What Can (and Should) Companies Do to Prepare for the Novel Coronavirus (COVID-19)?
As the Impact of the Novel Coronavirus Pandemic Continue to Broaden, Companies Must Ensure that They are Adequately Prepared
The novel coronavirus (COVID-19) is continuing proliferate across the United States and around the world; and, while local, state, and federal authorities are undertaking significant efforts to stop the spread of the virus, at this point the situation is still expected to worsen before it gets better. With this in mind, companies in the United States need to begin preparing for a long-term change in the status quo (if they haven’t begun already), and their preparation efforts must extend across all aspects of their business operations.
From a legal perspective, the novel coronavirus (COVID-19) presents a number of challenges, obstacles, and obligations. From protecting employees to mitigating the risk of employee lawsuits, and from maintaining regulatory compliance to dealing with contractual issues with vendors and customers, companies of all sizes and in all business sectors need to be taking appropriate steps to mitigate risk on a number of different fronts. In this article, we break the key legal considerations down into five key areas:
- Employment Law
- Teleworking Compliance
- Contract Relations with Vendors and Customers
- SEC Compliance
- Emergency Preparedness
5 Key Legal Concerns for Companies During the Novel Coronavirus (COVID-19) Pandemic
As the novel coronavirus (COVID-19) maintains its grip on the United States economy and the public at large, what do U.S.-based businesses need to do in order to protect themselves, their employees, and others?
1. Employment Law Matters
For most companies, the most immediate impacts of the novel coronavirus pandemic fall within the realm of employment law. Companies will need to make difficult decisions about if, when, and how to ask employees to stay home, and they will need to be prepared to respond to allegations that their efforts were too little too late. Even setting aside the practicalities of unexpectedly dealing with the novel coronavirus in such a short time window, companies will face a number of legal challenges, including:
- Asking Employees to Stay Home – Companies can ask their employees to stay home, but in doing so they need to exercise caution. Companies can expect employees to resist any efforts to combat the novel coronavirus that limit their income; and, even if teleworking is an option, this presents a host of legal considerations as well (more on this below).
- Maintaining OSHA Compliance – Under the federal Occupational Safety and Health Act of 1970 (OSHA), companies are obligated to provide their employees with a work environment “free from recognized hazards that are causing or likely to cause death or serious physical harm.” If employees are exposed to the novel coronavirus through their employment, this could potentially give rise to liability under OSHA.
- Dealing with Requests for FMLA Leave – Many employees will likely seek to take job-protected leave under the Family and Medical Leave Act (FMLA). While employers must assess all FMLA requests in good faith, there are likely to be serious questions in many cases as to whether a confirmed COVID-19 diagnosis constitutes a “serious health condition” for FMLA purposes.
- Deciding When to Allow Employees to Return – Finally, when is it safe (and legally advisable) to allow employees to return to work? While employers can lawfully require their employees to obtain doctors’ notes, they must be very careful to avoid any practices which are even arguably suggestive of ethnic or national origin discrimination.
2. Teleworking Compliance and Risk Mitigation
For many companies, the solution to dealing with the novel coronavirus will largely entail asking employees to work from home. Critically, while this may seem fairly straightforward (especially for companies that already have the logistical capabilities in place), there are a number of legal considerations involved.
Firm founder Nick Oberheiden, PhD recently published an Op-ed on FoxBusiness.com discussing the legal issues involved with transitioning to telework during the coronavirus pandemic. In the opinion piece, he outlines five key issues that companies will need to consider:
- Ensuring that the company has appropriate teleworking policies and procedures
- Avoiding violations of the Americans with Disabilities Act (ADA), Title VII of the Civil Rights Act of 1964, and other state and federal anti-discrimination laws
- Maintaining the necessary level of data privacy and security, as dictated by law and contractual requirements
- Complying with legal and contractual notification and disclosure obligations
- Complying with state-specific obligations, particularly in circumstances in which employees commute across state lines
3. Engaging with Vendors, Clients, and Customers
With the NBA, NCAA, MLB, and other major entities all cancelling highly-profitable events due to concerns over the novel coronavirus (COVID-19), other companies need to be thinking very carefully about how and to what extent they engage with their vendors, clients, and customers as well. Several states and cities around the country are also placing bans on gatherings over certain sizes (generally with exclusions for ordinary workplaces). While most companies cannot afford to simply shut down while much of the country’s economic activity is on hold, continuing to travel and have in-person meetings could create unnecessary exposure to the virus and to legal liability.
At the same time, companies have contractual obligations, and while force majeure clauses may apply, exercising these clauses may or may not be in companies’ best interests. There is a careful balance that needs to be maintained; and, ultimately, companies must make informed decisions that take all relevant considerations into account.
If there is a silver lining, it is that virtually all companies are facing the same issues, and this means that opportunities to compromise and work collaboratively to overcome challenges are likely to be in abundance – far more so than in “ordinary” times when companies only have their own business interests to consider. So, for business dealing with contractual situations in which one party is having trouble performing or meeting deadlines due to factors beyond their control, working to find creative solutions may prove to be more cost-effective than resorting to litigation. Of course, this will not invariably be the case, and companies must not hesitate to take legal action during the novel coronavirus pandemic when necessary.
4. SEC Compliance for Publicly-Traded Companies
While the U.S. Securities and Exchange Commission (SEC) is providing public companies some leeway insofar as their ability to comply with federal securities laws is directly impacted by the novel coronavirus (COVID-19), it has made clear that publicly-traded entities must still continue to supply investors with accurate and up-to-date information. To this end, public companies potentially face a number of disclosure and reporting obligations, and they may need to be prepared to file multiple updates and revisions as the state of affairs in the United States and abroad continues to evolve.
We recently discussed factors that may trigger SEC filing obligations with respect to:
- Earnings guidance
- Forward-looking statements
- Management’s discussion and analysis (MD&A)
- Proxy statements
- Form 10-K, Form 20-F, and Form 40-F risk factors
When assessing whether their current SEC filings are still adequate, companies must consider both (i) whether general disclosures are sufficient to cover coronavirus-related matters, and (ii) whether previous coronavirus-specific disclosures remain accurate. If updated filings are required, companies must make the requisite filings promptly in order to avoid unnecessary and unwanted SEC scrutiny.
5. Being Prepared to Respond in the Event of an Emergency
Finally, while it is easy for companies to focus on the business and financial implications of the novel coronavirus pandemic, it is important not to lose sight of the fact that we are facing a national health crisis. People are getting sick, people are dying, and the threat’s geographic scope is expanding on a daily basis. With this in mind, some companies will find themselves facing emergency situations in which one or more employees come to work while infected with the COVID-19. When this happens, they need to be prepared.
For companies of all sizes, effective emergency preparedness requires a multi-faceted approach. The first step is to develop appropriate internal policies and procedures, and the second step is to implement these policies and procedures effectively. Of course, both of these steps are easier said than done, and there are various intermediate steps (i.e. risk assessment, training, and implementation) that require an equally attuned and detail-oriented approach.
When evaluating their emergency preparedness, companies should assess whether their current policies and procedures are adequate to address the unique concerns presented by the novel coronavirus (COVID-19). The most-recent comparable event was the SARS epidemic of 2003, and a lot has changed since that time. For all companies, emergency response efforts should focus on preventing the spread of the virus, ensuring that impacted employees receive the necessary medical care, and mitigating risk on all fronts – from public relations to employment litigation.
Discuss Your Company’s Needs in Confidence
Do you have questions about what your company needs to do to prepare for the novel coronavirus pandemic? If so, our federal lawyers and compliance consultants can help. To get started with a complimentary initial needs assessment, call us at 888-680-1745 or inquire online today.
Dr. Nick Oberheiden, founder of Oberheiden P.C., focuses his litigation practice on white-collar criminal defense, government investigations, SEC & FCPA enforcement, and commercial litigation.