Being prepared in advance is often the key mitigator
Without proper forethought and effective policies in place, it only takes one incident to really put a business in jeopardy both financially and loss of reputation (and therefore their customer base). ARAG Legal Solutions Inc. completed a revealing Canadian survey of small business owners in August 2022 with results worth sharing.
At one point in time, Canadians used to consider that our neighbours to the south would sue one another over just about anything and that we were somehow above that kind of worry. Turns out Canada is not so far behind any longer when it comes to time in the courtroom.
With more than four-million small businesses operating in Canada, building out a strategy to combat liability is an essential element in the overall business plan. For instance, compared to 2015 when three out of ten businesses had legal concerns, this latest study shows a 230% increase in legal anxiety when seven out of ten are hearing the warning bells in the distance.
“About 62 percent were due to regular business operations. A surprising and worrisome insight was that three out of 10 small-business owners surveyed personally knew another business owner who was significantly affected by, or lost their business following, a legal dispute.”
And it’s not just the direct financial impact. Lost time away from the day-to-day operations costs as well. Focus and attention removed from leadership, team building and overall culture, never mind the mental and personal stresses of dealing with legal disputes.
According to the survey legal liability ranked third when it came to top-of-mind risks just behind data and cyber security but ahead of complying with tax, regulators, licensing, or even employee retention. In fact, contract disputes, collecting money owed and employee liabilities were top of mind at 61% and 36% respectively. Even more concerning, is less than a quarter would have the means to pay for the legal bill, having to rely upon personal lines of credit and other means to pay the bill.
Win or lose, legal liabilities impose a substantial business risk. As Howard Levitt outlined in his Financial Post article, court rulings can haunt you down the road.
Even if it is you who plans to sue, consider how a judge’s comments will appear to your family, neighbours, friends, colleagues, customers, existing and future employers. That’s because a judge’s findings are deemed, at law, to be accurate and are now part of the public record, accessible to anyone, including future employers.
“Unless your name is extremely common, you will be immediately identifiable if your story is covered in the media…Employers can be damaged by the optics of a court case if they are taking a position which would deter customers, suppliers, or potential recruits from working with them. That may be worth vastly more than what it might cost to go to trial.”
We love working with you and other experts in these fields. If you are interested in having a conversation on this or any other topic as it applies to employee group benefits, we would be pleased to engage.
Disclaimer: Please note that the information provided, while authoritative, is not guaranteed for accuracy and legality. The site is read by a world-wide audience and employment, taxation, legal vary accordingly. Please seek legal, accounting and human resources counsel from qualified professionals to make certain your legal/accounting/compliance interpretation and decisions are correct for your location. This information is for guidance, ideas, and assistance.
