No business wants to be investigated or charged by the government, sued by a competitor, or compelled to defend against an employment lawsuit. The risks of such litigation to any company are so predictable, though, that large businesses with in-house legal departments regularly employ attorneys focusing exclusively on these practices. Prior to the start of any specific dispute, lawyers in litigation and related roles guide business leaders and units in shaping internal policies and developing cultures of compliance. Indeed, the right operating guidelines—when properly drafted to insulate businesses against current and future legal challenges, widely publicized within the organization, and closely followed—will mitigate litigation-related risks and can justify the expense involved.
But what should small businesses without an in-house legal team do? And are there best practices, easily implemented and not requiring huge costs, available for businesses across industries? This blog series answers these questions and more.
At the start, and as a general strategy, small businesses should expect litigation even when it seems unlikely. Because most small businesses are not consistently managing government investigations or defending against lawsuits, it is unfortunately common for leadership and employees to develop practices that undermine rather than serve the company’s interests once those practices are scrutinized. Instead, small businesses should prepare for the possibility of outside review, often years after the events in question have occurred, as a matter of course. This requires deliberate efforts to:
- generate and maintain accurate records;
- stay up to date on governing regulations;
- build a culture of compliance; and
- prioritize mitigation of legal risks through timely action.
Understanding that operational demands, budget constraints, and risk tolerance will necessarily guide decisions in each instance, expecting litigation means actively weighing the costs and benefits of those choices at the time they are made and with foresight.
Documenting that effort in the moment is equally critical, as is storing such proof within a system easily searched and intelligently organized. Small businesses with the best intentions, and those with effective internal policies for reaching business decisions and enforcing compliance, can still struggle to rebut allegations through reference to their records. What matters is what can be shown. Recognizing the potential for clear documentation to effectively defend a company’s actions leads a business toward better processes; if an invoice can become an exhibit, a company policy might prove intent, or an email may be offered as circumstantial evidence of knowledge in an adverse proceeding, they should (and can) be drafted to serve immediate business needs, as well as future litigation concerns.
