Businesses Should Plan & Prepare for Coronavirus-Related Legal Issues

March 13, 2020

By Robert W. George, Katherine C. Campbell and Matthew D. Mitchell

As the impacts of the coronavirus (COVID-19) reverberate through the economy, local companies would be wise to consider, and to prepare for, legal issues important to managing the business fallout from the virus. We touch on a sample of these legal issues below: (1) force majeure provisions, (2) business interruption insurance, and (3) employment law issues.

Force majeure clauses are often found tucked away in the “miscellaneous” provisions of commercial contracts — most often found in supply or sales contracts. Simply stated, a force majeure clause may excuse one party’s failure to perform its obligations under a contract if the failure is the result of events or circumstances outside of that party’s control. The classic example of a force majeure clause is a natural disaster that delays a party’s performance under a contract. However, courts have also applied force majeure clauses to business disruptions caused by former disease outbreaks, such as SARS. Determining whether a force majeure clause in one of your contracts excuses your performance, or the performance of a counterparty will require a consideration of contractual language and circumstances unique to each business and each contract. Nevertheless, what we can say is that conversations about coronavirus and contractual excuse are happening around the country right now, so thinking about impacts to your business may be a sensible use of time and resources. In the context of agreements for the sale or purchase of products rather than services, your rights may also be impacted by statutory concepts like the doctrine of “impracticability” in the Uniform Commercial Code which may excuse the delay or non-delivery by a seller of goods.

Business interruption insurance is another area potentially relevant in light of the coronavirus. Business interruption insurance covers the loss of income suffered by a company caused by certain “perils” that fall within the scope of the policy. Traditionally, physical damage to property, paired with the actual interruption of a business, is required in order for business interruption coverage. Although policies often exclude viruses and epidemics, endorsements are sometimes available to extend coverage to such communicable diseases. Even if the correct coverages and endorsements are in place, documenting the proper proof and following the correct notification protocol is critical for securing coverage. Starting the conversation early with counsel and your insurance consultants and agents is critical for assessing: (1) your rights based on current policy coverage and (2) whether added endorsements make sense for your business.

Regarding employment law issues, employers are being faced with numerous questions about the coronavirus, in particular how to protect their workplaces and their employees without risking employment law violations.

As a practical matter, what steps can employers take to help protect their employees?  Employers may require employees who exhibit flu-like symptoms to go home. Employers should work with employees to inform them about applicable sick leave and paid-time-off policies to encourage sick employees to stay home. Employers may consider staggering employees’ start and end times, as well as lunch and break periods, to minimize overcrowding in common areas.  Employers also should identify a single point of contact for all concerns that arise relating to health and safety to avoid misinformation and confusion. Employers should consider limiting employees’ work-related travel, and take extra precautions for those who travel to the areas that have been identified as high risk by the CDC.  Now is also a good time to evaluate remote work capabilities and policies, and employers may want to encourage remote work where possible.

When taking precautions, employers should keep a few things in mind.  Employers should avoid identifying employees who are infected or potentially infected by name, and employers must maintain all information about an employee’s illness as confidential.  Employers also should be careful as to the types of questions they ask employees.  For example, employers may ask whether an employee is experiencing flu-like symptoms, but they may not ask whether an employee has a pre-existing condition that would make him more susceptible to the virus.

The coronavirus implicates a host of employment law concerns, including workplace safety issues, employee leave, wages, and the Americans with Disabilities Act.  When in doubt, the wisest approach is to work with counsel to ensure legal compliance.

Robert W. George brings a wealth of knowledge and skill to the firm’s litigation, corporate governance and regulatory practices. His focus consists of a multifaceted business litigation practice in both federal and state courts and includes defending clients against antitrust, securities, environmental and toxic tort claims, as well as commercial disputes involving fraud, non-compete agreements, or unfair competition.

Katherine C. Campbell is an associate in the Litigation Practice Group at Friday, Eldredge & Clark. She serves as litigation counsel for individuals and businesses in complex business and commercial disputes including employment claims, collective action wage and hour claims, and breach of contract matters. 

Matthew D. Mitchell is a partner in the Mergers and Acquisitions Practice Group. Matt concentrates his practice in the areas of banking, corporate and securities, and real estate. Matt represents clients in a wide range of corporate and transactional matters, including entity formation and reorganization, corporate governance, mergers and acquisitions, securities offerings, and commercial contract drafting and negotiation.

Disclaimer: The information included here is provided for general informational purposes only and should not be a substitute for legal advice nor is it intended to be a substitute for legal counsel. For more information or if you have further questions, please contact one of our Attorneys.