Subjects
Annual Updates Subcategories
Anti-Bribery & Compliance
Anti-Trust & Competition
Data Protection & Privacy Subcategories
Employment Law
Employment Status Subcategories
Equality, Diversity and Equal Rights Subcategories
Industrial & Workplace Relations Subcategories
International Mobility Subcategories
Protection of Business Interests Subcategories
Recruitment, Termination of Employment Subcategories
Remuneration Subcategories
Working Hours & Pay Subcategories
Workplace Culture Subcategories
Jurisdictions
Americas Subcategories
APAC Subcategories
Cross Border
EMEA Subcategories

Coronavirus – Considerations for Businesses

By - - Employment Law

COVID-19 is now beginning to affect the viability of some businesses.

People Issues

Employers are reviewing the virus’s implications for:

  • Business travel – restrictions may affect employee commission earnings; compulsory medial checks or quarantining for employees returning from both business trips and holidays;
  • Holidays and last minute cancellations – reimbursement of holiday costs and/or rescheduling the holiday;
  • Self-isolation issues – local employment law implications and business risk; denial of individual access giving rise to discrimination claims – people returning e.g. from China treated differently from people returning from low COVID-19 risk places;
  • Sick pay – requirements of the local law, the employment contract and your employer brand;
  • Health and safety obligations – as an employer and as an employee;
  • School closures – members of staff on extended dependence leave;
  • Alternative business arrangements – home working (especially for vulnerable people); third parties visiting work premises e.g. clients and contractors;
  • Multi-occupancy offices – the actions of your “neighbours”; the attitude of your landlord.

We have given some guidance on these issues: Considerations for Employers.

Business Issues

Businesses are reviewing their third party contracts, with particular reference to force majeure clauses. Businesses are also reviewing the various policies of insurance that they have – travel insurance, private medical and business interruption insurance.

Force Majeure

Force majeure is an event that occurs outside the control of the parties to a contract and is of such a nature that it releases the parties from their contractual obligations or materially changes those obligations.

Many civil law jurisdictions of Europe recognise force majeure and there the local rules will apply. By contrast, English law does not recognise force majeure as a legal concept. Under English law, parties are free to set their own contract terms, so force majeure is wholly dependent upon the actual wording of the contract. Furthermore, a party attempting to rely on such a clause, will usually have to show that its performance of the contract is legally or physically impossible. If performance if merely more difficult or expensive, this will not be enough.

Offices Leases

Businesses are also considering what would happen if they have to close their premises. It is highly likely that landlords will be forced to close shopping centres and other retail and leisure areas. Tenants may also be forced to close their own offices for health reasons.

UK leases do not tend to contain force majeure provisions and instead rely on provisions for insured and uninsured risks. These commonly provide that, if a building is destroyed or damaged by an insured risk or possibly an uninsured risk, the rent will not be payable during the period of closure. Importantly, this would not cover a tenant in the event that a landlord closes a centre for health reasons as, in that circumstance, there would be no damage to the building.

Tenants could therefore find themselves in a position where they are paying rent but unable to use their premises for trade or otherwise. In the case of retail tenants, the situation could be worse as they may have provisions forcing them to keep open and obliging them to pay liquidated damages where a store is closed. It seems unlikely that landlords would enforce such provisions in these circumstances but they are likely to insist that the rent is paid.

Most leases will not contain provisions allowing tenants to end the lease where the premises have to be closed temporarily, so it is likely that tenants will be obliged them to pay rent even though they cannot use the premises.

Business Interruption Insurance

Businesses that cannot reduce their losses (e.g. by having workers work from home/agile working) such as businesses dependent on “just in time” supply chains, retail and events, which depend on footfall and sports which rely on merchandise, food and drink sales, should check the wording of their business interruption insurance if they have this cover.

As with force majeure, the scope of the insurance cover depends on the precise wording of the policy.

Following SARS, many insurance policies expressly exclude contagious disease cover. So, counterintuitively, a government announcement, which was designed to be helpful to the business community, that Covid-19 is a “notifiable disease” may result in insurers being able to repudiate cover under the terms of a policy.

Even if your policy covers notifiable diseases, it is likely to be the case that it will only cover losses that arise from the date of the government’s declaration of “notifiable disease” status.

If there are closure orders (e.g. for schools, hospitals, theatres etc.) and/or orders restricting public movement, as there are now in China and Italy, the losses arising from such orders may “fit” within the policy wording.

However, if a business suffers because workers are not coming into work, (resulting in reduced productivity) or customers are just not turning up to the business’s outlet then, making claims for these “contingent” business interruption losses will again depend on the policy wording.

Conclusions

As is right, the current focus is on the human cost of Covid-19.

However, businesses are also reviewing closely their ability to survive at all in the market disruption that has or may be caused by the virus.
Scroll to Top