Most legal trouble in a small business doesn’t start with a lawsuit. It starts with an outdated handbook, a missing contract, a mixed-up bank account or a termination handled in a hurry. This checklist covers the areas every Massachusetts business owner should review at least once a year, with links to more detailed guides.
1. Employment law compliance
Massachusetts and federal law both govern how you hire, pay, schedule and manage employees. Make sure your policies and practices reflect, among others:
- The Massachusetts Wage Act, including on-time pay and final paychecks
- Earned sick time and any vacation policy, since earned vacation is treated as wages
- Paid Family and Medical Leave (PFML) and, for employers with 50 or more employees, the federal FMLA
- Anti-discrimination and sexual harassment laws, including religious accommodation
- COBRA or state continuation coverage for group health plans
2. Policies, handbooks and job descriptions
Written policies on hiring, discipline and termination protect a business only if they’re current and actually followed. Liability risk goes up when an employer ignores its own procedures. Review the employee handbook against current law, and keep job descriptions accurate, since they’re often the first document examined in a discrimination or accommodation dispute.
3. Hiring and contracts with workers
- Vet new hires for the job and for any risk they bring, such as an existing non-compete with a former employer.
- W-2 employees. Massachusetts employment is generally at will, but a written agreement can make sense for key employees, especially to add confidentiality, non-solicitation or non-compete terms.
- Independent contractors. Use a written agreement, but confirm the worker really passes Massachusetts’ strict three-part test. A 1099 alone doesn’t make someone a contractor.
4. Protecting trade secrets and intellectual property
Confidentiality agreements, invention assignment clauses and carefully drafted separation agreements help protect customer lists, pricing, methods and other confidential business information. Limit access to sensitive information to the people who need it.
5. Terminations and separation agreements
How you end an employment relationship can create or prevent a claim. Follow your own disciplinary and termination policies, document performance problems as they happen, keep written communications professional and limited to what’s necessary, and pay final wages on time. A separation agreement with a release can make sense when the risk of a claim outweighs the cost of the payment. That’s a judgment based on the facts of each case.
6. Unemployment claims
Most Massachusetts employers pay into the unemployment insurance system, and former employees can usually file for benefits. An employer can contest a claim. A worker discharged for deliberate misconduct, or for a knowing violation of a reasonable and uniformly enforced policy, may be disqualified. Respond to the Department of Unemployment Assistance on time, and with documents.
7. Vendor and customer contracts
Read every contract for indemnification, limitation of liability, insurance, automatic renewal and termination terms before you sign, and negotiate one-sided terms out where you can. When you’re the one drafting, strong protective language for your own intellectual property or assets can be appropriate. See contract drafting for your Massachusetts business.
8. Records, filings and the company itself
- Annual reports. Corporations and LLCs must file annual reports with the Secretary of the Commonwealth. Missing them can lead to administrative dissolution.
- Company documents. Keep your organizing documents, operating agreement or bylaws, meeting minutes and ownership records up to date.
- Personnel records. Keep hiring documents, payroll records and personnel files, and remember that employees have the right to review their personnel records.
9. Bank accounts and commingling
Keep a separate operating account for the business, and separate accounts for separate business lines where it makes sense. Use business funds for business expenses only. Mixing personal and business money is one of the most common reasons a court will let a creditor reach an owner’s personal assets.
10. Insurance
Confirm each carrier has your current business information, locations, activities and payroll. An out-of-date policy can be the difference between having coverage and not having it. Review general liability, professional liability, employment practices liability and cyber coverage with your agent.
11. Collecting what you’re owed
A business that’s been treated unfairly by another business may have a claim under Chapter 93A, section 11, which allows double or triple damages and attorney’s fees for willful or knowing unfair or deceptive conduct. Unlike consumer claims, a section 11 claim doesn’t require a pre-suit demand letter, though a well-drafted letter often prompts payment. For ordinary unpaid invoices, collection letters, negotiation, and a lawsuit for breach of contract are often more efficient.
12. Closing the business
If the business is winding down, follow the legal steps to dissolve it, pay creditors in the right order, and end its legal existence. See how to close a Massachusetts business.
Getting a business checkup
Attorney Gaudet can review your contracts, handbook, worker classifications and company records, and help you fix gaps before they turn into disputes. Call 978-273-8337 or contact our office.
About the Author
Richard Alan Gaudet, Esq. is a Massachusetts attorney at the Law Offices of Richard Alan Gaudet, LLC in Middleton, Massachusetts, who advises business owners on compliance, contracts, employment and risk management. His practice focuses on professional license defense, business law and litigation, family law, and landlord representation, serving clients across Northern, Eastern, and Central Massachusetts. Reach him at 978-273-8337 or rgaudet@gaudetlawoffice.com. Office: 35 Village Rd., Ste 100, Middleton, MA 01949.
ABOUT THIS ARTICLE
This article was prepared by a Massachusetts attorney and is provided solely for general informational and educational purposes directed to members of the general public. It does not constitute legal advice and does not create an attorney-client relationship. The law applicable to any particular situation depends on the specific facts and circumstances of that matter. Readers are encouraged to seek the advice of a licensed Massachusetts attorney before taking any action.
