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Handling legal matters effectively is critical to the success of any business. Whether it’s addressing workers’ compensation claims, drawing up contracts or hiring the best employees, using common sense and sound business practices often will keep building service contractors out of court, experts and owners say.

Twenty-five years of business experience will teach a BSC common sense when it comes to many legal issues, says John Hess, president of ABH Services Inc., Winchester, Va. Knowing the rights of all parties involved, and knowing the law, will help a contractor enormously.

Hess says he reads industry publications and follows trends online.

“We try to learn from our mistakes, but we also try to learn from other people’s mistakes,” he says. “That’s the best way to learn. Here, you just have to be proactive. It’s one thing to have an MBA, but it’s another to have common sense.”

Hess notes the many laws governing workers’ issues, workplace safety and financial matters.

“If you don’t keep up with the rules and regulations, and something happens, then you’re in trouble, “ he says. “You want to avoid workers’ comp issues; you want to avoid liability issues. You don’t want to learn the hard way.

Legal threats

BSCs may face various types of legal claims. Employees may bring claims that administrative law judges hear and decide, such as workers’ compensation claims before a state workers’ compensation commission, or unfair labor practice charges before the National Labor Relations Board.

Workers also may file employment discrimination charges that could be investigated by the U.S. Equal Employment Opportunity Commission, a state human rights commission or a local civil-rights enforcement agency — if not by all of them. Typically after such an investigation, employees still may sue in court, alleging discrimination or retaliation.

In addition, an employee or the U.S. Department of Labor may sue a BSC in court, alleging that it failed to pay overtime to its workers. Further, union-represented employees may charge a contractor with breaching its collective-bargaining agreement by bringing a grievance that ultimately may be heard by an arbitrator.

Besides claims brought by workers, a BSC’s clients may bring disputes with the company to court to resolve them.

“Each lawsuit has its own history,” says Gerald Richardson of Evans & Dixon LLC, a law firm in St. Louis. “That history and the personalities involved will influence how a company handles it.”

Generally, fewer than five percent of the civil lawsuits filed nationally ever go to trial, Richardson says.

BSCs also should have workers’ compensation insurance and general liability coverage, Richardson says.

“Most companies should also consider employment-practices liability insurance,” he says.

Despite these safeguards, litigation can occur — and the process toward trial can become arduous and expensive.

“It also has the disadvantage of allowing a third party, a jury or judge, to decide how to resolve a dispute,” Richardson says.

“A small business sees a lawsuit as a source of unknown anxieties, especially if it has no insurance coverage for the claim,” he adds. “Most view the lawsuit as an intrusion on their more important responsibilities, such as making sure that the company can cover the next payroll.”

Staying out of court is even better “from a mental-health perspective,” says Tim Peterson, director of the Small Business Development Center at the University of Wisconsin-Milwaukee. Though a BSC may experience a small loss, it is often preferred to a long legal battle that is a distraction from day-to-day business.

That’s why most lawsuits are settled.

“Settlements may transform a known win-lose resolution by litigation to a win-win resolution by negotiation,” Richardson says. “The parties may negotiate non-monetary terms instead of, or in addition to, monetary compensation. A settlement also eliminates both parties’ risk of loss if a trial resolves their dispute.”

To navigate such waters, sound legal advice becomes critical. All BSCs should know an attorney, experts say.

“Every small business should have an ongoing relationship with someone — not on retainer, but it’s someone you’ve paid money to,” Peterson says. “You should get to know someone. You know them, and you should have them to get to know you.”

Business owners also need to get everything in writing — something BSCs know all too well. Not only do union employees require contracts, but so do customers.

“BSCs should have written contracts that specifically define the services that they will perform and the fees they will receive,” Richardson says. “They should have employee handbooks for their non-union employees that establish their expectations and provide a complaint procedure for employee grievances or concerns.”

Contracts are necessary, Peterson says, and the more a BSC has documented, the better off they are.

Experts reiterated how these steps reflect good common sense and proper planning.

“The regular application of common sense will prevent many lawsuits,” Richardson says. “The goodwill that a sound relationship fosters will enable a business to resolve legitimate complaints before they become major disputes that produce lawsuits.”

Be prepared

No matter a contractor’s size, disagreements arise and lawsuits may result. To avoid them, companies must have clear expectations on various levels, experts say.

“You must look at staffing issues,” Peterson says. “There’s lots of turnover, and you must have clear hiring polices — do background checks.”

To prevent lawsuits, a company must communicate its own expectations regarding outcomes, Richardson says.

Quality customer service and specific policies for addressing complaints also are integral to preventing lawsuits.

“Customer complaints tell BSCs that the customer expects an outcome different from the one it has received,” Richardson says. “At a minimum, the BSC needs to listen to a customer’s complaint empathetically. Businesses that ignore customer complaints, rather than resolve them informally, run an increased risk of litigation.”

Employee and customer safety are at the top of the litigation-prevention list for any BSC.

“Customer service is the name of our game, and it’s on a couple of levels,” says Hess. “We look at our employees as one of our biggest assets. If they’re not out there doing the job and doing it well, then that’s not good for your business. These people have to be properly trained — and they want to come to work, so they have to be able to work in a safe environment.”

ABH requires all new employees to complete a basic safety program before receiving instruction on the proper use of chemicals and related issues, Hess says. The company has about 90 employees, mostly part-timers.

“If you’re stripping floors, and you don’t have the ‘wet floor’ signs up or tape on the door — and somebody slips and falls, then, yes, you’ve got a big problem,” Hess says.

Todd Beamon is a freelance writer based in Milwaukee.