One area of legal vulnerability that's expanded rapidly in recent years is employees suing employers for wrongful termination, or some form of discrimination (such as failure to hire because of age).

How serious is the risk? According to a recent study, in California alone, the courts have been deluged with more than 100,000 of these lawsuits. In addition, employers who give a departing employee a bad reference are sometimes later sued for defamation.

According to Michael L. Potter, Esq., and financial and marketing consultant Stanley R. Joseph, one of the best defenses against these types of litigation is in the use of a "professional employer organization" (PEO), sometimes referred to as "employee leasing."

A PEO serves as an off-site, full-service human resources department. They assume all liability and responsibility for the functions of hiring, firing, payroll, tax deposits, quarterly filings, compliance, worker's compensation, benefits and so forth. More important, they stand between you and your employee in the event of litigation.