Minimising the impact of Coronavirus on Your Business – Steps to Prepare.

The Coronavirus continues to claim business casualties along with the significant and tragic human impact.  The announcement of Flybe’s administration reflects the substantial adverse economic effect the global spread of the virus is having; disrupting production, supply chains and travel, affecting airlines and the tourism industry significantly.

Businesses across all sectors can take practical steps to mitigate the economic impact – we look at some of these and the legal considerations that go alongside them in this brief guide.

Contingency plans

Review any pre-prepared contingency plans in the event of a disruption in supply or workforce availability. These plans will likely need to be adjusted but an increased readiness to react can often limit the impact on the wider business. 

Your contingency plan should deal with the problems faced by staff absence.  For instance:

  • consider if staff can work from home and if so, that they have the necessary equipment; ask them to take home laptops and check functionality;
  • can your IT system cope with an increase in remote working?  Now is the time to check these points with your provider and purchase additional licences for remote working if necessary;
  • consider options such as Skype, video-conferencing, using webcams and telephone conferences rather than face-to-face meetings or conferences; if necessary hold training on using equipment of this nature;
  • check travel plans of staff over the next few months to evaluate numbers that may be absent.  If any of these persons include key staff, pre-plan who will cover in any absence;
  • assess if any staff training needs to be carried out so that staff have the necessary skills to cover other roles;
  • ensure that any emergency contact details of key staff and contact information for all staff are up-to-date; and
  • nominate a ‘go to’ person to communicate workplace closures, evacuations or notifications of incidents and ensure there is a stand-by should that person become unavailable.

Legal points to note:

At the time of writing, there are proposals to change the laws around payment of statutory sick pay to staff who are self-isolating so employers will need to be aware of any changes and keep abreast of developments in this area. 

Where employees are willing to increase workloads to cover colleagues’ absences, employers will need to ensure that the provisions of the Working Time Regulations are complied with such as adequate rest breaks and that such employees have opted out of these regulations, where appropriate.

Protect your employees. For many companies, ‘business as usual’ is not an option.  Employers have legal duties to protect the health and safety of staff (and visitors) and whilst it may not be good for business to close an office or unit, this may be unavoidable.

Staff with children may be affected by school closures and may be less able to work from home than those without. Such employees are entitled to a reasonable amount of time off to deal with dependents.  Whether they will be paid for such time off will depend on their contracts and employer’s policies.  Contracts and policies should be readily accessible and your approach communicated to staff.

Where it is not possible for staff to work remotely and there is a downturn in work, some employers may be able to lay-off employees temporarily or reduce their hours to reduce the financial impact on the business. What is possible will depend on both what their contracts say and any implied custom and practice.  However, this should be considered alongside issues of employee engagement and corporate reputation.  We recommend you seek early advice should you wish to proceed in this way.

Liquidity

For those businesses without significant cash reserves who are affected by a downturn in income, they may need to identify any short- or medium-term funding.  Undertake research into the funding options and work this as a possibility into contingency plans.  Where your industry is significantly impacted, the business may need to keep solvency and directors’ duties in mind.

Legal consideration:

If companies trade whilst insolvent, there is a point where they should not continue and directors face personal liability should they do so.  Where directors allow a company to continue trading when insolvent and they ought to have known recovery was impossible, they may be liable for “wrongful trading”.

Supply issues

If your business relies on areas where Coronavirus has halted or may halt production, consider what alternative suppliers are available, for instance from outside the Asia-Pacific region.

It is important to understand the capacity constraints of alternative suppliers as it is likely any such supplier will face increasing demand from customers during the period of disruption – prices may be higher on usual principles of supply and demand.  And if you are a supplier with existing contractual obligations, you will need to be mindful of these and of maintaining those relationships for when business returns to normal. You may be inundated with requests for work at a time when staff are absent – be wary of taking on more than you can and ending up in breach of your existing obligations.

Where products are of a “big ticket” or bespoke nature, this may not be possible and you may need to commence discussions with your own customers about your own ability to meet their requirements.  You should review your contracts for force majeure provisions that may assist you.

Legal considerations:

Parties have limited remedies under English common law to end a contract where there are supply issues.  A contract may be ‘frustrated’ when it becomes impossible to perform but this really does mean impossible – not merely delayed or uncommercial and is rarely available.

Contracts with force majeure clauses allow performance to be delayed or might absolve one or both parties to a contract of all or part performance where an event arises which is outside their control. These may include natural disasters, terrorism, acts of God, epidemics or pandemics, war, strikes and acts taken by governments. Whether or not the Coronavirus will constitute a force majeure event will depend on the relevant contractual wording, interpretation and particular circumstances of the parties.  Mundays can review and interpret any such wording to determine your rights.

If you are considering relying on a force majeure clause (or resisting one), you should:

  • consider applicable limits and relevant notice periods and methods of serving notice;
  • consider if there are any alternative ways of performing contractual obligations and take appropriate steps to reduce any loss as a result;
  • retain all evidence of the disruption so that you can prove how your business is affected;
  • if entering into new contracts, draft clauses sufficiently clearly to cover eventualities such as the Coronavirus outbreak; and
  • consider opening discussions and negotiating amendments to agreements allowing suspension or part performance.  You will need to ensure any formalities are complied with as set out in the original contract.
  • consider whether insurance cover applies – do you need to notify?

How can Mundays help?

We can assist you in reviewing employment contracts and policies to ensure that correct procedures for home working, time off for dependants and working time opt outs are in place.  We can also advise on your payment obligations for staff and your responsibilities when ordinary work patterns are disrupted.

We can review any existing commercial agreements to evaluate the extent of any force majeure provisions and draw up any appropriate amendments that may be negotiated between parties.

Although it is not possible to plan for every eventuality, consideration of the above factors may allow you to continue with the least disruption despite the spread and impact of Coronavirus on your business.  It is important to engage with both your staff and your customers and work together during what may be a difficult time for many businesses.

For help and guidance on any of the issues contained in this article please contact:

Fiona Moss: fiona.moss@mundays.co.uk or +44(0)1932 590611

David Irving: david.irving@mundays.co.uk or +44(0)1932 590577

Andrew Knorpel: andrew.knorpel@mundays.co.uk or +44(0)1932 590673

The contents of this article are intended as guidance for readers. It can be no substitute for specific advice. Consequently we cannot accept responsibility for this information, errors or matters affected by subsequent changes in the law, or the content of any website referred to in this article. © Mundays LLP.

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