Another risk in discrimination cases? Shareholder lawsuits

On Behalf of | Mar 1, 2021 | business litigation

When employers face employment claims, they know that they also face high legal risks. Dealing with the claim itself can be time-consuming and expensive, but companies nowadays can face a barrage of bad press coverage if these claims become public as well.

However, these are not the only risks that could put the business in jeopardy. As a recent case illustrates, companies could also face legal disputes with the shareholders of their company.

Report: Shareholders take legal action against Pinterest

Throughout 2020, Pinterest faced a number of discrimination claims from individuals at all levels of their business, with several complaints from their employees and their former chief operating officer. And the company’s shareholders compounded these legal cases by adding their own in December.

Pinterest’s shareholders filed a lawsuit against the company, executives and the board of directors, claiming that they failed to:

  • Address illegal workplace biases and actions
  • Monitor issues of unequal pay
  • Prevent a toxic culture of racial and sexual discrimination
  • Uphold their fiduciary duty to investors

The claims state that the defendants were aware of these issues but did not act to resolve them.

Prompt action is essential to avoid this risk

Shareholders reserve the right to sue directors of the company if they cause harm to the business – and, in turn, the shareholder’s investment in the business.

Business owners and employers alike must be proactively aware of this risk. Any issues that could harm the businesses could lead to shareholder disputes that could develop into litigation. This often only spells greater losses for businesses on top of the other legal issues they face.

Employee claims are a common risk that business owners face throughout their career, but there are steps they can take to reduce the harm they cause to the overall business. Business owners should:

  • Ensure their employee handbook and policies comply with California law
  • Make sure they adhere to those policies
  • Respond efficiently and effectively to employee complaints and reports

A consistently fair and prompt response can help avoid larger legal issues with the employees themselves, as well as ensuing shareholder disputes in the long run.