An unlawful business practice is a practice that is conducted in a business setting that is against the law, also known as illegal business practices. Examples of unlawful business practices are:

  • Employment discrimination;
  • Employment harassment;
  • Breach of a business contract;
  • Bribery;
  • Unfair competition;
  • Financial fraud; and/or
  • Theft.

Employment discrimination is an unlawful business practice. It occurs when an employee or prospective employee is treated less favorably than other prospective employees due to protected characteristics such as race, sex, age, and/or national origin.

Employment harassment is an unlawful business practice that occurs when an employer creates a hostile work environment. A hostile work environment exists when individuals in a workplace engage in harassment that makes it extremely difficult and/or impossible for an employee to perform their job duties.

Breach of a business contract occurs when a party fails to perform their duties as outlined in a business contract. Each situation is unique and will depend on the terms of the specific contract. This unlawful business practice may also occur if a party makes a misrepresentation during the formation of the contract that benefits the breaching party.

Bribery is an unlawful business practice that occurs when one individual offers, promises, or gives something of value, usually money or an expensive item, in return for a better deal on products or services.

Consumer fraud is an unlawful business practice that involves using unfair or deceptive tactics to illegally lure consumers into purchasing a product or service. This type of fraud can include false advertising, pyramid schemes, and/or bait and switch. A bait and switch occurs when a customer is lured into purchasing a product or service that is no longer available and is offered an alternative product or service instead.

Unfair competition is a legal term that is ever changing and expanding with each lawsuit filed. Common examples include:

  • Misrepresentations made to consumers;
  • Discriminatory treatment of consumers;
  • Trademark infringement;
  • Advertisements expressing hostile treatment of competitors; and/or
  • Unreasonable “non-compete” clauses in employment contracts.

What falls into this concept will vary by state and federal law.

Financial fraud is an unlawful business practice that occurs when an individual makes changes to a company’s financial statements or financial books that makes it appear the company is generating more revenue than it actually is. This is used to lure investors to buy stock and to increase the company’s market value.

Theft is an unlawful business practice that can take many forms. These can include:

  • Failing to refund customer returns;
  • Embezzling company funds; and/or
  • Stealing warehouse equipment.

Laws regarding unlawful business practices vary depending on whether state law or federal law applies. It is important to have an attorney review the case to determine what laws will apply.

What is the Difference between Unlawful and Unfair Business Practices?

Under unlawful business practice laws, unlawful business practices are different from unfair business practices. Unfair business practices are typically legal. Usually, they involve a business behavior by an owner or corporation that is unethical or immoral. Examples of unfair business practices would be if a company owner takes and/or destroys a competitor’s work product or deliberately violates a company policy.

The main difference between unlawful and unfair business practices are unlawful business practices actually violate the law, as discussed above. Unfair business practices do not violate the law, but may violate a personal or company moral code.

Is an Unlawful Business Practice the Same Thing as Puffery?

No, an unlawful business practice is not the same thing as puffery. Puffery involves an exaggerated statement made for the sole purpose of attracting customers. These statements are used to “puff up” or to promote the quality of a product or service.

Puffery statements are usually viewed as subjective opinions. The Federal Trade Commission (FTC) does not consider them to be unlawful because they are such that a reasonable person would not take them to be a literal statement of fact. They are viewed as a legal practice that is frequently associated with language found in advertising and/or promotional sales.

For example, if an individual advertises their beach house rental as “Heaven on Earth,” they are not engaging in an unlawful business practice. They are advertising in a manner that, while exaggerated, is attractive to customers.

On the other hand, false advertising is a type of advertising that is not considered legal. It differs from puffery because it is a factual statement rather than an opinion that is used to intentionally deceive the general public instead of being used to attract customers. An example of false advertising may include a company that advertises a product as having healthy, high quality ingredients when their product actually contains high amounts of sugar and chemicals.

What are Some Legal Consequences of Unlawful Business Practices?

Unlawful business practices are illegal and owners and/or companies may face consequences for their actions. Similarly, individuals who relied on businesses may be able to recover damages for their losses.

There are many types of unlawful business practices, each with their own remedies so the consequences will depend on the specific case, laws of that jurisdiction, and whether federal or state laws apply. For example, remedies for an employment discrimination lawsuit may include:

  • Recovery of lost wages;
  • Reinstatement to the individual’s previous work position after a wrongful termination;
  • Reinstatement of the individual’s lost benefits, including retirement benefits; and/or
  • Changes to a company’s policies and practices.

Individuals convicted of business crimes such as bribery and/or fraud may face consequences such as:

  • Jail time;
  • Parole or probation;
  • Fines; and/or
  • Restitution or repayment of any money taken.

If an individual is convicted of a theft-related crime or embezzlement of employer funds, they may have difficulty finding future employment. They must be ready to disclose their crimes because they will likely be discovered during a background check.

In some cases, if an individual’s profession required a professional license, such as a financial investor, they may lose that license and be barred from obtaining another even after serving their sentence. Each case will depend on the specific circumstances of what occurred and the decision of the court.

Should I Consult an Attorney About Unlawful Business Practices?

Yes, you should consult an attorney regarding unlawful business practices. Whether you are a victim or accused of unlawful business practices, an experienced business lawyer will be able to assist you. A lawyer will be able to review the facts of your case, determine if you have a claim, determine what laws apply and represent you during any court proceedings, if necessary.

If you are accused of an unlawful business practice, you may be facing severe penalties. A business lawyer can review your case, determine what defenses may be available to you and represent you during any court proceedings, if necessary. A lawyer may also be able to help you negotiate a more favorable resolution to your case.

Moreover, if you are charged with a business crime, you may need to consult with a business lawyer with experience in criminal law. Many areas of the law overlap and many attorneys have experience in multiple areas of law. A criminal charge related to an unlawful business practice may have severe and long-lasting consequences.