Holiday Season Business Risks

Holiday Season Business Risks: What Every Small Business Owner Should Watch For

The holiday season is a time of celebration, community, and opportunity for many small businesses. With the increased demand for products and services, it can be a highly profitable time of year. However, the fast-paced nature of the season also brings unique legal challenges that can catch business owners off guard if they’re not prepared. From managing seasonal hires to ensuring compliance with advertising laws, taking proactive steps now can help you avoid costly missteps and focus on making the most of this festive period.

Let’s explore some of the most common legal risks small businesses face during the holidays and how to mitigate them effectively.

1. Seasonal Hiring and Employment Compliance

Many businesses bring on temporary or seasonal employees to help handle the holiday rush. While hiring extra help can alleviate pressure, it also comes with specific legal responsibilities.

Seasonal employees must be properly classified based on their role. Misclassifying workers as independent contractors instead of employees can lead to significant penalties and back taxes. Additionally, overtime rules can be a trap for the unwary; ensure you’re compliant with both federal and state laws regarding pay for non-exempt employees who work over 40 hours a week.

Safety is another concern. With new hires who may be less familiar with your workplace, the likelihood of accidents can increase. This is particularly true for businesses in retail, warehousing, or hospitality, where the fast pace and crowded conditions can lead to slips, trips, and other injuries.

How to Prepare: Create a straightforward onboarding process for all seasonal hires. Include training on workplace safety, customer service expectations, and your company’s harassment and discrimination policies. This not only ensures compliance but also fosters a positive work environment that benefits both employees and customers.

2. Consumer Protection and Advertising Laws

The holiday season is prime time for sales, discounts, and promotional events—but these marketing efforts need to be carefully planned to avoid running afoul of consumer protection laws.

For example, claims like “50% off” or “limited-time offer” must be truthful and substantiated with evidence, such as documentation showing the original price and the dates of the promotion. Similarly, gift cards are a popular item this time of year, but laws governing their expiration dates and fees vary by state. Be sure to review these regulations to avoid legal disputes with customers.

Another critical area is return and refund policies. The holidays often come with increased returns, especially after big shopping events like Black Friday and Cyber Monday. Clearly outlining your return policy and making it easily accessible—whether online or in-store—can save you from customer complaints and potential legal challenges.

How to Prepare: Regularly review your marketing materials and store policies with an attorney to ensure compliance with Federal Trade Commission (FTC) guidelines. A clear and transparent approach to advertising and refunds builds trust and protects your business from liability.

3. Data Security Risks for Online Transactions

The surge in online shopping during the holiday season brings not only opportunities but also risks. Cybersecurity threats are heightened as fraudsters target small businesses that may not have robust protections in place.

Protecting customer data is not just good business—it’s the law. Depending on where your customers are located, you may need to comply with privacy regulations like the General Data Protection Regulation (GDPR) or the California Consumer Privacy Act (CCPA). These laws require transparency in how you collect, store, and use personal information.

Fraudulent transactions are another concern. Chargeback scams, where customers dispute legitimate transactions, can be particularly damaging during peak sales periods. Additionally, an unsecured payment system could expose your business to breaches, leading to stolen customer information and reputational damage.

How to Prepare: Work with reputable payment processors that offer built-in fraud detection tools and encryption. Regularly audit your website’s security features, such as SSL certificates and firewalls, to ensure they’re up to date. Clear communication with customers about your data protection measures can also enhance trust.

4. Liability Risks with Increased Foot Traffic

If your business operates a physical location, you’ll likely see more foot traffic during the holidays. While this can boost sales, it also increases the risk of accidents—and potential lawsuits.

Slippery floors from wet weather, crowded aisles, or even poorly maintained entrances can lead to slip-and-fall accidents. These incidents not only disrupt your business but can also result in costly legal claims. If you’re hosting special events or sales, such as holiday pop-ups or midnight shopping hours, ensure you have a plan in place to manage crowds safely and avoid hazards.

Additionally, if you hire vendors or contractors to support your holiday efforts—such as caterers, decorators, or entertainers—make sure they have their own liability insurance to protect your business in case something goes wrong.

How to Prepare: Conduct a safety audit of your premises. Simple steps like placing wet floor signs, rearranging displays for better traffic flow, and adding extra staff to monitor busy areas can significantly reduce risks. Update your liability insurance to cover any potential incidents.

5. Contract Issues with Vendors and Suppliers

During the holidays, your relationships with vendors and suppliers are critical to keeping shelves stocked and customers happy. However, the pressure of the season can strain these relationships and expose your business to legal risks.

Delivery delays are one of the most common issues. To protect yourself, your contracts should include clear terms about delivery timelines and penalties for missed deadlines. Quality control is another concern; ensure that your agreements specify the standards vendors must meet and outline remedies if they fail to do so.

Cancellation policies can also be a source of conflict. For example, if a vendor backs out at the last minute, you need to understand your rights and options for seeking compensation or finding a replacement.

How to Prepare: Review all vendor and supplier contracts in advance to identify potential weak points. Consider consulting with a business attorney to negotiate terms that protect your interests while fostering strong, long-term partnerships.

Planning Ahead for a Stress-Free Holiday Season

The holiday season is an exciting time, but it’s also a period of heightened legal exposure for small businesses. By proactively addressing seasonal hiring, marketing compliance, cybersecurity, liability, and contract management, you can navigate the challenges with confidence.

Remember, preparation is key. Taking the time now to identify and mitigate risks will help you focus on what really matters—delighting your customers and growing your business during the most wonderful time of the year.

If you’d like tailored legal advice to safeguard your business this holiday season, don’t hesitate to reach out. Let’s work together to make this your most successful—and stress-free—holiday season yet.

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This article is a service of Dolev Law, a Personal Family Lawyer® Firm. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That's why we offer a Life & Legacy Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Life & Legacy Planning Session™.

Disclaimer: This blog is for informational purposes only and does not constitute legal advice. Expanding a business into a new state involves unique legal considerations, and the information provided here may not apply to every situation. We recommend consulting with a qualified attorney to discuss the specific legal needs of your business before making any expansion decisions. No attorney-client relationship is formed by reading or engaging with this content.