The spread of COVID-19 is a rapidly evolving disturbance in our collective business and financial environments. Our clients are faced with an unanticipated and potentially existential threat. Businesses are working furiously to keep their employees safe and to protect their relationships with customers, suppliers, regulators and other critical partners. We are advising our clients around the globe who want to understand the legal ramifications of the COVID-19 pandemic.
We wanted to share our initial thoughts on some of the most critical legal considerations confronting business today. The situation is fluid, and the legal issues are varied and complex. The purpose of this alert is to help business owners and operators through this crisis and to ensure they have considered the most material current legal issues. Links to more detailed alerts are included, where available, to provide more specific guidance on issues that are of particular importance to you. As the situation evolves, we will stay in touch with you, in a continuing effort to provide practical and actionable advice.
While this checklist addresses U.S. law, these issues have global impacts. With nearly 1,700 lawyers in 30 offices around the world, Reed Smith is uniquely positioned to help you navigate this crisis.
- Business Continuity Plans (BCPs) – Many businesses are legally required to have BCPs and many others have them as a matter of good business practice. Many BCPs, however, are designed to be invoked in isolation, not in a circumstance of widespread disruption. Firms should review their current BCP, evaluate its suitability for the current circumstances, and quickly activate it. For many businesses, supply chain risk will be an area of particular concern (see “Contractual Issues” below). Your BCP must also address a variety of employee-related issues (see “Employment Law Compliance” below).
- Commercial Insurance Coverage – Coverage for COVID-19-related losses may be available under commercial insurance policies, most notably business interruption policies. There may also be coverage under general liability policies (e.g., for claims arising from COVID-19-related litigation) and/or directors and officers policies (e.g., for claims arising from alleged inadequate Securities and Exchange Commission (SEC) disclosure). You must examine existing policy language, as there is a high degree of variability in scope of coverage and applicable exclusions. Our Insurance Recovery Group can provide quick, high-level reviews of your existing policies. If it appears that coverage is available, please be mindful of the obligation to give prompt notice of loss. We also recommend keeping a detailed record of the lost profit and added expense incurred. These records will facilitate a more comprehensive and effective proof of loss. Visit reedsmith.com for more information.
- Employment Law Compliance – Late evening on March 18, 2020, the U.S. Senate passed and the President signed the Families First Coronavirus Response Act, which applies to employers with less than 500 employees and provides for emergency paid sick leave and an expansion of the Family and Medical Leave Act (FMLA). For details on this new legislation, visit employmentlawwatch.com. A variety of other U.S. employment laws will impact your response to the COVID-19 outbreak, including:
- The Occupational Safety and Health Administration’s (OSHA’s) mandate to provide a hazard-free, safe, and healthy workplace, including when employees work remotely.
- The FMLA’s job protection for employees with serious health conditions and for employees with family members having serious health conditions, as well as the expansion of the FMLA in the Families First legislation to provide partially-paid leave to certain employees related to child care and school closures.
- The Americans with Disabilities Act’s (ADA’s) prohibition of disability-related inquiries and its impact on an employer’s ability to take employees’ temperatures, require medical testing of employees, and undertake other preemptive and precautionary workplace safety measures.
- The Worker Adjustment and Retraining Notification (WARN) Act’s requirement that certain employers provide advance notice in the event of mass layoffs and other temporary and permanent reductions in force.
- The ADA’s protection and confidential treatment of personal health information, including that an employer cannot disclose the identity of an employee who has a confirmed or suspected case of COVID-19.
- The FLSA’s mandate that employers accurately track and record all hours worked by non-exempt (i.e., hourly) employees, even when such employees perform work outside of the office.
For U.S. employers, it is also extremely important to bear in mind that state and local laws – in New York and California, for instance – often impose obligations that far exceed those levied by federal law. Multijurisdictional employers, therefore, may be subject to different COVID-19-related workplace obligations from office to office.