Want to Avoid Claims Against Your Small Business? This Simple Exercise Will Help

Debbie Nuttall, an associate at HRC Law, explains how making just a few notes can help prevent your company falling victim to a lawsuit

Want to Avoid Claims Against Your Small Business? This Simple Exercise Will Help

With legal disputes, as with most things, prevention is better than cure. So whilst I can’t offer a litigation antidote nor a cure-all for every dispute wound, there are some straight-forward measures that can help you to minimise the risk of claims against your business.

As legal advisors, we are often brought into disputes part-way through the process. Often, with the benefit of hindsight, parties to litigation (and their advisers) can see where things went wrong and how they could have better protected themselves. Repeated exposure to such cases has left me with super-powerful fore-sight glasses. I now see litigation risks. Everywhere. They are so obvious to me that I’m sometimes shocked that other people can’t see them too.

Yet my seeming affliction is a gift: a gift that can save you and your business time and money. So, I’m going to lend you my foresight glasses for a few moments. Ready? OK. I’m putting them on you now.

Step 1. Make a list of all the areas in which your business is potentially exposed to claims.

Some obvious ones to get you started include:

  • Contractual claims from suppliers or customers
  • Claims from others who might use your products or services
  • Claims from employees
  • Claims from visitors or others entering your property
  • Claims from competitors

Step 2. Now, write each risk in the middle of a blank page (one page per risk) and draw three ever-wider circles around it. 

How could your business be put at risk?

Step 3. In the first circle (the one closest to it) write all of the ways that you could avoid the risk.

You’ll have to think about the ways in which the risk could materialise to do this.

So, for example, for claims from employees, you might wish to ensure that: 

  • Everyone has signed an employment contract
  • You have full grievance and disciplinary procedures in place
  • Your managers are adequately trained and alive to and aware of potential discrimination and bullying issues
  • Each employee’s working environment is safe
  • You’ve carried out a full health and safety assessment of the workplace and your’re complying with health and safety provisions (e.g. by having a first aid kit and trained first aiders; by carrying out a fire risk assessment etc.)
  • Your employees aren’t exposed to risks elsewhere (e.g. when visiting customers; when driving company vehicles)
  • Your employees are, so far as possible, happy (rather than alienated) and feel able to approach management with any concerns or worries they may have
  • Maternity, paternity, holiday, sickness absence and other procedures are set out in writing and everyone knows where to find them
  • You’re paying at least the National Minimum or the National Living Wage, as applicable.

For claims from suppliers, you may wish to ensure that:

  • Your accounting systems show when invoices are due for payment you have adequate cash flow to enable you to pay invoices when due
  • You do pay invoices on time; you have (signed!) written contracts in place with all suppliers and you can find these easily
  • You check incoming goods immediately and report faults at once
  • You maintain a good relationship with your suppliers and know whom to discuss issues or concerns with
  • Any concerns from suppliers or customers are escalated internally and promptly dealt with
  • You don’t put all your eggs in one supplier basket and have at least two potential suppliers for all key goods
  • Your procurement procedures mean you get quotations from more than one supplier to ensures prices are fair and competitive.

What happens if the risk materialises?

Step 4. In the second circle, write what you’ll do, if despite trying to avoid the risk, it materialises.

So, if someone alleges that they are being bullied, think about how you’ll deal with this.

  • Who’ll be responsible in the first instance for investigating the allegation?
  • Do your procedures adequately cover this?
  • When will you get involved?
  • How will you communicate with the disgruntled employee?
  • When will you seek legal advice?

What solutions are available?

Step 5. Finally, in the third circle, write if and how you can transfer the risk.

Insurance can cover a wide range of issues from employer’s liability to legal claims on other issues. Make sure you know what you have cover for, who to call if you need to, and where the gaps are in your coverage.

Once you’ve completed one sheet for each risk, then you then have to act on it. These will act as maps for your business’s future claim-free world.

If you haven’t got procedures in place: get them drafted. If you haven’t got time to sort things yourself, delegate: to your managing team or senior staff; to your accountants; and to your lawyers.

And finally, if you feel that the complaint/issue boulder is rolling down the hill and will soon become a fully blown unstoppable legal claim, don’t ignore it until it’s picked up enough momentum to present a real problem. Seek some advice, sooner rather than later.

We don’t mind at all being parachuted in just before trial, but we’d rather be behind the scenes from the start, helping you to ensure that your business never needs to see the inside of a court or tribunal and that the big rocks are under control.

Debbie Nuttall is an associate at HRC Law

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