Mistakes That Can Turn Everyday Business Decisions Into Litigation in California

Running a business in California can be rewarding, but it is not without challenges. Business owners are at an increased risk of facing legal trouble. Every decision you make as a business owner carries potential legal consequences. What might seem like a simple, everyday decision can unexpectedly lead to expensive disputes and litigation if mistakes happen.

Understanding the common mistakes that can turn everyday business decisions into litigation is crucial for protecting your business and ensuring long-term success. Below, we discuss these common traps.

1. Relying on Verbal Agreements

One of the biggest mistakes business people make is not putting agreements in writing. While oral contracts can be legally binding under California law, relying on these contracts creates significant risk. Disagreements often arise over the scope, obligations, and payments. Such disputes can easily lead to costly litigation.

2. Poorly Drafted Documents

It is not enough to have contracts. You must ensure that the contracts are well-drafted and do not leave any room for misunderstandings. Avoid using generic online templates or vague language. Contracts should be customized to specific situations to include the essential clauses.

3. Poor Recordkeeping and Documentation

Another mistake that can turn everyday business decisions into litigation is poor recordkeeping and documentation. Operating a business without proper documentation of decisions can lead to misunderstandings. Documentation is crucial for clarifying decisions, agreements, and actions. For example, keeping accurate financial records can help clarify what was owed, paid, or agreed upon, thus preventing confusion and disagreements with clients, partners, or vendors.

4. Overlooking California Employment Laws

If you are an employer, you need to ensure that you comply with the state’s employment laws. Some of the California employment laws you must comply with include:

• Correctly classifying workers
• Paying employees at least the minimum wage
• Paying employees overtime
• Giving employees meal and rest breaks
• Not discriminating against or harassing employees

For example, if you misclassify an employee as an independent contractor (even unintentionally) or fail to provide required breaks, you may face employee claims and lawsuits.

5. Ignoring Intellectual Property Protection

As a business owner, do not make the mistake of assuming that your ideas, products, or branding are automatically protected. You must secure trademarks, patents, or copyrights to protect your intellectual property (IP). Without these legal protections, you risk facing infringement claims. Infringement claims arise when another party accuses you of using, copying, or distributing their protected IP without authorization. It is vital to conduct thorough due diligence and obtain proper IP protection to protect your business.

6. Making Decisions Without Legal Guidance

It is common for business owners to make decisions based on intuition or advice from non-legal sources. This approach can sometimes lead to mistakes that can have serious legal consequences. Consulting an experienced business law attorney before entering a contract, hiring employees, or making financial decisions can help identify risks early and prevent you from making decisions that can lead to litigation.

If mistakes are made, even a simple, everyday business decision can be the basis for costly litigation. It is crucial to adopt proactive strategies, such as ensuring compliance with the law, putting contracts in writing, and consulting an attorney, to protect your company.

Contact Us for Legal Help

If you need help protecting your business, contact our skilled business attorneys at SAC Attorneys LLP to schedule a consultation.