UPDATED APRIL 1, 2020
As Canadians and Canadian business assess the Impact of COVID-19, there are key considerations which should be reviewed. Canadian businesses and our response to this pandemic will be a key factor in the impact which it will have in Canada.
As many Canadian businesses have closed completely, moved to remote work or limited work options or, at the very least, suffered a significant impact on level of business, we are constantly evaluating changing best practices and options to consider.
This post contains a summary of some of the key legal considerations, but you should check our COVID-19 resource pages for more up to date information on government funding and other rapidly changing information
A. Employees:
1. Work-From-Home policies
Workplaces which are set up for remote work, or which can fairly easily implement remote work options, have relatively easy decisions to make. Across the world, technology companies with employees who largely work on computers have implemented a range of optional or mandatory remote work policies, even in locations where there at not known outbreaks of the virus. With very few exceptions, a company or location-specific remote work policy for employees will raise no employment law issues, provided adequate accommodations are made for individual employees to enable them to perform their job. Employers should take special care to address issues of employees who live in rural settings where internet connectivity is low or where there may be other individual issues. If the workplace has specific accommodations for an employee, care should be taken to ensure that remote work also meets those accommodations.
At Momentum Business Law, we have always been well set up for remote work since all our systems are cloud-based. As a result, there is no need to regularly be physically present at our office locations. Some of our efforts:
Ø We have worked, as many businesses do, to ensure that we maintain the relationships which thrive with physical proximity, when our teams are remote from each other. We have learned that this takes work and needs constant attention. Tools like Microsoft Teams work really well to promote communication.
Ø We have made great efforts to get institutional knowledge out of the heads of individuals and into accessible digital formats – this is a key work in progress to ensuring that remote teams can efficiently and effectively access the information which is otherwise obtained by popping your head in the door of a co-worker to ask for direction.
Ø We always provide the option for our meetings – with clients or colleagues, to happen online. We have used Zoom to great effect for several years and firmly believe that video calls are a much more personal and effective meeting format than audio-only calls.
Ø We use a VOIP phone system, making phone calls from remote office locations easy and seamless for our clients. We currently use Ottawa-based company Versature and highly recommend their system!
Ø All our documentation is maintained in secure cloud storage – meaning that both ourselves and our clients can access the information they need from wherever they are. We use digital signatures in absolutely every circumstance we can, meaning that in-person meetings are not required to close even the most complex of transactions.
2. Travel policies
Many workplaces have already implemented either complete or extremely restricted work travel policies. Again, unless a particular policy would significantly impact the ability of an employee to perform their job, a workplace decision like this carries few risks for employers.
Commissioned sales people who regularly travel to close sales are an example of employees who might need additional attention with travel restriction policies.
A more complex question is whether employers can direct employees to stay home from work if they have been travelling – whether it was work-related travel or personal travel. Again, for workplaces where remote work options are strong, there is little risk for employers in requesting employees self-isolate.
However, a workplace policy which requires employees take time off which is either unpaid or uses a limited amount of paid time off, will almost certainly raise employment law issues. Some employers have consulted with us regarding pro-active policies which advise employees in advance that a self-quarantine will be required if personal travel is undertaken, particularly to high-risk locations. With no evidence that the employee poses a risk to the company, a restrictive policy around personal travel is not recommended at this time, although this advice may change if the Canadian government provides specific directives to limit travel.
3. Paid Sick Leave
Employers with paid time off policies are better poised to provide support for employees who need to self-isolate or receive treatment for illness. Employees who know that they have this type of support are more likely to remove themselves from the workplace. If an employer is able to accommodate this, it is advisable to make it clear to employees that these days can be used as a preventative measure – either because of known exposure to the virus or because of emerging symptoms. Additionally, employers could consider expanding the number of available sick days where possible (and where employer-funded).
Employers who have short term disability policies in place which provide for paid time off for illness should check with their benefit providers to clarify the parameters of those policies and then clearly inform employees.
As noted above, any employer policy which requires employees to use limited paid time off against employee wishes should be approached with caution.
4. Unpaid sick leave
Many businesses in Ontario do not have paid time off polices which provide paid time off beyond mandated vacation time. The Canadian government has recently announced that they will be waiving the one-week waiting period for government-funded sick leave benefits and has a stated commitment to ensuring that Canadians feel that they can take time off work as needed, to help stop the spread of the virus. As this government response evolves, employers should ensure that they are aware of the benefits available and any employer obligations in this regard.
In addition, the Ontario Employment Standards Act and Ontario Human Rights Code both act to protect the jobs of people who take leave from work for a number of reasons. This includes illness as well as caring for family members. Although employers in Ontario ARE entitled to require a note from a doctor indicating that an employee is off work on medical leave, employers are advised to consider whether it is necessary to require this in all circumstances during this outbreak. We very strongly advise against taking any disciplinary action against an employee without obtaining legal advice first.
Again, having a clear workplace policy in this regard, carefully communicated with employees and consistently implemented, is key.
5. Temporary Layoff
Another important question for Ontario business owners is the impact that even a temporary economic slowdown will have on the employer’s workforce. Some industries are already feeling the impact: travel, entertainment, tourism and conferences in particular. As the outbreak grows in Canada and Canadians isolate themselves and limit social contact as advised to, the impact on businesses will be felt and employers may need to consider at least temporary workforce layoffs.
Although the Ontario Employment Standards Act provides for an employer to temporarily lay off an employee or substantially reduce their work, an employer generally speaking only has the right to do this if there is also a contract in place which specifies that the employee has agreed to this. If the employer doesn’t have the legal right to temporarily lay off employees then the layoff is treated as a full termination of employment, with the required notice or pay in lieu of notice. It is a complex area of employment law and employers are strongly encouraged to consult with a lawyer well in advance of feeling like this step is necessary.
Communication with your entire team is absolutely critical to business continuity and resiliency as this virus and our approach to it continues to evolve. Clear policies, applied across the business, need to be communicated and implemented.
B. General Business Considerations:
Although employees are a key consideration for business continuity, dealing with the impact of this global issue on your own business will likely expand well beyond your workforce.
As we have seen over the past weeks, there have been significant cancellations of travel plans and mass gatherings. Both travel generally and mass gatherings are proving to be high-risk for spreading infection so businesses should expect cancellations to grow. If any part of your business involves obligations around events which might be cancelled, you should be assessing the potential impact now. Whether you are a conference or event organizer, have supply obligations/ expectations around events or rely on events happening near your business, you should prepare for cancellation.
1. Force Majeure
It is possible that the virus will make it difficult or impossible for a business to fulfill contractual obligations. In law, we typically refer to this as a “force majeure” or “act of God” clause in a contract – something which pops up in many contracts and which you have likely not paid very much attention to in the past. The force majeure clause is a common contract provision that allows a party to suspend or terminate the performance of its obligations when certain circumstances beyond their control arise.
If your contract doesn’t have a “force majeure” clause, then you should have a general legal review of your contract and termination provisions to see what the outcome of a failure to deliver on the contract terms will be. You can contact our Momentum team to assist with that review.
If your contract does have such a clause, there are three main questions to consider.
I. Establish whether the novel coronavirus is an event that triggers your force majeure clause.
Force majeure clauses typically list a series of narrow triggering events and a broad catch-all phrase. If the clause in your contract specifically contemplates “epidemics” or “quarantines” as triggering events, the coronavirus has a high likelihood of being captured, especially with the World Health Organization recently declaring COVID-19 a pandemic. If your clause has not listed this and only includes a catch-all phrase (e.g. unforeseen events beyond the parties’ control), it becomes less clear whether the clause is triggered. As a result, courts will have to engage in contractual interpretation and consider the contract’s language, purpose and intention in order to determine if the COVID-19 outbreak is within the scope of the catch-all phrase. The result of interpretation would vary on a case-by-case basis.
II. Show that the triggering event actually impacted your ability to perform contractual obligations.
In addition to showing that the coronavirus is the type of thing that triggers the force majeure clause, you must also prove that it actually impacted the ability to perform your contractual obligations.
The virus may prevent the performance of obligations as a result of quarantines, prohibitive health issues, and consumer and supplier disruptions. However, mere inconvenience is not sufficient, and it is not certain whether choosing to stay at home as a result of precaution would be adequate. Instead, the impact must “strike at the root of the contract” so as to frustrate the purpose of the contract. The effect of the coronavirus will vary on a case-by-case basis, and whether there has been sufficient impact is context specific.
III. The outcome of the clause being triggered will depend on how your force majeure clause is drafted.
The outcome of the clause being triggered will depend on how the force majeure clause is drafted. Your obligations may be suspended, or completely/partially terminated.
Parties that trigger a force majeure clause have a duty to reasonably mitigate any damages that may result. What is considered reasonable is a matter of context, and can include taking advantage of available resources, technologies or protocols in place to mitigate any potential consequences of invoking the clause on the other party.
2. Insurance
Now is also the time to review your business insurance policies. Many small businesses do not have business interruption insurance in any event, but discussion in the insurance world seems to be leaning towards non-coverage from losses associated with COVID-19. Nonetheless, insurance is completely policy driven and your business should include a review of any insurance policies you do have in place to determine what coverage you may have.
For companies involved in the tourism or events business, your insurance policies may have additional specific clauses around the cancellation of events. You can contact the Momentum team if you would like help assessing your event and the risks associated.
3. Communications
If your business has not already started considering a communications plan for your clients and customers, now is the time. Large hotel chains, for example, have circulated communications regarding their approach to the virus and additional procedures being implemented. If your business relies upon the public coming to you, the business should be actively planning a communications strategy.
The strategy should clearly set out precautions the business is taking, wellness policies, cancellation policies and expectations regarding the health of your clients/ customers if they come to your business. Clear and open communications will build trust in your business at a time when there are more questions than answers. That being said, all communications must reflect steps that the business will actually be implementing. If your business delivers services at people’s homes, additional steps and sensitivity to the likely concerns of your clients will help insulate your business as people move to reduce social contact.
C. Risk and Opportunity Assessment
Your business should be actively preparing an assessment of all potential risks as well as identifying opportunities for protecting against losses and providing alternatives.
1. Risks
· Service industries: any industry which relies upon the public coming into a business needs to consider ways which it can reduce risk for its customers and then clearly communicate those steps. For example, it has been well publicized that certain coffee chains have temporarily stopped accepting reusable cups to reduce the risk of spreading contamination.
Service industries which are open to the general public are almost certainly going to feel the impact as social-isolation directives come from the government. Assessing those risks now and planning for them is critical to being able to sustain a reduction in business. See the discussion below on “opportunities”.
· Supply Chain: Are you part of a supply chain or do you rely on a supply chain which is likely to be interrupted by the virus? If your business is vulnerable as a result of a supply chain issue, you should immediately start taking steps to find alternative solutions or to provide them. Again, see the “opportunities” discussion below.
· Cash Flow: Regardless of your industry, you should assess the impact of a general economic downturn as a result of the virus and calculate how that might impact your cash flow. If you supply the service industry, your business may drop and payments for orders may be delayed. Clients may delay making investments in additional products or services as they assess their own business outlook. If possible, start strictly enforcing existing payment terms or consider implementing new ones to ensure that cash flow issues are minimized.
· Key Employees and Contingency Plans: Whether it is you or other key employees in your business, how prepared are you for a serious illness to take that employee away from the business for a period of time? Are there any processes or practices which only one employee knows how to perform? Is all key information needed for operating the business located in a location which can be accessed by others? This type of planning may seem extreme for the current problem, but it is critical business planning which should always be undertaken for business continuity.
2. Opportunities
· Supply Chain: whenever there is a supply chain disruption in an existing market there are opportunities for new players to enter that market. If you have a locally produced product or service you may be able to set up new market opportunities with businesses who are not able to obtain good and services from their existing suppliers. This is a case where “buy local” messaging can be extremely persuasive.
· New Business Lines: If your traditional ways of doing business are likely to be constrained by the virus and community reaction to it, start assessing opportunities for changing how your business operates, at least temporarily. A fitness center, for example, might offer temporary online classes to keep engagement with their customers. A restaurant may reduce its in-person offering but might create opportunities for patrons to set up regular home meal delivery – communicating the steps they will be taking to ensure a healthy service. Any service which is possible to provide remotely in some version, should be offered.
· Messaging: as noted above, communication with your clients and customers is key. If your service offering is already well poised to respond to the type of business environment which may develop, now is the time to ensure that your target customer or client knows about it.
There is no doubt that the impact of the global outbreak of COVID-19 is going to impact business in Canada – it already has. The best approach for any business is to build a plan around all possible impacts to the business: employee, contractual relationships, business market risks and opportunities. Not all risks can be identified or controlled, but having a plan in place which the business can act on when the unexpected happens is key to continuity.
How Momentum Can Help: Please contact our team at Momentum to discuss any questions about employees and planning, contractual obligations or other business concerns you may have. We can always be reached remotely!