Dear Friends, Colleagues and Clients,
We’re sure you’ve received many “coronavirus (COVID-19) notices,” but in case you haven’t – or even if you have, perhaps we’ll add something new. As the virus continues to spread (which is now declared a pandemic), it is not only impacting personal lives, but is now dramatically impacting the business community and our clients. We understand this is a stressful and uncertain time – and we share your concerns.
First, we wanted to assure you that the McHattie Law Firm has taken the appropriate steps to be available to serve you during this time – we are all “wfh” – working from home and taking steps to “self-isolate” to keep our staff safe, and we recommend that you, to the extent you can, do the same.
Second, stay calm, be flexible, develop and implement your plan – not everyone else’s plan, but a plan uniquely tailored to you and your company’s needs. Not everyone can work from home, so create a workplace where people can work as safely as humanly possible. Remember, if your staff or customers get sick, they’ll be no good to you, so protect them.
Third, we have outlined some key legal issues which directors, general managers and legal counsel should consider over the next few weeks.
1. Crisis Management
Does your organization have an existing crisis management plan in place? If your company has an existing crisis communication plan, it is time to activate your crisis management team. If you do not have a crisis plan in place, this outbreak should be the push you need to develop one. It is no longer a matter of “if” an organization will need a plan; you need it now.
Are employees familiar with the plan and who is on the response team? Who are the backups for the response team? It is also important to ensure that your organization communicates with key stakeholders (clients and vendors) in a consistent and effective manner.
It’s important to consider and decide how your company will handle the following potential situations:
Office closure. Are you prepared for your employees and administrative staff to telecommute? What resources might they need, and can your servers handle the load? If you are a multi-office firm and one office needs to close, can you relocate work and workers? If the office must remain closed for some time, are you prepared to work remotely for several weeks?
Office quarantine. Are you prepared to help employees and their families if the need arises to quarantine team members on-site?
Travel restrictions. Do you have a draft communication in place to send to clients if you must cancel travel and move meetings to a videoconference format? Is your team proficient in the use of videoconferencing technology? Do you maintain a subscription to a videoconference platform?
Information Technology Infrastructure. Do you have a “contingency” and backup plan for your Information Technology Infrastructure. If your IT person/department/vendor falls ill, what’s your fallback plan?
2. Performance of Contractual Obligations
COVID-19 may mean some of your contractual partners, or you and your company, will not be able to fulfil their contractual obligations. (It may also be an opportunity for others to use this emergency as an excuse to renege on existing obligations, which, with the benefit of hindsight, they regret.) Legal doctrines such as force majeure[1] or frustration[2] may apply. Each contract will need to be individually considered in order to ascertain the impact, if any, that COVID-19 may have. Don’t lose heart if you can’t perform, you may have a contractual provision that excuses or delays those contractual obligations.
3. Employment
If an employee tests positive for COVID-19, first, tell them to stay at home. If you are aware of an employee testing positive and you allow them to come to work, there are negative legal implications. Moreover, an employee who tests positive will likely, and we believe you should consider them to, trigger a higher level of care; i.e. if you withhold benefits or leave to such an employee, we believe the Courts will ultimately look negatively on such conduct. In other words, we are recommending that employers “bend over backwards” to accommodate any employee who tests positive, who believe they’ve been exposed, or who have family members who are infected and ill, have tested positive or have been exposed. You, as the employer, will need to consider whether or not to pay employees in respect of periods of self-isolation and may make other decisions on the origin of the self-isolation – medical advice, employer instruction or employee decision. Those who seek time off to care for family members, may not have any entitlement to normal salary, but will likely be protected by the Family Medical Leave Act. Force majeure leave, annual leave or agreed other forms of leave may potentially apply and should be considered as well.
In uncertain situations, people can become fearful. This can result in individuals or groups of people being treated differently due to race or health status. Employees and your customers are entitled to be protected from bullying, discrimination, harassment or victimization by their employers, co-workers and facilities they do business with, particularly in situations such as these. Be particularly diligent to look out for inappropriate and discriminatory behavior. Companies can proactively combat this by thoroughly educating all employees on the symptoms and transmission of this virus. You need to focus on facts and avoid speculation. Encourage everyone to support one another and their communities.
Times of uncertainty, whether caused by a pandemic illness, a natural disaster or any other crisis, can provoke fear. Companies that have planned ahead to handle any contingency are better equipped to weather the storm.
4. Public sector and government bodies
Be aware that public institutions will close and have limited access and availability. Plan ahead, be proactive, and anticipate governmental delays. Many Courts have already limited access.
5. Insurance coverage
Your company may have insurance coverage for some of the losses that may arise from COVID-19. The types of coverage that may be available includes business interruption, employee compensation and public liability. In order to maintain a successful claim, it will be necessary to establish that there is a causal link between the losses and COVID-19.
It would be appropriate for organizations to consider and conduct an early stage analysis of their insurance policies to ascertain what coverage may be available. In particular, consideration should be given to any specific notification requirements, obligations to engage with your insurer and duties to mitigate your loss.
6. Duties of directors and senior management
Directors have a number of statutory duties including the duty to act in good faith in considering what the best interest of the company is and to act honestly and responsibly in relation to the conduct of the affairs of the company. Management will have difficult judgment calls on particular courses of action involving, for example, the health and welfare of employees and customers, the ability to perform contractual commitments and repay debts as they fall due.
7. Business difficulties
As alluded to above, you may find that your suppliers and/or vendors will struggle to perform the contracts they have with you. This in turn may adversely impact your ability to perform your contractual obligations. You may also have customers who struggle to pay you. It is important that you consider the foregoing, as early as possible, to develop a plan and to consider how you will respond. Again, it is likely that the Courts will be sympathetic to parties who, in good faith, were or are unable to perform. As such, while we recommend you review your agreements to consider your potential remedies that are available to you, we highly recommend that you consider the full implications of the circumstance, the relationships you have, and proceed accordingly.
CONCLUSION
The full impact of COVID-19 is unknown and this is causing a fast-evolving situation of chaotic fear through all industries. Each company should, to the best that they can, conduct an early stage risk analysis of the issues identified above in order to ensure that your company has a plan in place to minimize the potential operational and financial implications of COVID-19.
[1] Force majeure refers to a clause that is included in contracts to remove liability for natural and unavoidable catastrophes that interrupt the expected course of events and restrict participants from fulfilling obligations. https://www.investopedia.com/terms/f/forcemajeure.asp
[2] Frustration is an English contract law doctrine that acts as a device to set aside contracts where an unforeseen event either renders contractual obligations impossible, or radically changes the party’s principal purpose for entering into the contract. https://definitions.uslegal.com/f/frustration-of-purpose/
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