Essential Legal Issues Concerning COVID-19
COVID-19 was initially reported on December 31, 2019 in Wuhan, China. On March 11, 2020, the World Health Organization (WHO) officially declared the outbreak a pandemic and acknowledged the likelihood of it spreading to all countries across the globe. According to a March 12, 2020 “Situation Report” published by the WHO, there are about 125,000 reported cases of individuals contracting COVID-19 and 4,613 related deaths reported globally. As of March 12, 2020, there have been over 1,000 cases of COVID-19 across the United States, with at least 33 deaths.
On Wednesday night, March 11, 2020, President Donald Trump imposed a 30-day travel restriction on foreign nationals who have visited 26 countries in Europe. The travel ban, which went into effect on March 13, 2020, is one of many containment measures to be taken by the administration, as Trump has outlined a series of measures intended to tackle the impact of the virus, which you can read here.
The COVID-19 outbreak has caused significant disruptions to supply chain, employment, contractual and commercial relationships. There currently exists many domestic laws that can help guide appropriate responses to the outbreak, which many employers should remain aware of as they take steps towards containing the virus and managing employees’ concerns.
II. Employment and Labor Law
a. What if employees do not want to come to work?
The U.S. Department of Labor’s Occupational Safety and Health Act of 1970 (OSHA) requires employers to be responsible for maintaining safe and healthy work environments for their employees. Though OSHA establishes and enforces standards for responding to outbreaks, there currently exists no OSHA standard that explicitly addresses occupational exposure to COVID-19. Instead, OSHA has highlighted here a few standards that may apply to employers on a case-by-case basis, such as the General Duty Clause in OSHA Section 5(a)(1). See 29 USCA § 654. If employees do not want to come to work due to fears of exposure to COVID-19, then employers, under OSHA, may be required to conduct a hazard assessment and take additional steps toward fulfilling their obligation to provide a safer workplace. OSHA also established a recordkeeping requirement at 29 CFR Part 1904, mandating employers to log certain work-related injuries and/or illnesses. COVID-19 may be considered a recordable illness if the employee is infected while at work.
- Additional information regarding OSHA’s Injury and Illness Recordkeeping and Reporting Requirements can be found here.
- OSHA has also provided additional guidance to prevent employees’ exposure to COVID-19, which can be found here.
b. What if I suspect an employee has contracted COVID-19?
If an employer believes that an employee has contracted the disease and is at risk of contaminating the workforce, then the employer must have objective evidence before reasonably taking action to reduce widespread exposure in the workplace. Once an employer obtains objective evidence, they may be permitted to ask high risk employees (i.e. an employee exhibiting symptoms and/or who recently traveled to a foreign country with relatively high rates of exposure to COVID-19) to, without identifying the illness, voluntarily screen themselves or report whether they have a contagious illness.
It may also be permissible to require employees who show symptoms of the virus to take a fitness for duty exam before returning to work. However, it is highly recommended that employers consult with counsel before making any such determination and taking any such action.
c. Can employers issue mandatory quarantines?
Employers that wish to issue mandatory quarantines of employees who exhibit COVID-19 symptoms should be cautious to avoid violating the Americans with Disabilities Act. Though earlier guidance from the Equal Employment Opportunity Commission (EEOC) explicitly permitted employers to encourage employees to work remotely as an effective means of controlling the spread of other pandemics such as influenza, whether or not an employer can require a particular employee to work remotely, depends on the circumstances and should be discussed with counsel.
d. Can employers single out certain employees based on race and ethnic origins?
No. Employers should avoid targeting employees when asking them about their medical history and personal travel plans, and remain mindful that those employees could be in a protected class under anti-discrimination laws (i.e., ethnicity, national origin, race, age).
e. What if I need to close my business?
Under relevant federal and state laws, employers are required to only pay for the actual hours worked by non-exempt employees – i.e. most hourly employees. Please note that New York State is waiving the 7-Day waiting period for filing for unemployment for people who are out of work due to COVID-19 closures or quarantines. If employers temporarily close their businesses due to COVID-19, then employers may be able to require exempt, salaried employees to use their vacation or leave without pay during the temporary closure
f. What if an employee must take leave to care for themselves or a family member?
Under New York State Law, employees who work at least 20 hours per week for an employer with at least 1 employee are entitled to Paid Family leave for the purpose of, among other things, caring for a family member who is ill. The maximum coverage is 10 weeks, and is capped at 60% of weekly pay, but no more than $840.70. For more info, see https://paidfamilyleave.ny.gov/.
Employees who work in New York City, for at least 80 hours in a calendar year, and for an employer with at least 5 employees, are entitled to up to 5 paid sick days in a calendar year, accrued as 1 hour for every 30 worked, up to a maximum of 40 hours of paid leave. For more info, see https://www1.nyc.gov/site/dca/about/paid-sick-leave-FAQs.page.
The Family and Medical Leave Act (FMLA) requires covered employers to allow employees to take unpaid leave for medical and family related reasons, including severe and complicated cases of the flu, without disrupting group health insurance coverage. The FMLA applies to employers in the private sector who have more than 50 employees for a period of at least 20 workweeks in the year. Federal law does not require employers to provide leave to employees caring for dependents released from child care or school. In a 12-month period, eligible employees could be entitled to twelve unpaid work weeks for a number of reasons including a “serious health condition” that makes the employee unable to perform the essential functions of his or her job. See 29 USCA § 2611.
III. Corporate Law and Supply Chain
a. The Securities and Exchange Commission (SEC)
On March 4, 2020, the Securities and Exchange Commission (SEC) released an order in response to COVID-19, stating that the commission will provide conditional regulatory relief for certain publicly traded companies with filing obligations under the federal securities law. The SEC also provided an additional 45-days for publicly traded companies to file certain disclosure reports that would have been due from March 1st to April 30th, 2020. The SEC also encourages all companies that have become aware of a COVID-19 related risk, to appropriately inform investors about the risk before engaging in securities transactions with the public. In doing so, companies may be able to avail themselves of the safe harbor provision in Section 21E of the Exchange Act.
Visit the SEC website here, for additional information pertaining to the SEC’s conditional regulatory relief in the wake of the coronavirus outbreak.
b. Force Majeure
As widely reported, the coronavirus has placed a severe strain on supply-chains around the world. Initially limited to China and its manufacturing centers, COVID-19 is now impacting supply chains not just in Asia, but on all continents. To the extent US-China trade wars have caused brand owners to move manufacturing outside of China, they are now faced with a formidable enemy in new territories. With no end date on the horizon and as international travel restrictions from and too many countries mount, many businesses are examining their contracts to understand the extent of their rights, remedies and obligations.
Parties may wish to proactively audit their critical supply chain and customer agreements to evaluate rights and obligations in the likely event of impact. Each circumstance will be unique. However, general considerations/actions include:
Noting contract provisions defining events of default.
Determining whether written agreements contain force majeure provisions. If so, key points on which to focus include notice requirements (i.e., time, method of delivery and content of required notices) and possible termination rights. A force majeure event can occur when an event beyond a company’s control occurs and significantly reduces a company’s ability to perform under a contract. In which case, the company may be able to temporarily suspend or release their duty to perform without being held liable.
If a need to declare a force majeure event is anticipated, assessing facts and circumstances of the event (e.g., specific supply chain components impacted, facilities impacted, availability of alternative facilities and/or shipping methods).
If a force majeure declaration is received from a manufacturer or supplier, assessing not only rights vis-à-vis the declaring party, but also whether receipt of the notice will trigger the necessity for a party to provide its own declaration to customers.
In the absence of written agreements or force majeure provisions, parties may wish to conduct risk assessments, explore potentially applicable legal precedents and formulate strategies for productive communications with customers and downstream parties.
c. Frustration of Purpose and Impossibility of Performance
If a contract lacks a force majeure clause, then parties may wish to consider the defense of frustration of purpose or impossibility of performance. Frustration of purpose occurs when after a contract is made, a party’s principal purpose is substantially frustrated without fault by the occurrence of an event, the non-occurrence of which was a basic assumption on which the contract was made. In other words the occurrence of an event makes the performance completely worthless to the other party. The doctrine, however, does not apply where performance under the contract would merely cause some degree of financial hardship.
Impossibility of performance is a defense to nonperformance and refers to situations where the purpose for which the contract was made has become impossible to perform. This occurs where there is destruction of the subject matter of the contract, or the means of performance is objectively impossible to accomplish by a party.
In the context of the delivery of goods, for example, parties may also wish to consider the Uniform Commercial Code. Section 2-615(a) of the N.Y. U.C.C. provides that “[d]elay in delivery or non-delivery . . . is not a breach under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.”
Again, one size does not fit all, and specific circumstances will differ. However, proactive review and planning with counsel now may help lessen potential impacts on contractual agreements and minimize disputes and related costs later.
a. Business Interruption Insurance
Business interruption insurance protects the insured against losses resulting from an inability to conduct normal operations. For instance, if a store is damaged by fire or a machine breaks down, the period of interruption would be the time it takes to remediate the damage or repair the machine respectively. Generally, the insured would receive the profit that they would have earned absent the interruption.
However, whether an insured is covered and, if so, how much they are insured for, are potential causes for controversy. For instance, if a business is adversely affected by an external issue that does not result in the cessation of business, there may not be any recovery. A primary example of this is the September 11, 2001 terrorists attacks. While many businesses were covered for physical damages; they were not protected against the long-term business reduction in lower Manhattan which were in the nature of uninsurable consequential damages. Similarly, businesses that are affected remain obligated to mitigate damages. We are already starting to see this vis-à-vis COVID-19 with restaurants increasing take-out and delivery options in lieu of dining room operations.
As with all insurance litigation, careful attention to policy details, exclusions, notice periods and other provisions will be required. We expect that numerous declaratory judgment actions and other lawsuits will be filed by insureds if coverage is declined or the amounts offered are deemed insufficient. While health and safety is of the foremost importance at this time, insured business owners should be proactive and take steps to protect themselves. The Dunnington team is available to assist in assessing these important tasks.
a. Department of State’s Office of Academic Exchanges
The Department of State’s Office of Academic Exchanges has provided information for exchange visitors whose travel may be affected by the novel coronavirus 2019 (COVID-19). In an email to sponsors, the office describes USCIS’s discretion to prolong or change status, and in some circumstances give student work authorization, for people who cannot leave the United States due to serious situations. The DOS office reemphasizes that any exchange visitors subject to the home residency requirement will need a 212(e) waiver, but notes that expedited waiver processing may be requested for circumstances with critical humanitarian need. Additionally, the office writes that exchange visitors can request a “No Objection Statement” from their home country government and submit it as an update to their application once they have a waiver case number. F-1 Students experiencing severe economic hardship because of unforeseen circumstances beyond their control may request employment authorization to work off-campus. See 8 CFR 214.2(f)(9). To apply, it is necessary to submit Form I-765, Application for Employment Authorization, and copies of the Form I-20, the Certificate of Eligibility for Nonimmigrant Student Status, and any other supporting documents. The Form I-20 must contain the employment sheet completed by the Designated School Official, showing eligibility for off-campus employment due to severe economic difficulty for unforeseen events beyond the student’s control. If the application is approved, the student is authorized to work off-campus for up to one year until the expected date of graduation. See 8 CFR 214.2(f)(9)(ii).
b. Presidential Proclamations
On January 31, 2020, President Trump issued a Proclamation to suspend entry of non-citizens physically present in China, excluding Hong Kong and Macau, 14 days prior to their entry into the United States. The ban became effective on February 2, 2020. Further, U.S. citizens who traveled in the Hubei province (China) in the 14 days prior to arriving in the United States will be subject to up to 14 days of mandatory quarantine. Returning U.S. citizens who had visited other parts of China, with the exclusion of Hong Kong and Macau, will be subject to monitoring and potentially voluntary quarantine at home.
On February 29, 2020, President Trump issued a second Proclamation extending the same suspensions to Iran. The ban became effective on March 2, 2020.
President Trump issued another Proclamation, effective 11:59 pm (ET), March 13, 2020, which suspend the entry of most foreign nationals who have been in certain European countries at any point during the 14 days prior to their scheduled arrival to the United States. These countries, known as Schengen Area, include: Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, and Switzerland. This does not apply to legal permanent residents holding a green card, (generally) immediate family members of U.S. Citizens, and other individuals who are specifically identified in the Proclamation. The Proclamation shall remain in effect until further notice by the President.
On Saturday March 14th, President Trump declared that all aliens who were physically present within the United Kingdom, excluding overseas territories outside of Europe, or the Republic of Ireland during the 14-day period preceding their entry or attempted entry into the United States is hereby suspended. This does not apply to legal permanent residents holding a green card, (generally) immediate family members of U.S. Citizens, and other individuals who are specifically identified in the Proclamation. The Proclamation shall remain in effect until further notice by the President.
c. U.S. Immigration and Customs Enforcement
U.S. Immigration and Customs Enforcement (ICE) announced that it will be “flexible” with visa rules for international students as many universities move courses online as a prophylactic measure against coronavirus. International students on F visas for academic studies can only take one course online per semester to maintain legal status. In contrast, students on M visas for vocational training are barred from taking any online classes. But ICE stated that it will overlook these requirements temporarily in light of the public health crisis so long as universities provide written notice within 10 business days of deciding to change its practices. The U.S. Department of State, which manages the J-1 exchange visitor program, has also issued guidance on its own to shield students participating in the program from penalties caused by the virus, including by allowing students who have yet to enter the U.S. to postpone their start dates.
Foreign students on F visas for academic studies can only take one course online per semester to maintain legal status, while students on M visas for vocational training are barred from taking any online classes. But ICE said it will forgive those requirements temporarily in light of the public health crisis so long as universities provide written notice within 10 business days of deciding to change its practices.
ICE also encouraged foreigners working in the U.S. through Optional Practical Training (OPT) to work with their companies to find “alternative ways to maintain employment,” such as through teleworking. However, a work interruption for people on OPT could present problems for workers whose jobs do not permit remote work, such as engineers.
VI. Real Estate – Commercial Leases and Brokers
a. Commercial Leases
Commercial tenants may face daunting rent obligations where retailers are obligated to close due to coronavirus. At the height of the pandemic, China and other Asian countries faced numerous store closures due to the virus. Tenants should take a close look at their commercial lease provision as they may contain force majeure provisions that typically prevent tenants from withholding rents in such events. Such provisions are typically a negotiated term with respect to the commercial lease.
b. Inability to Perform
Typical provisions state: this Lease and the obligations of Tenant to pay rent hereunder and to perform all of the other covenants and agreements hereunder on the part of Tenant to be performed shall in no wise be affected, impaired or excused because Owner is unable to fulfill any of its obligations under this Lease or to supply, or is delayed in supplying, any service expressed or implied to be supplied or is unable to make, or is delayed in making, any repair, additions, alterations or decorations or is unable to supply, or is delayed in supplying, any equipment or fixtures if Owner is prevented or delayed from so doing by reason of strike or labor troubles or any cause whatsoever beyond Owner’s reasonable control including, but not limited to, government preemption or restrictions or by reason of any rule, order or regulation of any department or subdivision thereof of any government agency or by reason of the conditions of supply and demand which have been or are affected, directly or indirectly, by war or other emergency or by reason of any other Force Majeure (as hereinafter defined) occurrence or event.
Commercial brokers may also consider changing their contracts to add a “state of emergency” clause, so that the agreement is extended if a state or federal authority declares a state of emergency.
VII. Trusts and Estates
a. Estate Planning
As shut downs and changes to daily life occur, take a few minutes to review all personal planning documents – Wills, Trust Agreements, Living Wills, Health Care Proxies, Powers of Attorney as well as beneficiary designations for financial accounts, retirement plans and insurance products.
Are your documents up to date – and do they provide adequately for loved ones?
If you have concerns or questions related to any of those documents or your planning in general, please seek counsel from one of our experienced Trusts and Estates attorneys, who are ready to help you make any needed changes.
As the world continues to respond to COVID-19 employers and employees must remain diligent and informed in the many ways in which they or their businesses are effected by the ramifications of the outbreak.
While you worry about remaining healthy during this pandemic, let our experienced Corporate, Employment, Immigration, Commercial Litigation, Real Estate and Trusts and Estates attorneys assist with delivering and maintaining your professional objectives. Visit https://www.dunnington.com/ for more information. For any inquiries, please call us at (212) 682-8811.
*Required Disclaimer: This alert is provided for informational purposes and does not constitute, and should not be considered legal advice. Specific facts and circumstances will differ. Neither the transmission nor the receipt of this information shall create an attorney-client relationship between the transmitter and the recipient. You should not take, or refrain from taking, any action based upon information contained in this alert without consulting legal counsel of your own choosing. Under applicable professional rules of conduct, this informational publication may be considered attorney advertising.