Legal Implications Of COVID-19 Outbreak

The current coronavirus pandemic has thrust all of us into a situation unlike anything our society has experienced in recent history.  In the midst of COVID-19, the federal, state, and local governments are implementing new policies and regulations, which will have a large impact on businesses and individuals alike.  As we navigate these uncharted waters together, LGC remains committed to serving our clients and community with the same level of legal professionalism and integrity despite the ever-changing circumstances.  Our attorneys and staff are continuing to work remotely during this emergency, and are readily available to assist our clients and community in whatever way is needed.  Whether you are an employer or employee, a landlord or tenant, a homeowner, contractor or supplier, an insurer or insured, the policies implemented as a result of the coronavirus present complex legal issues that will have a lasting effect for months, maybe years to come.

LGC is here to help you understand how the new restrictions implemented by the State and local agencies apply to you and your business and advise you how to best protect yourself and your business during these extraordinary times.  Below please find a brief overview of some of the legal issues presented by the Coronavirus pandemic for your consideration.

STATE OF CALIFORNIA – ABSENSES AND REDUCED WORK HOURS

Absences and Reduced Hours

Due to school closures and quarantine procedures, many employers are faced with the issue of how to deal with sick policies and absences and many employees are unclear of the government benefits available.  As employers develop their policies in response to the coronavirus quarantines, they must make sure that they continue to comply with the State and Federal employment regulations unless an exception has been approved.

Paid Sick Leave – If an employee has available paid sick leave, employers must allow their employees to use such leave and provide compensation for those hours used. Such paid sick hours can be used for illness, the diagnosis, care or treatment of an existing health condition, or preventative care for the employee or his or her family member. If an employee is quarantined, the employer may not force the use of paid sick leave; it is still the employee’s choice. If paid sick leave is used, however, the employer can require the use of a minimum of two hours of paid sick leave.

Other Paid Leave – If paid sick leave is exhausted, an employee may choose to use their other paid leave such as vacation and overtime.  However, such hours of leave and compensation will be provided based upon the original terms implemented by the employer.

Leave Due to School Closures – Many schools have been closed due to coronavirus and an important implication upon employers is that employees at companies with 25 or more employees cannot be discharged or in any way discriminated against for taking up to 40 hours of leave per year for specific school-related emergencies. (Cal. Labor Code 230.8). When an employee has to take time off due to school closures, any such leave will be provided based on the paid and non-paid leave policies of the employer. An employer cannot force the employee to use paid sick time.  However, they can require that the employee first use other paid sick time, such as vacation or paid time off, before taking unpaid leave. Paid sick leave can be used for employees to be with their child as preventative care.  If the employee does not have any paid sick leave and is unable to work from home while caring for their child due to school closure, the employee may be eligible for unemployment insurance benefits. More information is available here on the EDD website.

Working from Home

Although many employers are beginning to take measures to go remote, there is no general mandate yet in San Diego County that employers give their workers the option to work from home, unless another applicable law applies such as the Americans with Disabilities Act, which may require certain accommodations for qualified individuals. Employers can, however, require that their employees work from home as preventative measures. For example, employers have the right to inquire about their employees’ recent travel and request that they work from home due to potential exposure.  As an employer, you not only have to consider your obligations to your employees who are potentially infected with the virus, but you also need to consider the welfare and safety of your other employees when making determinations regarding your workplace policies and procedures in response to the COVID-19 pandemic. Employers who fail to take the necessary precautions to protect their employees from exposure to the virus could face tort liability.  Please contact LGC if you have questions regarding your workplace policies or would like assistance in drafting employee policies and guidelines to be implemented in response to COVID-19.

UI Work Sharing Program/Reduced Hours

The California Employment Development Department (EDD) has recently implemented numerous policies that benefit both employers and employees impacted by absences and reduced work hours related to COVID-19. Employers who are experiencing a slowdown in business as a result of coronavirus can apply for the UI Work Sharing Program, which is an alternative to lay-offs. The program allows employers to continue to retain their trained employees by reducing work hours and wages, which can be partially offset.

To qualify for the program, employers must be legally registered in California and have an active California State Employer Account Number. At least 10% of the employer’s regular workforce, and a minimum of two employees, must be affected by a reduction in hours and wages. Such hours and wages must be reduced by at least 10%, but no more than 60%. Health and retirement benefits, however, must remain the same as before. Should the employees participate in a union or have collective bargaining agreements, there must be an agreement for voluntary participation. In an employer’s application, the number of hours, employee name, and social security number must be provided. Furthermore, employers should notify their employees of their intent to register for the program, identify the number of layoffs that will be avoided due to participation in the program, and provide the EDD with the necessary documentation and reports.  Employers considering reducing employee hours to avoid layoffs should consult with legal counsel prior to making that decision.

Inability to Fulfill Contractual Obligations

In response to the outbreak, some cities/counties have imposed mandatory shelter in place orders and have implemented temporary operational guidelines for some businesses, such as night clubs, bars and wineries.  If your business has been restricted as a result of the cornavirus, you could be unable to fulfill certain contractual obligations you have with other entities or third-party vendors.  Your potential liability resulting from non-performance will vary depending on the terms of your contract.

Many contracts incorporate a force majeure provision, which means “act of God” and refers to a clause that relieves the parties to a contract from liability for natural and unavoidable catastrophes that interrupt the expected course of events and restrict participants from fulfilling obligations.  In California, courts have held that force majeure is not necessarily limited to the equivalent of an act of God, but the test is “whether under the particular circumstances there was such an insuperable interference occurring without the parties’ intervention as could not have been prevented by prudence, diligence and care.”  (Horsemen’s Benevolent & Protective Assn. v. Valley Racing Assn. (1992) 4 Cal. App. 4th 1538, 1545).

Your exposure for breach and potential remedies will depend on the wording of your contract. It is highly likely that breaches resulting from coronavirus-enacted restrictions will qualify as force majeure, but it will depend on the exact phrasing of the clause.  Even if your contract does not contain a force majeure clause, other provisions could be enforced to limit your exposure.  For more questions regarding the applicability of a force majeure provision or the remedies available to you under your contract, contact our contract professionals at LGC.