The Cost of Damage Control v. The Cost of Prevention

Categories: blog

Many small businesses do not realize that when a lawsuit is filed against them, their time to prevent any issue or problem in an affordable and controlled manner has long passed. When a small business is holding a summons in its hands, the only questions left to ask are: “How much will an attorney charge me to get me out of this mess?” (the answer generally being thousands of dollars) and “How much will I have to pay the Plaintiff?” (the answer to which is unknown, but will undoubtedly be more than if the issue was resolved before the suit was filed). Essentially, a summons means: “Brace yourself and be prepared for the hourly costs of an attorney and damages owed to a Plaintiff.” A small business cannot run or hide from a lawsuit, it is required by law to answer and defend itself.

Why don’t small businesses owners consult an attorney and attempt to prevent an issue before it arises? Usually, many small businesses suffer from numerous misconceptions:

(Misconception #1) They run a small business and are immune to most laws; therefore, they don’t need an attorney or need to take any preventative measures because they will be ok,

(Misconception #2) Their company is like a small family, everyone trusts and has mutual respect for one another, so no one would ever betray their family and sue, or

(Misconception #3) They’ve been fine until now; they should be fine going forward.

In response to the above misconceptions:

(Response to #1) Although it is true that some laws only apply after a certain amount of employees, many laws apply regardless of number of employees,

(Response to #2) As for the family run business and mutual respect among employees, this may be true in the beginning, but situations quickly change, and when one runs an open and laid back company, it leaves excessive room for casual conversations that quickly lead to lawsuits; and

(Response to #3) Even though a company may have been able to survive five, fifteen, or twenty years without a lawsuit against it, it takes only one law suit to send a company to bankruptcy.

An example of a damage control situation in comparison to a preventative situation, is as follows: A small business is hiring employees for a new office located across town. The goal is to hire individuals that are willing to work long hours and weekends for the next three to five years as the new office opens and develops new clientele in the area. In order to avoid hiring and training employees who are unable to dedicate this extensive amount of time to their work, the small business asks potential young female employees about their plans to have children in the near future. Then, they exclude anyone who answers in the affirmative assuming they will need to take maternity leave.

A couple months later, the small business is sued on behalf of a class of applicants who were not hired for answering in the affirmative to the question regarding having children in the near future. Although the small business believes they were not trying to discriminate based on gender and were simply looking out for their company, they have violated the law by even asking such a question during an interview.  

Now the company will have to pay for a consult with an attorney, execute an hourly retainer, and allow the attorney to begin charging their $300+ hourly rate for every minute spent answering the complaint, speaking with opposing counsel, investigating the matter, filing additional motions, and a multitude of other actions required in a lawsuit. In a matter of weeks, the company will have spent thousands of dollars before it can even discuss settlement with these applicants.

Now, rewind a few months. If the small business had retained an attorney on an hourly basis or on a yearly “on call” retainer, and had it ran the questions being asked in an interview by its attorney, it would have learned that asking such a question was not legally sound. Furthermore, the attorney could have helped the company redirect its line of questioning without running the risk of getting sued. And, more importantly, the company would have spent 1/10th of the cost of defending a case in litigation. A few minutes and a couple hundred dollars are minimal in comparison to thousands upon thousands of dollars defending a case over a series of months or years.

Although it’s difficult for a small business to see the benefit of hiring an attorney, and paying a significantly reduced cost now, rather than risking an expensive lawsuit later, a small business owner should view the attorney the way they view health insurance or seeing a doctor regularly. One may be healthy; however, that does not stop one from having and maintaining health insurance over the years or having yearly wellness visits. Why? “Just in case,” because a few hundred dollars a month or a yearly visit to the doctor, is less costly than being admitted to a hospital for weeks due to a condition that could have been caught at an early stage, and incurring hundreds of thousands of dollars in hospital fees. In essence, an attorney is the “insurance” or “doctor” of a small business. It protects the company over the years and assures a “diagnosis” early on, before a matter can get more serious than the business can handle.

Wilson McCoy, P.A. offers basic hourly retainers as well as annual retainers, whereby a small business can call at any point with any questions and one of our attorneys will gladly answer them, review any documentation before the business sends it out or implements it, draft letters, draft handbooks, draft any other required documentation for the company, and conduct companywide audits and reviews to assure compliance at every step. In fact, Wilson McCoy, unlike other firms, will tailor our annual retainer to a company’s specific needs and budget to assure our clients are protected from facing the costs of a pricey lawsuit.