COVID-19: Key legal issues for public and private organisationsFriday, 06 March 2020
Thirteen cases of coronavirus disease (COVID-19) have now been confirmed in the Republic of Ireland and 7 in Northern Ireland1.
The rapid spread of COVID-19 across the world since it was first reported in Wuhan, China on 31 December 2019 has forced countries to implement unprecedented containment measures including international travel restrictions, quarantine measures and the cancellation of events such as the Ireland –v- Italy rugby game scheduled for this weekend.
The effects of COVID-19 are beginning to be felt across the Irish business community. Indeed, Danny McCoy, CEO, IBEC has stated today (6 March 2020) that the COVID-19 situation is “having significant impacts for many employers and employees and wider business activity”.
We outline below some key legal issues which directors, general managers and legal counsel should consider over the coming days.
1. Crisis Management
Does your organisation have an existing crisis management plan in place? Has a response team been established? Are employees familiar with the plan and who is on the response team?
It is also important to ensure that your organisation communicates with key stakeholders in a consistent and effective manner.
2. Performance of contractual obligations
COVID-19 may mean certain of your contractual partners are not in a position to fulfil their contractual obligations. It may also provide others with the opportunity to attempt to renege on arrangements which, with the benefit of hindsight, they would prefer not to have entered into.
Legal doctrines such as force majeure2 or frustration3 may apply. Each contract will need to be individually considered in order to ascertain the impact, if any, that COVID-19 may have.
Employees who are medically certified as having COVID-19 will be entitled to receive sick pay if their contract provides for it.
Employers will need to consider whether or not to pay employees in respect of periods of self-isolation, and may make different decisions depending on the origin of the self-isolation - medical advice, employer instruction or employee decision.
Employees who seek time off to care for family members, may not have any entitlement to normal salary. Force majeure leave, annual leave or agreed other forms of leave may potentially apply.
Disciplinary issues may arise from unreasonable refusals to comply with employer instructions.
Employees are entitled to be protected from bullying, discrimination, harassment or victimisation by their employers or co-workers.
4. Public sector and government bodies
Decision making which involves the impact on classes of people, or individuals needs to be proportionate/rational and consistent with other relevant statements made by government agencies. If decisions are not in line with these principles, they may be open to challenge. There may also be public duties that could give rise to statutory obligations and legal claims against the State or state bodies.
Public sector employers should have regard to the FAQs that have been published by the Department of Public Expenditure and Reform for public sector employers.
5. Insurance coverage
Your organisation 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 casual link between the losses and COVID-19.
It would be prudent for organisations to conduct an early stage analysis of their insurance policies so as 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 at company law including the duty to act in good faith in what the director considers to be the best interests of the company and to act honestly and responsibly in relation to the conduct of the affairs of the company. Directors will also have statutory duties under other enactments relating to, for example, employment and health and safety law.
Senior management of organisations in both the public and private sectors who are not directors will also have duties and responsibilities by virtue of their roles. Directors and senior management in the days and weeks ahead are going to have to make 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. Thought processes and decision making in this regard should be clear and documented.
7. Trading Difficulties
You may have suppliers who will in time struggle to perform the contracts they have with you. This in turn may adversely impact on your own ability to perform a wide range of contractual obligations whether to funders, customers or otherwise. Alternatively you may have customers who are struggling to pay you. It is important that you consider as early as possible the potential remedies which are available to you and the parties you deal with in these circumstances.
8. Listed companies
Listed companies are under a duty to keep the market informed as to any event that is likely to cause material damage to their business. This is particularly relevant for companies whose supply chain is likely to suffer disruption, or who operate in the travel or hospitality sectors. Regular consultation with advisers will be crucial. For companies preparing to carry out an IPO or secondary fundraising, this will be a challenging time. In certain cases, the prospectus/admission document will need to contain appropriate risk factors outlining the uncertainties which the outbreak of the virus may bring.
COVID-19 is a fast evolving situation and the impact of it not yet fully known. Early stage information from the business community suggests that its effects will be far reaching and may have a negative impact on the sales and profit levels of all organisations over the coming weeks and months; particularly industries reliant on the international supply chain.
Organisations should conduct an early stage risk analysis of the issues identified above in order to ensure that they have a plan in place to minimise the potential operational and financial implications of COVID-19.
For further advice on dealing with any of these issues above, please contact Jon Legorburu, Mark O’Shaughnessy, Michelle Ní Longáin, Loughlin Deegan, Neil Keenan, Gerry Beausang, John Fitzgerald, or your usual ByrneWallace contact.
1 As of 6 March 2020, 16.00
2 Force majeure relieves a party from the consequences of non-performance in the event of circumstances beyond their control
3 The doctrine of frustration applies when an event occurs that makes the performance of that contract commercially impossible or makes the obligation to perform a radically different obligation from that initially envisaged