A vendor might become disgruntled with a decision by the market management.
A vendor might violate market rules.
A vendor might be displeased with the booth/stall assignment.
A vendor might use tactics to market product and attract customers that are disagreeable to customers or other vendors.
Vendors may conflict with each other over pricing or product selection.
These conflicts can lead to an array of undesirable outcomes, including unpleasant interactions between vendors and/or market leaders, and vendors withdrawing or being ejected from the market. In a worst-case scenario, a conflict can escalate into a lawsuit. Although vendor lawsuits against markets are uncommon and usually difficult to succeed upon, the stress and bad publicity alone can negatively impact a farmers market.
Two of the most significant legal claims a vendor could bring against a market are discrimination and wrongful eviction. These are not common legal problems for markets, but they are worthwhile issues for market owners and managers to understand.
Private businesses and nonprofits are given a wide berth to develop their enterprise in the manner they see fit. However, businesses and nonprofits are not allowed to discriminate against specific protected classes, which includes making decisions on the basis of race, gender, and other prohibited factors. Lists of specific protected classes vary from state to state. Making decisions based on these characteristics is a potential discrimination problem. Making solid business choices based on other factors is not discrimination.
Wrongful eviction is a possible legal claim when someone is removed from a space they are entitled to occupy. Choosing vendors to participate in a market and prohibiting others is not a legal matter of eviction. Eviction can only happen where a person or business has a legal right to occupy a space. Rarely would farmers market vendors have a legal right to occupy a space at a farmers market.
Vendor management may not be about avoiding lawsuits so much as promoting peace of mind, smooth operations, and a good reputation for the market. Farmers markets have many ways to manage these risks. Insurance, governance, recordkeeping, and rules and procedures each have a role to play in keeping vendor management problems to a minimum.
Strong rules and procedures are perhaps the most important risk management tool when it comes to vendor relationship management. Clear rules and procedures create predictability and accountability, both of which minimize the chance of conflict and the chance that any conflict will escalate into a legal matter. For example, developing procedures and processes around dispute resolution can minimize conflict.
Overall, three key best practices will help farmers market businesses and organizations make the most of vendor relationship management through rules and procedures: transparency, consistency, and discretion.
The learn more about Market Rules and Procedures as a risk management tool, click here.
As compared to other risks, insurance has a limited role to play in managing vendor risks. There is a possibility that a vendor disagreement could escalate into an issue related to whether a business owner or nonprofit director performed his or her responsibilities to the entity; and in this case, directors and officers insurance may be useful. The most likely legal claims that could be made by vendors are discrimination and eviction, which are not generally managed by insurance.
The learn more about Insurance as a risk management tool, click here.
A business structure is one of the most basic tools to limit liability. An LLC, corporation, nonprofit corporation, or cooperative can insulate market owners’ personal assets from business liabilities. In many cases, the lawsuits and liabilities that might result from vendors would be business liabilities. That means vendors could only seek the assets of the market—they could not pursue the assets of the owners/leadership personally. However, this protection is not absolute. Some discrimination claims can be made against owners/leadership personally, even when the business is incorporated.
In terms of internal governance, any business structure should have a procedure for reviewing the performance of managers and executive directors. Reviewing a manager or executive director’s performance may help the farmers market in identifying and potentially stopping behavior that might lead to poor vendor management or a lawsuit for discrimination, eviction, etc.
The learn more about Governance as a risk management tool, click here.
Farmers markets should consider where good records can reinforce the rules and procedures laid out as a risk management strategy. For example, if a farmers market creates a vendor complaint process, it should document and record that process. Notes should be kept of interviews with vendors or site tours the manager may take as part of the process. Farmers markets should keep vendor applications on file and make a written note of how each applicant stacks up against the criteria. The decision maker should also keep records of any and all commitments vendors sign as part of the application process, such as agreements that they have read and understand market rules.
The learn more about Recordkeeping as a risk management tool, click here.