Brownstein Client Alert, August 18, 2020
As the pandemic continues with no clear resolution on the horizon, businesses must continue to revamp and reinvent their day-to-day operations to comply not only with a wide variety of new regulations, but also legal implications from existing laws and regulations. Often, these issues are overlapping and involve more than one area of law. Our COVID-19 Task Force has put together a list of issues for companies to consider as they move forward including:
Employment and Benefits: There are many employment issues to consider for a workforce, including:
- Worker health screenings, inquiries, tests and symptomatic employees: The new workplace norm for the foreseeable future includes wellness certifications and screenings, temperature checks, exposure determination and notification issues (with respect to both patrons and co-workers), obligations arising if there is a symptomatic employee in the workplace, COVID-19 testing, as well as considerations regarding returning employees to the workplace if they were COVID-19 positive or had a known exposure.
- Workplace safety, liability and reporting requirements: On a related topic, there are many considerations related to workplace safety, including the ever-changing recommendations of the CDC, EPA and OSHA, as well as state and local regulations and orders regarding appropriate safety measures related to personal protective equipment and face coverings, cleaning protocols, social distancing, shared space use, and monitoring of employees and visitors. There are special considerations for certain types of employees (such as those of critical businesses or food service companies) and employees visiting client sites or who are required to travel for work, among others. Federal, state and local reporting requirements, which can have reporting time frames as short as four hours, and workers’ compensation issues, including a presumption that COVID-19 is contracted at work if certain conditions are met in various jurisdictions, also come into play.
- Expanded employer-paid leave and documentation obligations: For covered employers, the federal FFCRA provides coronavirus-related paid sick leave and expands the Family and Medical Leave Act, and the paid leave must be well documented for an employer to receive a tax credit. Many states and localities have implemented their own, often more expansive, paid sick leave requirements as a result of the crisis, which, combined with existing leave laws and employer-provided paid time off, create complicated interactions, increased documentation requirements and new protected statuses. Given the uncertainty of in-person schooling for children, employers can expect an exponential increase in the number of employees seeking child care leave under the FFCRA and similar state and local laws.
- Employees who decline to return to work: Whether an employer can force an employee to return to work involves various considerations, including protected leave issues (e.g., under the FFCRA), ADA and state antidiscrimination and reasonable accommodation obligations, NLRA concerns, workplace safety/whistleblower issues and potential unemployment reporting obligations.
- Proper wage payments and reimbursements: Employers should ensure proper wage payments to their hourly workforces for safety screenings, donning and doffing, all hours worked remotely, reimbursements for work-related expenses, whether time spent obtaining a COVID-19 test is compensable time, and other issues under the FLSA and applicable state wage laws (see below). For exempt employees, employers should be cognizant that adjustments to hours, duties and/or pay, or partial furloughs may adversely impact the employee’s eligibility for the exemption.
- Remote Work Considerations: As the work-from-home situation stretches on, in addition to the wage payment considerations above, employers must consider the impact of employees working more “permanently” from a remote location, including state tax issues, unemployment insurance, workers’ compensation, registering to do business, applicable employment laws (e.g., state and local benefits such as paid sick leave, posting requirements, wage and hour provisions, and other requirements that may apply to the employee in the remote work jurisdiction), and a myriad of other issues.
- Employee benefits: Return-to-work issues include how to credit service for pension benefits and contribution allocations; restarting 401(k), HSA and other salary deferrals; satisfying applicable nondiscrimination requirements in participation, coverage and benefits; transitioning group health and other welfare benefit plan coverage; collecting premiums that may be due; administering status changes; designing retention programs; incentivizing your workforce; considering changes to equity grants; adjusting performance-based criteria; analyzing the effect of furloughs and work arrangement changes on outstanding equity awards and phantom awards; and addressing IRC 409A issues.
- Worker Adjustment and Retraining Notification (WARN) Act: With a resurgence of COVID-19 anticipated to occur later this year, employers should look ahead to potential staffing needs. Under the federal WARN Act and many companion state laws, the “unforeseeable business circumstances” exemption may not be available in the next round of furloughs or layoffs, so careful advance planning is essential to avoid triggering the WARN Act’s advance notice requirement, which is generally 60 days.
- Discrimination and adverse impact issues: As employers continue operations, return employees to work and also plan for potential full or partial closures going forward, they should be mindful of possible adverse impact that the return-to-work and ongoing reduced workforce plans may have on workers in protected categories, including newly created protected categories such as COVID-19 or child care-related issues or living with a “vulnerable” person.
- Government-issued orders and guidelines: Employers must continue to closely monitor federal, state and municipal orders and recommendations regarding workplace requirements and related issues, which continue to be promulgated and revised on an ongoing basis.
Real Estate: In order to comply with social distancing guidelines and ensure workplace safety, landlords and tenants will need to consider several issues, including:
- Property design and operations: Reconfiguration of common areas, displaying appropriate signage, flexible elevator occupancy and waiting areas, and implementation or modification of mechanical systems testing, security and health screening measures, janitorial specifications and other building rules and regulations.
- Landlord/tenant relations and communications: Landlord and tenant messaging on reopening requirements, reporting positive cases and communication of changes in governmental orders.
- Retail tenant changed operations: State and local mask requirements, curbside pickup areas, contactless payment options, distancing demarcations for customers, exchange and return logistics and inventory concerns.
- Retail operating covenants: Consider modifications to co-tenancy and continuous operations covenants to accommodate temporary or permanent closures.
- Reopening requirements: Lease and loan document limitations on the flexibility to accommodate phased reopening and the ability for a tenant to remain closed after a governmental order allows the business to open.
- Lease amendments addressing rent relief and operational changes: Updates to tenant leases with new COVID-19 and other applicable waivers and accommodations.
- Force majeure provisions in general: Consider modifications to traditional force majeure provisions in leases, property services agreements and purchase agreements.
- Residential and commercial tenant protections: Consider governmental protections for tenants including limitations and moratoria on evictions, mandatory alternative dispute resolution and government-assisted rent-relief programs.
Corporate: Provisions in new and existing contracts are impacted by the outbreak, continuation and possible resurgence of COVID-19 (or other, future health emergencies) in unexpected ways that warrant careful consideration. By way of example, consider these issues, some of which were seemingly mundane and often “boilerplate” prior to COVID-19, but now have unexpected and material impacts:
- Business day: What is a “Business Day” for measuring various periods in the agreement, when some but not all commercial offices in a city are closed and have been for months, or are open only a few days per week, but banks and government offices are open, sometimes to some extent.
- Notice: Your office might be closed on a particular business day, you might have a prolonged office closure for an indefinite period, or your office might have significantly reduced staffing and hours. Despite that reality, the notice rules in most contracts will deem notice to have been received when your business was incapable of receiving it.
- Audits and inspection rights: If a party cannot audit, inspect or access books/records or goods or facilities of another party in person (due to stay-at-home rules, or if the target has elected not to open an office or facility), then these provisions are rendered meaningless.
- Meetings: Consider difficulties obtaining owner and board consent, and holding meetings.
- Force majeure: Consider who should bear the risk of a pandemic, and note that the current pandemic might not be contemplated in your force majeure provisions. Also note that force majeure provisions, even if they cover pandemics, might not excuse the performance obligation that is most important to you.
- Equity compensation: Consider whether you want to take into account pandemic-related issues, such as employees being less actively engaged, furloughs and layoffs when calculating vesting, forfeiture, etc.
- Performance metrics: Consider whether changes are necessary to financial and performance metrics tied to a fixed time period, such as working capital, earn-outs, requirement/supply arrangements, etc., and whether to provide for alternative metrics, resets or other consequences in response to the pandemic.
- Deadlines: Consider performance timelines and ensure that they are long enough to allow for reduced hours, unexpected closures, failures of performance or delays by third-parties/service providers, and/or allow for tolling of deadlines based on well-crafted triggers (such as a virus resurgence, for example).
Liability Mitigation: While much of the guidance given by federal, state and local entities requires further clarification, businesses should consider the following liability risks when reopening and anticipating additional shutdowns:
- Premises liability: Duties to invitees and employees in mitigating their risk of coronavirus exposure on company property, including through implementing clear policies about how risk of exposure will be managed, and applying those policies consistently.
- Privacy: Collecting health information from employees and invitees may trigger obligations under state and federal privacy laws related to how that information is maintained and used. Additionally, businesses need to be prepared for privacy issues related to contact tracing and possible governmental requests for employee and guest information.
- Managing third parties: Contracts with vendors and suppliers to ensure that they are not taking on liability for risk of coronavirus exposure where the vendor or supplier is better positioned to manage the risk.
- Disclosure related to risk mitigation: While businesses want to reassure their customers of the steps they are taking to minimize possible coronavirus exposure, they need to be careful about how they describe those measures so they don’t overstate their efficacy and risk false advertising claims. Businesses also need to know when and to whom they are obligated to disclose an exposure.
- Insurance issues: The pandemic has raised numerous issues around insurance coverage, and businesses should know if and when business interruption, general liability, advertising, workers’ compensation, or even directors’ and officers’ policies could be triggered by issues around reopening.
- Force majeure clauses: Businesses should be looking at contracts through the lens of the pandemic and gain an understanding of how clauses allowing for delayed or nonperformance may be construed going forward, particularly where many are predicting a potential resurgence of infections in the fall.
- Enforceability of waivers: Waivers will be a critical tool for companies to manage liability when they reopen, but there are limitations on what liabilities can be waived and the extent to which disclaimers can offer protection.
- Compliance liability: How to comply with government requirements for reopening, including following cleaning protocols and use of PPE, and to ensure you don’t inadvertently assume duties beyond what is required.
- False claims/fraud: Companies receiving government relief funds or serving as government contractors need to be careful about how money is obtained and used so as not to become the subject of a fraud investigation, or sued under the False Claims Act.
Communications Plans: Businesses will also need to have:
- Policies: Communications around new and evolving policies put in place to keep employees, customers, vendors and visitors safe.
- Plans: Internal and external plans around a new outbreak or exposure to COVID-19.
- Protocols: Develop and/or refine communications channels to keep target audiences updated as the situation evolves; media protocol for inquiries and on-site visits.
- Training: Media training for spokespeople and communications training for employees in highly visible roles.
- Materials: Update marketing materials for a COVID-19 world including signage.
Policy and Regulatory Advocacy: As the legal, regulatory and commercial implications of COVID-19 continue to evolve, companies may want to engage with policy professionals to assist with:
- Public grants or loans: Eligibility for public grants or loans available to businesses and public entities impacted by COVID-19.
- Relief funds: For schools, education programs and child care.
- Tax incentives for businesses reopening/continuing to operate: Including the Safe and Healthy Workplace Credit proposed in the HEALS Act.
- Liability protection: Contours of what is being discussed in Washington.
This document is intended to provide you with general information regarding updates related to coronavirus. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions.
The information in this article is accurate as of the publication date. Because the law in this area is changing rapidly, and insights are not automatically updated, continued accuracy cannot be guaranteed.