Client Alert

What To Consider In Light Of The Impact COVID-19 May Have
On Your Business Operations

The World Health Organization (WHO) recently characterized the outbreak of coronavirus (COVID-19) as a pandemic. WHO and the Center for Disease Control (CDC) have advised that social distancing is one way to slow down the spread of COVID-19. Taking their cue from these health experts, some local governments have banned gatherings of large groups of people and are considering other actions that will restrict the gathering of people even further. Conferences and banquets have been postponed or cancelled. Sporting events around the country have been suspended. Travel has been disrupted and, in some cases, banned. Schools and universities are closing. People have been quarantined or are fearful of exposure and self-imposing methods to protect themselves. As the spread of COVID-19 in California and elsewhere becomes more inevitable, expansive and imminent, everyone is faced with many difficult questions stemming from the novelty and uncertainty of the situation. Businesses, in particular, are grappling with balancing between protecting the health and safety of their employees, clients and customers, minimizing economic and business disruption and determining their legal rights and obligations.

There is no one size fits all answer to these questions. Also, information is shifting hourly as additional information is disclosed and additional lessons are learned internationally, nationally and in our own local communities. Nonetheless, there are some things that all businesses should consider in the coming days and weeks ahead. Below we try to provide some general guidance to some of the key questions based on the current state of the information now known.

What is the best way to stay on top of the latest information about COVID-19? The CDC (https://www.cdc.gov/coronavirus/2019-ncov/index.html) and WHO (https://www.who.int/health-topics/coronavirus) are constantly updating their websites with new information and advice for individuals and businesses alike and are essential resources. Business owners should also follow information from local health authorities and what is happening in neighboring states, their own state and, perhaps, most importantly, their own immediate city and community. News outlets, local governments and local health authorities, are following the situation very closely and will have information that may impact you more directly. What may be happening in one locale may be drastically different than in others and, therefore, businesses need to evaluate each of their operating locations separately.

What can we do to minimize the spread of COVID-19 in structures we own or occupy? In addition to staying informed about the ever-evolving situation through education and regular monitoring, real estate owners and operators should consider taking the following steps, at a minimum:

  • Distribute accurate information to employees, members, tenants and clients about preventive steps they can take individually and direct questions about the disease to health authorities, such as the CDC and WHO.
  • Post reminder notifications about preventive steps that can be taken by individuals in commonly used spaces, such as lobbies, restrooms, breakrooms, kitchens and elevators.
  • Mandate that employees, members, tenants, clients or guests that have any flu or cold-like symptoms, and especially a fever, cough and/or shortness of breath, stay in their homes and encourage them to seek medical advice when the situation requires it.
  • Take extra efforts to disinfect and sterilize common areas and commonly touched surfaces such as doors, handles, handrails, elevator buttons, countertops and the like. This could include any or a combination of wiping down those surfaces more frequently, placing auto-dispensing hand sanitizers by doors and heavily trafficked areas, extra efforts to wipe down individual work spaces, deep cleaning common areas frequently or placing wipes or tissues and a disposal bin by doors.
  • Minimize the number of vendors and guests only to essential persons and encourage all meetings to take place by telephone or video-conference instead of in person.
  • Regularly communicate with employees, members, tenants, clients and guests as information is learned or changes to normal operations are made.

How do we balance protecting our employees’ privacy rights and complying with HIPPA and the ADA requirements, and what else should we be thinking about with respect to our employees? Generally, employers are prohibited from seeking medical information from employees, except in limited situations. In the event of a pandemic, additional inquiries and actions can be made. But, at a minimum, employers should be familiar and follow the guidance of the EEOC in these matters (https://www.eeoc.gov/facts/pandemic_flu.html). Employers may ask employees if they are experiencing influenza-like symptoms, such as fever, chills, cough or sore throat, but must maintain all information about employee illness as a confidential medical record. If an employee or visitor tests positively for COVID-19, the employer should notify persons who have come into contact with that person and advise them of the situation so they can seek appropriate medical advice. Employees who worked closely with that employee should be sent home for a minimum of 14-days to avoid spread of the infection. Employers should not identify by name the infected employee without the employee’s express permission.

An employer should consider how it will sanitize a space if a person who tests positive with COVID-19 enters the building, an office or retail space, a neighboring space, a different floor or a neighboring building. Things to consider include whether there should be a mandatory or voluntary temporary closure and, if for an extended period of time, how the employer will address compensation and benefits during that time. Cleaning staff may need to be properly certified for hazardous conditions depending on the circumstances.

Employers should also analyze existing company policies to determine whether any adjustments need to be made or new policies implemented for addressing the impacts of this epidemic. For example, employers should consider whether they are going to restrict domestic, international, business and/or personal travel by their employees. Employers should anticipate how to respond in the event an employee reports being sick, such as advancing sick days or allowing employees to take the necessary unpaid time off.

If possible, employers should also consider whether there is flexibility to allow employees to work remotely and implementing plans to facilitate remote work. Employers with employees working remotely should prepare a remote work policy that describes what is required of and permitted by employees working remotely, how communications will be delivered by the employer and how the policy will be administered.

What rights and obligations do landlords and tenants have? In addition to taking the actions discussed above, landlords and tenants should consider whether and when to close busy shopping centers, office buildings and other facilities for periods of time and whether such closures will prevent them from complying with their lease obligations.

Landlords will need to analyze the risks of leaving spaces open and exposing individuals to COVID-19 and potential claims for personal injury or negligence, as compared to the possible economic consequence of closing such spaces and preventing tenants from operating as usual.

Leases should be analyzed to determine whether there are provisions that discuss what the landlord or tenant can or cannot do to avoid breach of lease or breach of quiet enjoyment claims. Some leases give landlords the right to temporarily close in the event of an emergency. Some retail leases contain “continuous operation” provisions which require a retailer to remain open for business for a minimum number of hours on particular days.

In the event of a closure, a tenant may have a right to abate rent during some or all of the closure. Some cities are passing laws that prohibit landlords from evicting tenants for a period of time for the non-payment of rent but in places where that is not the case, the landlord needs to consider how it will address the failure of tenant to pay part or all of the rent if a tenant shuts down operations for a period of time and there is no applicable rent abatement provision in the lease, including negotiating adjusting rent obligations in such circumstances.

In some circumstances, a landlord or tenant may have defenses to the enforceability of a lease such as the applicability of force majeure provisions in the lease, and certain performance of contract defenses such as impossibility, change of circumstances or frustration of purposes.

Since each lease is different, landlords and tenants should seek legal advice to determine what options they may have and the potential consequences.

Is there any insurance coverage that may be applicable? Businesses may have insurance coverage for certain events related to COVID-19 that lead to economic harm or employee claims.

Often, comprehensive general liability police include coverage for business interruption. While generally such coverage is limited to situations where there is physical damage to a structure there may be policies where coverage for business interruption caused by contamination from COVID-19 may be covered.

Similarly, workers compensation insurance may be available to cover certain claims made by employees who are exposed to COVID-19 in the work place.

There also are other specialized insurance policies that may apply to certain types of situations such as event cancellation or E&O insurance.

Since every insurance policy is different, existing policies should be analyzed to determine whether coverage may be available and to what extent. Businesses may want to consult an insurance attorney to help them navigate their policies. Businesses should remember to tender claims to their insurance carriers as soon as possible.

Cox, Castle & Nicholson’s professionals are monitoring the rapidly changing landscape caused by COVID-19 and are available to provide advice and recommendations for you and your business.

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