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The Five Most Common Lawsuits business owners face

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What are the most common types of lawsuits filed against businesses?

Employment Discrimination and Wrongful Termination

Many lawsuits filed against businesses are based on allegations of discrimination, harassment, retaliation, or wrongful termination. Most workers are protected from these acts by federal and state anti-discrimination laws. Federal laws bar employers from discriminating against workers based on gender, race, religion, age, disability and other characteristics. Many states have enacted similar laws.

Harassment and retaliation are types of discrimination. Federal law defines harassment as unwelcome conduct based on race, color, religion, sex (including pregnancy), national origin, age, disability, or genetic information. In a harassment claim, the alleged perpetrator is often a manager or co-worker. The plaintiff claims that he or she reported the harassment to the employer but the employer failed to stop it.

Retaliation refers to the firing, demotion, harassment or similar act committed by an employer to punish an employee who has filed a discrimination complaint or lawsuit. A worker who has been fired after filing a discrimination complaint may sue the employer for retaliation.

Wrongful termination means firing an employee in violation of the law. Many wrongful termination claims filed against employers are based on allegations of discrimination. For example, a 50-year-old worker who was terminated files a wrongful termination suit against her employer. Her suit claims that she was fired solely because of her age.

Many small businesses do not employ a human resources professional. If the business owner is not familiar with federal and state anti-discrimination laws, the company will be vulnerable to lawsuits. Claims alleging discrimination and other employment-related acts may be insured under an employment practices liability (EPL) policy.

The Importance of an Employment Contract

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Why Employment Contracts are important - ‘she is only a secretary’

An engineering company built their own Employment Contracts for their engineers. They soon didn't waste time getting Employment Contracts for secretaries. Why?

Joanne joined the company as a secretary. She typed letters for the manager. She sent gifts to the clients' wives. She memorised the names of key client employees. Her boss was impressed with Joanne - and she was a loyal and dutiful employee.

One day Joanne was poached by another engineering company. Joanne after leaving telephoned her old company's 20 largest clients. Four moved with her to her new employer. Her old employer's lawyer wrote a letter threatening her with all manner of punishments. Which she quickly dismissed. Why? She had no confidential clause restriction. She suffered no restraint of trade. She didn't even have an Employment Contract. Relying on the latest court cases, she used her mobile as a database to contact more clients.

The moral of this story is simple, without an employment contract you have no protection. All staff should be on some form of employment contract regardless of the duties they perform or how loyal you think them to be. It makes good sense to protect what you have worked so hard to build and establish, for it can all be so easily disrupted if you haven`t put in place the right agreements you need. This is a common example of what transpires in the workplace everyday, regardless of employee roles and positions.

So if you have a Joanne, then immediately draft and present her with an Employment Contract to sign. It isn't too late. An Employment Contract gives you a fighting chance:

> A non-competition clause prevents the Employee from unfairly competing with you after termination.

> Protect trade secrets, customer and client details, suppliers and your systems.

> Stop the employee from stealing your employees.

> Force the Employee to leave on the spot and not work during garden leave.

Remember always to seek professional legal advice.

Value May be Less Than Price

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In the recent case of Miley and Commissioner of Taxation (‘Miley’), which relates to the small business CGT concessions, the AAT held that the market value of shares owned by the taxpayer just before the CGT event was less than the capital proceeds received from their sale to an unrelated buyer.

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