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The Importance of Policy in Business Management

I recently participated in a lawsuit which I think really elucidated the importance of having a well-written policy when operating a company. The case I worked on regarded property management, but the lesson learned can apply to all business: have a reasonable policy and stick with it.

When it comes to trial, surprisingly enough, a company’s policy does not legally determine what duty is owed to a plaintiff. For example, if a policy says that you’ll do X,Y & Z when you get a report of bed bugs in one of your units and you don’t do X, you are not per se liable for failing to follow your policy. In the property management context, a landowner’s duty is to maintain the property in reasonable condition.

“Everyone is responsible, not only for the result of his or her willful acts, but also for an injury occasioned to another by his or her want of ordinary care or skill in the management of his or her property or person…” (Civ. Code, § 1714.)

Most of the time the fight in habitability suits or premises liability suits will be over what “reasonable condition” is. Where a company’s policy fits into all this is in the presentation to the jury.

A company’s policy will come into evidence at trial, as well as evidence regarding whether the company’s employees followed that policy. As was my experience recently in our property management case, the jury will use that policy as the standard of care for what “reasonable” means. So, if your policy is extensive, like your employees need to do X, Y, Z and A through F, then you could be hurting yourself by imposing an onerous burden on your business by setting up a standard of care that your employees may not be able to follow. Switching to the opposite end of the spectrum, if your policy does not require much action, you’ll appear negligent simply because you didn’t require reasonable actions on the part of your employees. For example, if the policy only requires you to do A, when X, Y & Z are required, you can look very poor in the eyes of the jury.

Keep in mind that this does not just apply to property management, but can be useful in general business management and employment law matters. The bottom line is that while it’s not the legal standard at the time of trial, your policy can affect the outcome of any legal proceedings. It is always best to have a reasonable policy that your employees know and can implement. If you need any help generating company policies or have any issues that might have cropped up with your policies, feel free to contact Ericksen Arbuthnot at 510-832-7770 for a consultation. Jason Mauck is an attorney at Ericksen Arbuthnot who works in landlord tenant matters as well as commercial litigation and professional negligence.

Feel free to contact our Oakland office a call at 510-832-7770, if you would like to discuss an issue with one of our attorneys.