Being a business owner is hard.
As excited as you might feel right now, you’re in for a challenge if you want to start your own company. Not only will you have to deal with competition (over 600,000 new businesses open each year in the U.S. alone), but you will also need to know how to save your company in case of business malpractice.
Today, we will discuss the three most common things you should know about business malpractice and answer the main question – if it happens to you, will it end your business for good?
1. What Qualifies as a Malpractice?
Let’s define business malpractice first to understand what it entails.
Business malpractice is an action undertaken by your staff or an individual employee on behalf of the company that is considered illegal in regard to your customers, stakeholders, other workers, or a local community.
When a person from outside feels you’ve committed business malpractice, they can file a legal claim against you. However, not every mistake you or your employees make qualifies as malpractice.
Here are a few cases of business malpractice:
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not complying with a legal obligation
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damage of property or environment
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financial malpractice
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criminal activity
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inappropriate behavior
As you can see, the lines in these activities are quite blurry. So, if a mistake occurs, you have to ask yourself the following questions to make sure it’s really business malpractice:
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Were you or your employees negligent?
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Did your mistake cause damage?
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How significant was this damage?
Basically, any error can be business malpractice if it caused significant damage to a person or an environment.
2. How to Protect Your Business from a Lawsuit?
Now that you know what qualifies as business malpractice, what should you do to protect your company from a lawsuit?
Here are some recommendations:
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Hire a seasoned attorney. A qualified lawyer will study your documentation, from a business proposal to contractor agreements and company bylaws, and will prevent possible cases of business malpractice.
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Have detailed employment contracts. When signing an agreement to work for you, each employee should know about their responsibility for any liability they might cause.
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Get insurance. Some insurance packages cover business malpractice cases.
The main thing to do is to hire a lawyer, of course. Under their guidance, you will be able to prevent any situation that can lead to business malpractice.
3. What if Business Malpractice Has Already Happened?
If your business has already got sued, there are a few steps you must follow to prepare for court:
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Review the case with your attorney. Your lawyer will help differentiate a false claim from true business malpractice and prepare a non-disclosure agreement for all your employees to prevent information leaks.
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Talk to your insurance company. If a business malpractice case happens, you should inform your insurer immediately after reviewing the case with the lawyer.
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Find a defense attorney. Decide how you want to respond to the complaint, and if a court hearing is the only way out, hire a defense attorney to represent you.
Many business malpractice cases end with the mutual consent of two parties. But remember – you shouldn’t talk to the plaintiff directly. Voice your objections and offers to your lawyer, and they will handle the conversation with the plaintiff.
If a Business Malpractice Occurs, Will It Ruin Your Career?
To conclude our business malpractice discussion, let’s answer the question that probably bothers you the most – if a business malpractice case happens, is it the end of your company?
No, not every business malpractice case is that damaging. Everything depends on the situation. Remember our three questions – if the malpractice happened because of your or your employee’s negligence, caused damage, and it was significant, it might damage your business’s reputation and derail your career.
That’s why it is so important to have a lawyer for such situations. You may fall victim to a false claim, and if you don’t know how to defend yourself, it will be a shame to lose your business if you’re innocent.
