This New Kind of Expensive Lawsuit Could Easily Bankrupt Your Small Business


Originally published in Entrepreneur

By John Shunk

In recent years, a parade of household names have been hit by lawsuits accusing them of underpaying or misclassifying their workers. So-called wage-and-hour suits have been brought against Walmart and Amazon, among many other of the world’s largest employers, on the basis that they failed to pay required wages and overtime to workers.

Meanwhile, ride-sharing service Uber is being sued for misclassifying its drivers as independent contractors rather than employees, a claim that strikes at the heart of the very business model of one of the world’s fastest-growing companies.

For owners of smaller businesses, it’s easy to look at these corporate giants and assume that the same rules and risks don’t apply. That would be a mistake.

In my work, I regularly see smaller companies, even those that belong in the “mom-and-pop” category, getting hit by lawsuits over their employment and wage practices. In fact, the smaller the company the higher the risk — and the higher the potential to go bankrupt. While a successful lawsuit can be absorbed by the Amazons and Walmarts of the world, it can be an existential threat to non-giants and very costly even if the companies prevail.

Read the full article in Entrepreneur

John Shunk is Head of the Labor & Employment Practice Group and Messner Reeves.