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Coronavirus Update: Legal issues and the impact on business

13 March 2020

The spread of Covid-19, a strain of coronavirus, continues to pick up momentum globally and is increasingly becoming a key priority for organisations.

The NHS describes the symptoms as a cough, high temperature and shortness of breath, but it can also lead to serious respiratory problems and death.

The Government has warned that up to one-fifth of the UK workforce could be absent at the peak of the outbreak, presenting a significant challenge for organisations in relation to ensuring the safety of their workers and maintaining business operations.

Current Status

The World Health Organisation has declared that coronavirus is a public health emergency of international concern and has labelled the coronavirus outbreak as a pandemic. The UK has now moved to the "delay" phase in the fight against Covid-19 with the objective of slowing down the spread of coronavirus and reducing numbers infected at the peak.

Employees who are advised by their GP or NHS 111 to self-isolate for 14 days are entitled to statutory sick pay from day 1 of isolation. The situation is ever-evolving and from Friday 13 March, individuals who have either a high temperature or a new continuous cough must also self-isolate for 7 days. It is our view that employees self-isolating for 7 days would also be entitled to statutory sick pay from day 1.

Implications for Employers

The Chancellor of the Exchequer, Rishi Sunak, announced on 11 March that businesses with fewer than 250 employees will receive a Government refund of any statutory sick pay (SSP) paid to employees for the first 14 days of sickness. It is anticipated that this is a temporary measure to help insulate businesses against the impact of coronavirus. Statutory sick pay is currently paid at £94.25 per week.

The Scottish Government also issued Workplace Guidance on 9 March aimed at slowing the spread of coronavirus in Scotland’s workplaces and the main points for employers to note are:

  • Routine cleaning and disinfection of frequently touched objects and surfaces such as telephones, keyboards, door handles, desks and tables should be undertaken;
  • Basic hand washing is most effective way of preventing the spread of infection and should be promoted by ensuring all staff, contractors, service users and visitors have access to hand washing facilities and alcohol-based hand rub, where available;
  • Crockery and cutlery in shared kitchen areas should be cleaned with warm water and detergent and dried thoroughly;
  • Food such as crisps and sandwiches should not be left open for communal sharing unless individually wrapped.

ACAS also recently issued advice for employers, available here, and the main points are set out below:

Send guidance to staff: Communicate with your workforce encouraging all employees to be extra-vigilant to avoid the spread of infection. This can include reminders to wash their hands regularly and dispose of used tissues immediately etc.

Avoid travel to affected areas: Consider whether planned business travel to affected areas is really necessary and follow the Foreign Commonwealth Office guidance.
Instances of the disease are considerably higher in other countries including China, South Korea, Hong Kong and Italy. Those travelling from affected areas to the UK are advised by the Government to stay indoors and avoid contact with other people for up to 14 days. As a result of this, some employers, including oil giant Chevron, have been sending employees home from work as a precaution.

Monitor cases of self-isolation / quarantine and statutory sick pay: Arrangements for remote working should be put in place, where possible, so that business can continue as usual during self-isolation and employees can be paid their normal salary if they are able to work.

If employees are not symptomatic but cannot work remotely during self-isolation, they will be entitled to Statutory Sick Pay from day 1 where they have been given written notice, typically issued by a GP or by NHS 111. Payment of SSP will also alleviate concerns that employees could spread the virus by leaving self-isolation because they want to be paid. Employees may also be entitled to contractual sick pay if applicable and depending on the terms of the contract.

Monitor and manage sickness absence: The usual statutory or contractual sick pay entitlement will apply to someone with coronavirus and absences should be managed in the normal way. However, allowances may be made where, for example, an employee has difficulties providing a fit-note if they are in self-isolation.

Be mindful of potential discrimination: Ensure that no employee is singled out in any action you take because of their race or ethnicity.

NHS 111 now has an “online coronavirus service” which asks several questions and indicates whether a person needs to speak to 111 or potentially self-isolate.

This can be accessed here https://111.nhs.uk/service/covid-19 and is a useful tool for all employers in assessing what steps employees may have to take e.g. when they return from certain areas or are showing certain symptoms.

All employers should therefore prepare for the potential impact of the virus on the health and safety of their employees as well as the effect on the business.

Health & Safety Perspective

Now that the risk of coronavirus is known, employers must consider the risks posed to and from their employees and those with whom their employees come into contact.

Employers have a duty under Section 2 of the Health and Safety at Work Act 1974 to ensure, so far as is reasonably practicable, the health, safety and welfare at work of all its employees.

They also have a duty under Section 3 of the Act to conduct their undertaking in such a way as to ensure, so far as is reasonably practicable, that persons not in their employment who may be affected thereby are not exposed to risks to their health or safety. Those “who may be affected” could include:

  • Clients
  • Anyone else visiting the employer’s premises, or
  • Anyone coming into contact with their employees.

Employers must take reasonably practicable steps to minimise the risks posed - an exercise which requires an employer to take into account logistics and costs versus risk.

General Risks

First and foremost, employers must keep up to date with government and NHS guidance to allow them to assess the ongoing risk and consider what reasonably practicable measures must be taken.

Employers must ensure that their employees, and those with whom their employees are coming into contact, follow the most up to date travel advice from the government, such as self-isolating upon return from certain high risk countries. From a commercial perspective, as mentioned above, putting in place systems to allow employees to work from home (should the need arise) may be a prudent way to manage cost versus risk.

Guidance to prevent the spread of coronavirus is readily available and for most employers, reminding employees of this guidance - for example, via email or a staff notice board - will be a relatively low cost and simple exercise. Taking steps to assist employees and visitors to their premises to follow the guidance – such as providing hand sanitiser gel – will also be a simple step which most employers can take.

Specific Risks

Aside from these more general measures, employers must also take steps to address specific risks within their organisation. What constitutes “reasonably practicable measures” will differ greatly between types of employers.

For office-based roles, for example, employers may consider arrangements to minimise any exposure of their employees or third parties to the virus, such as using conference or video call facilities rather than face to face meetings. For manual roles, employers may consider providing additional PPE to employees, should that be advised.

It is important to remember that any employer with five or more employees must keep a written record of the risk assessment they have carried out and the control measures they have in place – although constant consideration of the sufficiency of those measures will be required due to the fast-changing nature of the risks posed.

Impact on Business Contracts

There might be an interruption in your supply chain because a component factory is closed, or your goods are stuck in a quarantined ship, or because your logistics firm is unable to transport them. You might find yourself unable to provide a service because your staff numbers are depleted. If issues like these could affect your business, you may be wondering about who will have to bear the cost.

The first place to look is the contract itself. There might be what is commonly called a force majeure clause. These are clauses which anticipate events that might prevent, hinder or delay performance of the contract. They often say what is to happen to the parties’ respective rights and obligations if such events occur.

Even if there is no applicable force majeure clause, it will still be possible in many cases to work out from the contract which party has to bear the risk that performance will be more difficult and expensive. If not, the next question may be whether the contract has been “frustrated” under general contractual rules.

Thought will need to be given to which particular country’s law governs the contract. Across the jurisdictions of the UK, the bar for frustration is set high. The party seeking to rely on it must not have been at fault in relation to the consequences of the event, nor have foreseen or provided for it in the contract. If the contract is ultimately held to have been frustrated, this will release the parties from their obligations, although they may have to account to each other if there has already been partial performance or payment.

A communicable disease crisis could perhaps have been foreseen. However, just because some people foresaw an event as a theoretical possibility, it does not necessarily follow that the courts will say that it cannot give rise to frustration. Frustration was considered in a recent English High Court case, in which the European Medicines Agency unsuccessfully tried to argue that Brexit had frustrated its £500M Canary Wharf lease. The judge observed, “There will, no doubt, be many cases where something can be foreseen as a theoretical possibility, but where neither party can be criticised for failing to take it into account.”

Therefore, it is conceivable that coronavirus related disruption could frustrate certain contracts. It will depend on the particular circumstances, including what was known at the time when the contract was entered into.

Construction Contracts

Construction projects are carried out under a particular set of contracts and legal rules. With an increasing reliance on worldwide resourcing, any effects on shipping and transport throughout Europe and beyond are likely to see knock-on effects on the availability and price of goods and materials on site. On site labour is critical and may also be in short supply.

As a result, delays on existing construction projects seem likely. Construction contracts generally allow the agreed construction period to be extended where there is a delay that is not the contractor's fault; an extension of time (EOT). The responsibility lies with the contractor to give written notice, flagging up the Relevant Event that has caused, or is likely to cause, the delay. Such notice should be given as soon as practically possible when a period of delay is anticipated.

Using the 2016 SBCC standard building contract as an example, clause 2.28 requires that the contract administrator shall award a “fair and reasonable” extension of time in cases where Relevant Events, including force majeure, are likely to cause a delay to the agreed Completion Date. Force majeure is not, however, a Relevant Matter which might allow the contractor to recover loss and expense.

The usual requirements of causation apply. A contractor will still be required to demonstrate the effect of any coronavirus related delay on the “critical path” of the project, and support its claim with adequate evidence.

Further, a delay to a project caused by force majeure may also give rise to grounds for termination. Clause 8.11 of the 2016 SBCC standard building contract provides that, where a force majeure event has prevented the carrying out of the whole or substantially the whole of the works for a specified period of time (2 months is the default position), then either party may give notice that the Contractor’s employment under the contract is to be terminated.

New Contracts

Looking ahead, now that we know that the coronavirus is more than a theoretical possibility, prudent businesses across all sectors will be well advised to review their contractual terms and think about whether their force majeure provisions are sufficient. In particular, parties ought to consider incorporating provisions into contracts which fairly apportion the risk of potential delays. With the spread of coronavirus rising at a rapid rate, it is worth giving thought to the potential implications now rather than months down the line…

Notifiable Disease – Insurance Implications

The fact that Covid-19 has now been confirmed as a notifiable disease (across the UK) has implications for business interruption cover. This could become increasingly relevant with the pressures businesses are experiencing in the face of the virus and the attempts to stop its spread / contain any outbreaks: there are reports of businesses sending staff home, there is the question of whether large events will be cancelled and people are beginning to shy away from attending large gatherings. This could impact numerous industries, including travel, entertainment and retail.

Some business interruption policies have an extension which includes losses arising from a notifiable disease (if the rest of the policy conditions are met / no applicable exclusions). The inclusion on the list of Covid-19 as a notifiable disease will allow this trigger to occur and in that sense it is significant. The claims are likely only to be in relation to losses which have occurred post the disease being confirmed as a notifiable disease.

In the event of this cover, each policy will have its own definition of what qualifies as a notifiable disease, the specific circumstances in which cover will apply, and any applicable exclusions. Each policy must be considered against the specific losses claimed, the trigger for those losses and the period within which such losses occurred.

On 4 March 2020, the ABI confirmed that: `Commercial insurance policies provide cover against a wide range of risks, that can be tailored to the needs of individual businesses, including extensions to cover. Businesses who are concerned about this should check the scope of their cover, and speak to their insurance adviser or broker. It may be possible to buy consequential business interruption cover for notifiable diseases as an extension to a business insurance policy, subject to any policy terms and conditions. Standard business insurance policies are designed and priced to cover standard risks, not those that are very unlikely, such as the effects of Covid-19.`

Summary

This is a challenging period for all involved and it is important that employers continue to minimise the impact of Coronavirus on the health and safety of their employees and the subsequent effect on business.

Employers should keep themselves and their employees up to date by viewing the Government's daily situations reports here. While it is unclear how long the threat of coronavirus will last, employers should plan for a period of potential disruption. By adopting agile and flexible working practices and paying sick pay, organisations can better position themselves to contain the coronavirus and minimise disruption to business.

In terms of business continuity, if performance of an existing contract is affected by the coronavirus, the first place to look is the contract, and if the contract does not provide a clear answer, the question of frustration can be considered.

Looking ahead, now that the coronavirus is a reality, prudent businesses will be well advised to review their contractual terms and think about whether their force majeure provisions are sufficient.

Our specialist legal Coronavirus Taskforce can help you navigate all of these issues. If you have questions, please do not hesitate to contact any of the following:

Employment law

Caroline Carr, Partner: E: cac@bto.co.uk / T: 0141 221 8012
Laura Salmond, Partner: E: lis@bto.co.uk / T: 0141 221 8012
Jacqueline McCluskey, Partner: E: jmcc@bto.co.uk / T: 0131 222 2939

Health & Safety

Clare Bone, Partner: E: cbo@bto.co.uk / T: 0141 221 8012
Vikki Watt, Partner: E: vwa@bto.co.uk / T: 0141 221 8012

Corporate

Gary Booth, Partner: E: gab@bto.co.uk / T: 0141 221 8012
Jeremy Glen, Partner: E: jsg@bto.co.uk / T: 0141 221 8012

Commercial Litigation

Grant Hunter, Partner: E: ghu@bto.co.uk / T: 0141 221 8012
Will Cole, Partner: E: wco@bto.co.uk / T: 0131 222 2939

Construction

Jilly Petrie, Partner: E: jpe@bto.co.uk / T: 0141 221 8012
Fraser Hopkins, Partner: E: fho@bto.co.uk / T: 0141 221 8012

Insurance

Angus Crawford, Partner: E: akc@bto.co.uk / T: 0141 221 8012

 

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