. 


ADDA can manage your HR

ADDA has the compliance expertise your company needs. We have consultants around the country who work with businesses in all industries. They stay up to date on national regulations and legislation, and they’re quick to master the nuances of local rules too. So if you’re done worrying about the looming potential of employment lawsuits, schedule a call with us today!

Fill out the form to learn how our business solutions can help you today!


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