How to Resolve Small Business Conflicts

Small businesses are businesses that are owned and operated privately. These businesses maintain a relatively low volume of sales, as well as a small number of employees. U.S. small business standards vary by state and on an industry-by-industry business. Small businesses are becoming more popular due to the ease of operation, and because certain tax deductions for small businesses are commonly available.

Generally speaking, a small business is defined as having less than five hundred employees for manufacturing industries, and less than $7 million in annual income for non-manufacturing industries. Small businesses generally take the form of a corporation, partnership, or sole proprietorship.

As with any other business organization, small businesses may be exposed to conflicts and disputes over legal issues. Simply because a business is smaller does not mean that the business will be free from conflict. Small businesses may be involved in very specific legal conflicts due to their size and specificity of operations. 

Some examples of the most common small business conflicts may include:

• Hiring and termination disputes;
• Disputes over business property and assets;
• Zoning, land use, and property use conflicts;
• Disputes over loans and financing; and
• Conflicts regarding the company’s structure or formation.

Additionally, small businesses may frequently experience internal disputes between workers, owners, and others involved in the business. Small business management disputes can create challenges for the business while causing setbacks in terms of production and profitability. Many small business conflicts may involve personal disputes, especially when considering smaller family-run businesses.

Some common examples of small business management conflicts may include:

• Conflicts with employees;
• Labor union conflicts;
• Issues with white collar crime such as tax evasion or fraud;
• Disputes with other businesses, such as those involving trade secrets, unfair competition, etc;
• Handling employee benefits and wages; and
• Compliance with federal and state laws, such as ADA (Americans with Disabilities Act) and handicap accessibility laws.

How Are Small Business Conflicts Resolved? What Are Some Legal Remedies Involved in Small Business Lawsuits?

There are a number of means through which small business conflicts and disputes may be resolved. The most common examples of such means generally include:

• Mediation;
• Alternative dispute resolution;
• Government investigations; and
• Lawsuits.

An example of this would be how a dispute over a single item of business property may simply require mediation in order to be effectively resolved. However, larger disputes such as those involving the sale of a building may require a lawsuit in order to resolve the issue. Other types of small business conflicts may be resolved through other means, such as re-working a business contract, or rewriting an employment policy. These actions can help redefine the company’s aims in order to help avoid similar conflicts in the future.

Generally speaking, many small business lawsuits result in a damages award as the primary form of legal remedy. This award is intended to help reimburse the plaintiff for financial losses and costs incurred because of the defendant’s actions. Other legal remedies may be more specific, such as a requirement that the defendant transfer a certain business asset to the plaintiff. Available remedies all depend on the facts of each individual case, as well as state and local business laws.

In some small business conflicts, the type of available remedy may depend on the type of small business involved. An example of this would be how in a dispute over business ownership, the remedy may depend on whether the business is an LLC or a partnership.

What Is Business Dispute Resolution? What Is Alternative Dispute Resolution?

Business dispute resolution serves as a cost-effective alternative to a formal lawsuit and generally involves the intervention of a neutral, third party mediator. This person can facilitate discussions between the disputing business parties, who can then negotiate a settlement or other type of business decision that will best fit their needs. An example of this would be how they might come up with a payment plan for debt, or they may modify a contract term.

Doing so can lead to a much more accurate resolution than one reached by a court. This is due to the fact that all of the parties involved in the dispute can participate in negotiations. However, the caveat is that the parties must be willing and able to act in a cooperative manner.

Alternative Dispute Resolution, or “ADR”, is an alternative to litigation. Through ADR, the parties at odds agree to be bound by the decision of an independent and impartial third party. ADR conferences generally encourage parties to settle their dispute without going to trial. As such, ADR is generally less formal, expensive, and time-consuming than taking the case to trial.

Arbitration and mediation are the two most common types of ADR. While there are differences between the types of alternative dispute resolution, all of them generally share the common goal of avoiding a court trial.

Some examples of the most commonly used types of alternative dispute resolution include:

• Mediation: In mediation, there is always a third-party mediator who is responsible for helping the parties reach a mutual agreement to the dispute. The mediator is not exactly a true decision maker in the process; rather, the mediator helps the parties in communicating with one another in order to settle the dispute without going to trial. They are moreso conversation facilitators. Mediations are particularly useful when parties want to preserve their relationship or working arrangement with one another;
• Arbitration: Similar to mediation, arbitrations employ a neutral person referred to as an “arbitrator.” This is a person who hears the arguments and looks at the evidence of each side. The arbitrator then uses that information to decide the outcome of the dispute or conflict. Arbitration is less formal than a trial, and does not follow the formal court rules and procedures for evidence; and
• Neutral Evaluation: In a neutral evaluation, each party presents their case to an evaluator. Once again, this person is a neutral third party. After hearing each side’s case, the evaluator then gives their opinion on the different strengths and weaknesses of each party’s case, evidence, and arguments. The evaluator presented with the case is usually very experienced in the particular subject matter at hand. An example of this would be if the legal dispute involves a business matter. The evaluator will usually have education, training, and experience in the business realm.

State laws may vary regarding each different type of alternative dispute resolution. In some cases, ADR may be prescribed or ordered by the court. A common example of this would be how in many divorce or other family law matters, the parties may need to undergo court-ordered mediation in order to help them resolve their disputes.

Should I Hire a Lawyer for Help with Resolving Small Business Conflicts?

Small business conflicts often involve major disputes, and may also involve significant amounts of money, property, and assets. You should consult with a local small business lawyer if you are filing a claim or a lawsuit. An experienced and local business attorney will be best suited to ensuring you understand your state’s laws regarding businesses and dispute resolution. 

An attorney can also help you gather evidence to support your claim, and help you determine whether alternative dispute resolution would be better for your case than litigation. Finally, an attorney can also represent you in court as needed, should the dispute require court intervention in order to be resolved.