6 Reasons Retailers Get Sued — and How to Avoid Them

Getting sued is a retailer’s worst nightmare. Lawsuits aren’t just stressful and time consuming, they’re notoriously expensive. With average attorney rates ranging from $250 to $550 an hour, businesses can expect to shell out hundreds of thousands dollars (likely more) in the event of a lawsuit.

Then there are the hard-to-quantify costs that come with the ordeal. Retailers can experience loss of business due to reputation damages and diminished customer trust. 

Needless to say, lawsuits in retail should be avoided at all costs. 

To do this, it’s important to understand why retailers get sued in the first place and what to do to protect your business and mitigate risk. Let’s dive in.

Employee discrimination

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Employee discrimation lawsuits are rampant in the retail industry, and they can come in various forms. 

In 2012, Costco faced a gender discrimination class action lawsuit when 700 female employees claimed that the retailer’s promotion practices discriminated against women.

More recently in 2019, Dollar General paid $6 million dollars to settle a racial discrimination lawsuit, when it was found that the company denied employment to African Americans at a significantly higher rate.

Getting sued for discrimination is a painful process, so it’s imporant to be aware of what constitutes as discrimnation and how to ensure that you’re not violating any laws. 

According to the U.S. Equal Employment Opportunity Commission (EEOC), there are various types of discrimination that can occur in the workplace. They include (but aren’t limited to):

  • Age 
  • Disability 
  • Genetic Information 
  • Pregnancy 
  • Race/Color 
  • Religion 
  • Sex

As a business owner, you need to be mindful of these things and ensure that you provide equal pay and opportunities to all employees and applicants regardless of the above-mentioned factors. 

The EEOC states that in certain cases, you may need to “provide reasonable accommodations (changes to the way things are normally done at work) because of an applicant’s or employee’s religious beliefs or disability.”

A poster describing federal employment discrimination laws must also be posted at your locations. 

Customer discrimination

Discrimination can also take place on the shop floor. Lawsuits, particularly when it comes to racial discrimination, are common.

One example is a 2018 case against Lord & Taylor, in which the retailer was investigated for disproportionately targeting black and Hispanic customers in its surveillance, apprehension, and other shoplifting prevention procedures. Lord & Taylor ultimately agreed to settle the case for $100,000.

Just like with avoiding employee discrimination, the first step to protecting your business from these lawsuits is to be aware of the types of discrimation that may occur and ensure that they’re avoided.

In general, shopper discrimination lawsuits take place when businesses violate civil rights laws such as California’s Unruh Civil Rights Act, which requires business establishments to offer “full and equal accommodations, advantages, facilities, privileges or services” to all customers.

Understand that you need to extend the same treatment to shoppers regardless of their age, gender, race, etc. 

Also, make sure that this is instilled in your employees. Many customer discrimation lawsuits stem not from corporate policies, but because store employees end up profiling or discriminating against shoppers. As such, educating your frontline teams on equal shopper treatment is a must. 

Labor law violations when it comes hours and pay

Mishaps around employee scheduling and wages can land you in legal hot water. Just ask Dollar Tree, which settled a class action employment lawsuit for $2.5 million in 2020. The plaintiffs sued Dollar Tree for violating wage and labor laws in California. It was alleged that the retailer implemented poor timekeeping procedures and failed to provide appropriate breaks to workers. 

The best way to avoid wage and labor law violations is to set up proper procedures. Not all violations are committed with malicious intent. Sometimes, they take place due to human error or lack of the right systems.

As much as possible, automate tasks like scheduling shifts, setting breaks, and tracking hours worked. Equip your business with a good employee scheduling platform to streamline attendance and timekeeping, then integrate it with your payroll system so that hours, wages, and overtime pay are calculated automatically. 

It’s also important to familiarize yourself with labor laws in your area. 

The Fair Labor Standards Act (FLSA), which “establishes minimum wage, overtime pay, recordkeeping, and youth employment standards” is a good place to start, though it’s important to also be aware of your state’s specific requirements. Minimum wage laws, for example, vary from one state to another. 

Premises liability

As a retail establishment, you have a duty to keep your premises safe and secure. Failing to do so could result in slip-and-fall incidents and premises liability lawsuits. 

In 2012, a Costco customer was awarded over $400,000 as a result of a premises liability lawsuit

Here’s what happened: the woman slipped and fell on a puddle of soap while at a Costco store. Several employees were apparently aware of the puddle but simply walked by without doing anything. In court, the judge sided with the plaintiff, who was awarded $90,000 for medical expenses and $325,000 for pain and suffering. 

Prevent your business from getting embroiled in a similar incident by keeping your locations clean, safe, and secure — especially when you have customers in-store. 

Start by investing in equipment and fixtures that can reduce spillage and falling merchandise. If you’re storing products in retail shelves, make sure you’re using the appropriate size for the products on display. 

Next, keep your store and everything in it properly maintained. Adhere to the maintenance schedule of any equipment or machinery. Also, conduct regular inspections of your premises to catch potential safety issues before they escalate. 

Having a surveillance system such as cameras can help you monitor your premises and identify risks or issues. If an incident takes place, having it on tape will enable you to determine what really happened so you can minimize false claims.

In the event of falling merchandise or spillage, take quick action to fix it. Clear the aisles and clean the mess ASAP. If you’re unable to resolve it immediately, display warning signs so customers are aware of any safety hazards. 

Conduct regular store audits to keep your stores in check. Have your district managers inspect your store and identify anything that is out of compliance. If issues come up, assign those tasks to the right people and get confirmation when they’ve been resolved. 

Lastly, make sure that you document everything. Keep a log of your inspections, audits, and everything you’ve done to prevent safety incidents. Doing so will help protect your business from claims and lawsuits. 

Trademark infringement

Trademark infringement, according to the United States Patent and Trademark Office, “is the unauthorized use of a trademark or service mark on or in connection with goods and/or services in a manner that is likely to cause confusion, deception, or mistake about the source of the goods and/or services.”

Essentially, if you release something  (e.g., a new product design) that resembles an existing product that’s been trademarked — and what you’re doing causes confusion on the original source of the idea — you may be sued for trademark infringement.

That’s what happened when Variety Stores (which owns Roses and Maxway discount stores) sued Walmart for infringing on its trademark for “The Backyard,” a section within Variety’s stores that offers lawn, garden, and outdoor products. 

In 2014, Walmart opened “Backyard Grill,” and Variety sued the retail giant, arguing that Walmart wilfully infringed on Variety’s trademark. In 2018, a federal jury sided with Variety and Walmart was ordered to pay $50 million dollars.

The best way to avoid trademark infringement is to do your research. If you’re thinking about launching a product, promotion, or any type of initiative, check if it has already been trademarked. 

Keep a critical eye on any ideas being implemented in your business and make sure that whatever you’re doing doesn’t cause confusion, particularly if there are companies who are doing something similar. 

When in doubt, consult an attorney who specializes in intellectual property. Run your ideas by them and get advice on the right way to move forward. 

Digital accessibility 

Digital accessibility lawsuits happen when websites or apps fail to be “meaningfully accessible” to all users, including those who are blind, visually impaired, or have seizure disorders. 

Retailers are the types of business that are sued most often for digital accessibility. Data from UsableNet Inc., shows that in 2020, 77.6% of all digital accessibility lawsuits involved retailers

One example of such a case is PAGUADA v. SPICEOLOGY, INC. In late 2020, Dilenia Paguada filed a complaint alleging that Spiceology’s website doesn’t meet the right accessibility standards. 

There’s a long list of alleged issues and violations, which include items such as:

  • The lack of alt. text on many features of the website 
  • Failure to properly label certain fields 
  • Insufficient headings and instructions 

Many factors are involved in digital accessibility, so the right course of action depends on the nature of your site.

In general, you’ll want to take steps to make the online shopping experience more inclusive. Evaluate your website from the perspective of a customer who is visually- or hearing-impaired. Are all the elements of your site properly labeled? Do you have enough descriptive text, so that someone using a screen reader or modified assistive tool can consume your content? If you have videos, do they have the accurate captions?

Addressing these things will go a long way in making your website more accessible. 

Final words

Getting your legal ducks in a row is an ongoing effort. Keeping yourself and your teams educated about legal issues is a must.  

It’s also essential to regularly audit and evaluate your efforts to limit risks and liabilities and ensure that you’re not violating any laws.

To that end, having a tool like Compliant IA can ensure that all your stores are compliant with the right laws and regulations. Our software makes it easy to conduct audits and implement corrective action. Take a free trial. 

About the author:

Francesca Nicasio is retail expert, B2B content strategist, and LinkedIn TopVoice. She writes about trends, tips, and best practices that enable retailers to increase sales and serve customers better. She’s also the author of Retail Survival of the Fittest, a free eBook to help retailers future-proof their stores.

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