The Cost of Damage Control v. The Cost of Prevention

The Cost of Damage Control v. The Cost of Prevention

On Behalf of | Apr 27, 2015 | 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.