Should small business owners worry about class action lawsuits?

On Behalf of | Nov 19, 2021 | business litigation

It is not uncommon to hear about class-action lawsuits against big companies in the news. The video-sharing platform TikTok is just one of the latest businesses facing an onslaught of headlines regarding a class action.

While many might believe that the larger the business, the greater the risk of litigation, class-actions could pose a risk to businesses of all sizes.

Myth: Only big businesses could face class-action lawsuits

Bigger companies could very well face a larger risk of class-action lawsuits simply because they have a greater range of interaction with customers and employees. However, the increasing digitization of the business world is quickly undermining that. Businesses of all sizes take advantage of social media and online platforms to grow their business and gain exposure. In turn, this could increase their exposure to risk as well.

Additionally, a class-action lawsuit does not require several plaintiffs – such as the cases that reach national news headlines often do. It only takes one or more individuals to file a claim in representation of a larger group who suffered similar damages.

Therefore, even small businesses could face the risk of class-action lawsuits.

What is the biggest risk small businesses face?

It is most common for businesses to face class-action lawsuits from:

  • Employees or former employees
  • Consumers
  • Other businesses, namely vendors or suppliers

Class-action lawsuits brought by employees are likely the most common risks for smaller businesses. For example, payroll mistakes or claims of discrimination could affect several employees, leading to widespread complaints and legal action. These issues may not necessarily result in a class-action lawsuit, but it does include the general factors that make up such a lawsuit.

What should businesses do?

These lawsuits require business owners to strike a delicate balance between:

  1. Addressing the dispute effectively
  2. Managing public relations
  3. Protecting the product, service and the business

This requires a proactive, aggressive but intelligent approach. Facing complicated lawsuits might be common in the business world, but that is precisely why smaller businesses must take creative steps to secure the future of their business and avoid the threats these lawsuits could pose.