In land of lawsuits, 10 ways to stay out of court

Published Mon, Mar 17, 2008 12:00 AM

By BEN PILLOW    

There were about 100,000 attorneys in the United States at the beginning of the 20th century. Now, there are 1 million.

That's approximately 70 percent of the world's total, and 94 percent of all lawsuits across the globe are filed in this country. In dollar figures, the U.S. tort system costs more than $260 billion per year, about $880 per person.

Those statistics come from Beth Milito, senior executive counsel for the Legal Foundation of the National Federation of Independent Business. Speaking in Beaufort recently, she cited "the dramatic rise in the costs and the number of lawsuits" as one ofthe primary concerns of small-business owners.

Her presentation on 10 ways to stay out of court to about a dozen local small-business owners two weeks ago at Golden Corral was meant to address those concerns. She started with a "horror story" that highlighted America 's leading litigation role:

A Pennsylvania man and his wife sued a general contractor and a small coal company for negligence, claiming $10 million in damages, after the man was injured in a portable toilet explosion. It happened when the man, a methane power plant operator, entered a portable toilet at the coal mine and tried to light a cigarette.

"When I struck the lighter, the whole thing just detonated. The whole top flew off. I can't tell you if it blew me out the door or if I jumped out," he told a local newspaper.

The basis for the negligence claim? The lawsuit said there was no sign on the portable toilet warning that smoking and open flame were forbidden.

"No common sense, right?" Milito said. "So rather than naively hoping that the lawsuit insanity will just pass your business by," she offers the following 10 steps business owners can take to help ward off the threat of a lawsuit.

*Rule No. 1: Incorporate. Milito said going alone often provides poor asset protection and poor tax benefits, and she recommends having an attorney or accountant review corporate records once a year.

*Rule No. 2: Know the law. "Ignorance is no defense, and in fact it's a good way to get sued," Milito said. Small-business owners should particularly focus on employment and tax laws. Good record-keeping and proactive tax planning are key.

*Rule No. 3: Maintain adequate insurance. Milito recommends an "insurance physical" every few years and said business owners should be aware that it's possible to be over-insured. Employment-practices liability insurance can help businesses respond to claims of employment discrimination.

*Rule No. 4: Manage fairly and wisely. Business owners should beware of falsified risumis, have detailed job descriptions, tackle poor performance early and consistently enforce policies, according to Milito.

*Rule No. 5: Prohibit harassment. A 2007 Texas case indicates "some male supervisors are still truly clueless, no offense to any males in the room," Milito said. She went on to summarize the case:

A male director of nursing was accused of quizzing female employees about their sex lives two to three times a week in front of other employees, including asking them if they took men home the previous night. When the women asked him to stop, he threatened to fire them.

"At trial, he admitted he was questioning the women this way because he thought that if they had a lot of sexual activity the night before, it would affect their work performance because they would be tired -- that's what he said. I can't believe this case even went to trial," Milito said. The jury awarded each woman $7,500.

*Rule No. 6: Catch and correct wage and hour violations. Milito called failure to pay overtime "the new food for plaintiffs' attorneys." Since 2003, federal court filings involving wage actions have surpassed employment discrimination cases, and settlements have reached into the tens of millions of dollars, she said.

*Rule No. 7: Be careful with independent contractors. Milito urges regular reviews of independent contractor classifications and careful consideration of how much control business owners have over contractors.

*Rule No. 8: Watch out for workers' compensation claims. Adequate training and maintaining a drug-free workplace can prevent accidents. If they do occur, Milito said immediately reporting claims and having a return to work commitment helps. Signs of possible fraud include claims by a disgruntled or new employee, an employee on leave who is difficult to contact, or accidents to which there are no witnesses.

*Rule No. 9: Hire an attorney. Milito recommends interviewing several before making a selection, holding regular meetings to compare case progress with budget constraints and requiring authorization for expenses exceeding $200.

*Rule No. 10: Document, document, document. Keep tax-related records for at least eight years, employee records for the term of employment, plus five years, and shred papers before disposal, Milito said.