Almost 40% of Small Business Owners Hit By Employee Litigation In The Past Year

Small Business Trends Report reveals how SMBs are wrestling with a complex legal landscape & shifting trends in DE&I, remote work, and AI adoption

Thirty-seven percent of SMBs have been hit with an employee lawsuit in the last year, according to the 2024 Small Business Trends Report by Counterpart. The report, which surveyed over 500 small business owners and CEOs across the US, found that businesses are fearful of an increasingly challenging legal environment — nearly one-fifth (15%) are more concerned about employee lawsuits compared to a year ago.

The report highlights how businesses are wrestling with the shifting trends in AI adoption, diversity, equity, & inclusion (DE&I), remote work, and political polarization in the workplace.

AI is disrupting the workforce

Artificial Intelligence (AI) is disrupting the workforce and the majority of small business owners expect it to result in redundancies. Half (50%) of all small businesses expect AI will reduce their workforce in the next five years. Despite this outlook, the AI jobs cull has yet to gather pace. Just 1 in 8 (13%) of small businesses are currently using AI to reduce headcount — a 5 percentage point decrease from last year.

Talent is still a priority as CEOs are optimistic about their business

Hiring and retaining the right people is one of the biggest challenges for 38% of small businesses. Although the large majority (72%) are currently hiring, this is a 20 percentage point decrease from last year, suggesting last year’s hiring frenzy has cooled. However, economic sentiment is mixed — while over three-quarters (77%) of small business leaders have an optimistic outlook on their own business, 44% think they’ll be grappling with a recession in the next 12 months. Three out of every four (75%) small business owners say inflation is the biggest challenge they’ll face in the year ahead.

Small businesses stick with DE&I

Despite the backlash, small businesses are sticking with DE&I and see it as an important part of their business strategy. Nearly three-quarters (72%) of all respondents said their small business has a DE&I policy. Over one-third (37%) of small business owners and CEOs say they will continue to expand their DE&I policies, and over one-fifth (22%) say they are maintaining their current DE&I strategy. Just 13% said they are scaling back their DE&I policy.

SMB leaders brace for workplace division this election

Leaders are concerned about the upcoming presidential election and anticipate it will create workplace division. Nearly two-thirds (64%) of small business owners and CEOs say the election will polarize their workplace and over one-quarter (28%) of small business leaders say there have already been arguments related to politics in their workplace. In response, over half (54%) of small businesses implemented a policy on political expression in the workplace.

Flexible work is on the rise

Most companies (54%) have a hybrid work model — where workers come to the office at least once a week. Three in every four (75%) small businesses believe remote work improves business performance, but nearly one-quarter (23%) say managing remote workforces was one of the most pressing challenges in the past year. Despite the complexity, flexible work is on the rise. Almost half (42%) currently require their team to be at the office five days a week, but only 33% of all small businesses plan to be fully in the office by the end of the year.

“Our survey highlights the complicated landscape that startups have to juggle every day,” says Tanner Hackett, CEO of Counterpart. “Ever resilient, small businesses are adapting to challenges in the shifting operating environment by finding innovative ways to manage talent, foster flexible workplaces, integrate AI, and mitigate risks.”

To access the full results from the 2024 Small Business Insights Report, visit the Counterpart site here.

Survey Method

Counterpart commissioned a survey of 504 small business owners and CEOs across the United States with a minimum of 25 and a maximum of 499 employees in June 2024. Based on a confidence interval of 95%, the margin of error for 504 is +/- 4.4 percentage points. This means that all other things being equal, the identical survey repeated will have results within the margin of error 95 times out of 100.

About Counterpart

Counterpart pairs trusted insurance experts with AI-driven underwriting and claims technology to enable small businesses to do more with less risk. Backed by A rated carriers such as Markel, Aspen Insurance, and Westfield Specialty®, Counterpart offers proprietary management and professional liability insurance. These products are complemented by a suite of tools and services that help its customers proactively reduce risk and grow with confidence. Counterpart has been recognized as the "Underwriting Innovation of the Year" in 2023 by Inside P&C, "Best Places to Work" in 2024 by Business Insurance, and "Top 50 Insurtech" in 2024 by CB Insights. For more information, visit yourcounterpart.com.

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