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7 Legal Issues Small Businesses Can Face During COVID-19 and Tips to Reopen

— May 10, 2021

Running a business is hard. Right now, the pressure of tackling a company is even more challenging. An attorney can help you create strategies that help.

Legal matters are a big concern for small business owners during the pandemic. Business survival is a crucial thing during this crisis time. Taking state and federal laws lightly can put your small business at risk. So, being aware of the various legal issues and the ways to tackle them is essential.

Types of legal issues small business faces during COVID-19 pandemic

1. Employee complaints

Business owners need to follow the state and federal guidelines. Following employment laws is also crucial to protect the employees. The Family and Medical Leave Act (FMLA) and Families First Act  mandate employers to provide 2 and 12 weeks of paid leave based on the situation. The Occupational Safety and Health Administration (OSHA) mandates employers to provide personal protective equipment (PPE). Monetary crisis due to COVID-19 prohibits the business owners from following some rules. Employees can file lawsuits in violation of state and federal guidelines.

What to do:

1.Keep the work environment safe for your workers.

2.Be sure you provide masks or PPE to employees and workers.

3.Create a policy for employees or their families dealing with COVID-19.

4.Follow the legalities of testing employees for COVID-19.

5.Update your employee handbook from time to time.

6.Avoid violating anti-discrimination laws.

2. Bankruptcy

From last year, United States business bankruptcies increased by 48%. Many small businesses are in massive debt and have to file  Chapter 13, Chapter 11, or Chapter 7 bankruptcy to repay their debt. Many people know that bankruptcy is a complicated legal subject that can lead to stress and hassles. Your legal help can advise you on the best repayment plan in Chapter 13 bankruptcy. You can consider liquidation (Chapter 11 and 7 bankruptcy) on a recommendation. However, restructuring isn’t even an option if the debt is massive. So, analyzing your current debt situation is essential. Seeking professional legal help is the only option.

What to do:

1.Explore federal, state, and local financial relief programs.

2.Seek debt relief.

3.Talk to a bankruptcy lawyer for advice.

3. Customer complaints

Business owners need to take safety precaution measures for their customers. For example, retail businesses need to ensure that the premises are safe for customers. Non-enforcement of social distancing and sanitary measures can raise legal hassles. A customer can take a legal stand for not following COVID-19 safety guidelines.

What to do:

1.Follow the guidance provided by the Centers for Disease Control and Prevention (CDC).

2.Follow the guidelines prescribed by the World Health Organization (WHO).

3.Check the recommendations on keeping workers safe.

4.Follow the social distancing parameters stated by the government.

5.Follow the sanitation instructions as mentioned by the government.

6.Restricts the number of visitors. 

4. Commercial rent

Apartment building with giant calendar on it, “Rent Due” in red ink on May 1; image by Morning Brew, via
Image by Morning Brew, via

Most of the small business owners rent space to run their businesses. Due to the economic loss during this pandemic, they are unable to pay the rent. Business owners are shutting down their companies and breaking leases. As a result, landlords are taking legal action against the business owners. Legal issues are preventing the business owner from reopening the business.

What to do:

1.Negotiate deals with the landlord to reduce the rent.

2.Know your state rules on lease termination. Some states allow tenants to terminate leases.

3.Get bankruptcy protection under The Coronavirus Aid, Relief, and Economic Security (CARES) Act. 

5. Unpaid business loan

Small business owners are in massive debt due to the economic crisis. They are facing the threat of closing down due to unpaid business loans. The fear of losing collateral like homes and cars is visible. Federal government funds were unable to reach many business owners who needed them. So, banks are sending legal notices to ensure they get their money back.

What to do:

1.Filing bankruptcy is the only option in the absence of assets.

2.Seek professional debt relief help to settle the business loan.

3.Try to get your Paycheck Protection Program (PPP) loan forgiven. 

6. Insurance claim denial

Businesses are dealing with legal issues when asking for business interruption coverage claims. Insurance companies are denying the coverage. Here, seeking lawsuits to clarify the insurance claims is the only option left.

What to do:

1.Review the notice of denial to know the reasons for the denial of coverage.

2.Recheck your insurance policy based on the reason given for your business insurance claim denial.

3.Prepare a response stating your arguments for claims based on the insurance policy’s terms and the current situation.

4.Discuss your business insurance claim denial with a lawyer.

5.Sue the company in civil court in case of refusal of payment. 

7. Data breach

Cyberattacks are putting small businesses at risk. Hackers are using tricks to snatch companies’ money. Phishing schemes are also a new concern for business owners. Many businesses are failing to safeguard the sensitive details of their customers. As a result, companies are facing severe legal repercussions.

What to do:

1. Implement the right policies and procedures.

2. Consider cybersecurity service.

Tips for reopening your small business during this new normal

It is possible to reopen your small business. You need to follow some tips. These tips can help you run your business without threats of sudden shutdown.

Review business contracts thoroughly

Revisit your agreements and insurance policy. It will help you avoid legal hassles related to business contracts and insurance policies. Read every clause to ensure that they are giving you protection during crisis time.

Understand what your insurance policy does and doesn’t cover

At the time of insurance policy renewal, be sure to look closely at all the guidelines. For example, be sure the new insurance policy covers the losses due to business interruptions caused by the pandemic.

Consider legal help

Running a business is hard. Right now, the pressure of tackling a company is even more challenging. An attorney can help you create strategies to overcome legal issues your business is facing. Hire a business law attorney or employment law attorney near you to receive legal help and guidance.

Focus on employment law

Focus on employment law issues to bring employees back into the workplace. It saves your business from a lawsuit.

Follow guidelines of the health organizations

To save the business from lawsuits, follow the health and safety parameters instructed by the health organizations.

Understand the State and Local Laws

Understand the state and local law before reopening the business. They can penalize you for the violation of rules. To understand the guidelines, visit all pertinent national, state, and local government websites.


This pandemic will continue to challenge the existence of small businesses. You can face changes in labor and employment law. You have no choice but to keep going during this time. Follow a reopening strategy that meets state and local requirements. Try to keep the customers and employees safe to reduce your liability. By doing so, you can avoid future legal hassles related to your business.

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