While conducting business, there are countless legal issues that a company may run into. Some, such as negligence in product liability and occupier’s liability, are obvious and most companies already have mitigation measures in place. Others are not considered as frequently and can even happen accidentally.

While unintentional, these mistakes can have consequences that are just as severe. Here are several legal risks that all companies should incorporate into their risk management plan.

6 Legal Risks Companies Shouldn't Forget

1. False imprisonment

False imprisonment is intentionally confining someone without legal authority or denying them from being where they are legally permitted. This can be an issue for retailers or other businesses where customers are on the physical premises.

A company can’t detain a person unless there is definitive proof that they were stealing or committing some other crime; suspicion is not enough. Even if there is proof, the store cannot hold them without calling the police.

Refusing to let a person leave the store can be cause for false imprisonment charges.


2. Defamation

It can be illegal to say something untrue about another person, brand, or company that will negatively affect them. Slander is making a false spoken statement that damages their reputation, while libel is in print.

When brands are creating ads that compare their products to a competitor, they must ensure that they are stating the benefits of their product instead of attacking the competitor’s. Comparative advertising is held to different standards in different countries, so research the laws in your area before creating an advertisement.

For example, in the US these ads are encouraged, as they can be beneficial to consumers (as long as the claims are true and accurate). In Canada, just using another company’s trademark in certain types of advertising can be cause for a lawsuit. If you can get your point across without tearing down another brand or person, it’s safer.


3. Invasion of privacy

This may seem an odd one to include here; how can a company invade someone’s privacy? It is defined as the “unlawful invasion into the personal life of another person without just cause”.

Algorithms and targeted marketing today are starting to become dangerously close to this definition. We’ve all been there: you search something on Google once and suddenly it’s advertised all over your social media feeds. 

here was a viral case in 2014 where a man who had recently lost his child received an advertisement letter addressed with his name followed by “daughter killed in car crash”. While he chose not to sue, he certainly could have had a case: the store had no business knowing this piece of personal (and tragic) information, let alone using it as part of an advertising scheme.

While customers value personalization and customized experiences to some extent, companies must ensure that they are not crossing the line and coming across as creepy or too involved.


4. Misrepresentation

A company cannot advertise their product or service as something it is not. Claims about its benefits and features must be accurate, proven, and not misleading.

There are many specific guidelines to follow: for example, on a product you must state specific information such as the product’s name, its quantity, and your contact information. Core label requirements for food products include bilingual labelling, country of origin, list of ingredients, nutritional information, and more.

There are also guidelines in place for specific products such as textiles, precious metals, and pharmaceutical drugs. Failure to follow these will result in an inability to sell your product or legal action.


5. Vicarious liability

Employers are not only responsible for the actions they take while on the job, but their employees as well. For example, if an employee injures a customer while performing a duty that is part of their job, their manager, the store, or the entire company can be held partially responsible.

This even extends to accidents outside the workplace: if you host a workplace party, provide alcohol to an employee, and allow them to drive home, you are partially responsible if they injure somebody. Employers have control over the employees they allow to interact with their customers and the general public, and are therefore at least partially at fault for their actions if something goes wrong.


6. Intellectual property

Copyright automatically comes into existence when a piece of work (text, a video, a picture, a speech, and so on) is created and generally lasts for the life of the creator plus 50 years. These rights protect the creator from having someone else benefit from their creation. Copyrights don’t have to be formally registered, but can be helpful if you need to sue for infringement.

Trademarks have to be registered nationally and last ten years. At the end of each term, it must be renewed to maintain its protection rights. These rights can go on indefinitely if the company continues to pay the fees. Trademarks typically include brand names, logos, colour combinations, or slogans.

Patents are registered on a first-come, first-serve basis and prohibit anyone but the creator from manufacturing a product. Products must be new or a new, innovative use of an existing product. To receive a patent, you must provide the full details of how the product works and how it is made. After 20 years, the patent expires and the information is free for the general public to access and use. Patents cannot be renewed.

These are the pillars of intellectual property, or non-physical assets, that companies can own. They belong to a company just as much as a piece of land or a product does, and if you violate their rights, they can sue you. Similarly, if somebody tries to copy something that you created, it is beneficial to have it registered.

To avoid encountering these issues, never present another company’s work without giving credit or try to pass it off as your own, don’t attempt to replicate another company’s brand or products, and above all else, do your research before beginning a project to ensure it is original.

Managing these risks is as simple as being aware that they exist. As long as you acknowledge and consider them before making production, advertising, or employment decisions, you’re well on your way to effectively mitigating these sometimes forgotten legal risks. Of course, you should also always consult your lawyer or legal team. 

ClearRisk's Risk Management System can also help you track the relevant information needed to stay on top of your legal risks. Want more information? Learn more below. 

If you found this article helpful, you may be interested in: