Greetings from 35,000 feet! Well, at least that is where I was when I started this post. It was not my intention to write about the Coronavirus but – after a vodka soda and a little reflection – my intended topic just didn’t seem as important given the “new normal” of March 2020. I usually try to stay away from topical issues because they grow stale quickly. The only exception I have made to this was when the Safe Harbor program was invalidated. That said, I have written about Crisis Management 101 and What to Do When Bad Things Happen. I was thinking about both of those posts after someone asked me earlier in the day what I would do if I were an in-house lawyer dealing with the virus. I mentioned a few things that came right to mind and then a little later I started jotting a few more down on a napkin (yes, that’s a real thing). Pretty soon, a new “Ten Things” post was born. I’d like to say that, as an experienced general counsel, I would have caught on to the magnitude of the Coronavirus problem way back when and been proactive weeks ago in helping organize a response (both legal and business). But, like many, when I first heard about the virus back in January I kind of shrugged my shoulders and thought “feels like another H1N1-type deal.” I was wrong. Mostly about how people around the world would respond (and it truly feels like we have fallen Through the Looking Glass this past week). Still, once things started coming apart, I suspect I would have had some pretty strong ideas on what the legal team should be doing just like I would during any health crisis. This edition of “Ten Things” lays out – straight from the napkin – what I think in-house lawyers should be (and probably are) doing during a pandemic outbreak like COVID-19:
1. Step up and lead! I had a great mentor who used to say “Let’s not let a good crisis go to waste!” What he meant by that was any type of crisis situation is an opportunity for the legal team to step up. If you want to know how the legal department can show its value to the business, leading during a crisis is pretty high on the list. And it should be as lawyers are uniquely qualified to deal with the uncertainties, challenges, and general craziness a pandemic situation presents to any company. The legal team should be the first ones raising their hands to help, including taking charge of the response process if that is needed (or called for under the crisis plan). And if it’s not, by being the best damn “lieutenants” on the team. Captain or lieutenant, be sure to grab the lead on keeping the written record of the company’s plans and response. Not only are lawyers generally the best writers in the company, but they also tend to write in a low key, “just the facts” manner (that you will appreciate if there is ever litigation) and there is a good chance the documents may be subject to the attorney-client privilege if tied to the provision of legal advice. Finally, and most importantly, the legal team should exude calm and reason, two things in short supply at present and during most pandemics. Be the rock for the company and its employees to lean on.
2. Get accurate news/advice. Most panic and irrational behavior during a pandemic arise from a lack of accurate information about what’s going on and what people should be doing. If you’re getting your pandemic information and advice from television news you are on the wrong path. Sadly, television is often opinions vs. facts, and a race by the talking heads to report something in as dramatic a manner as possible (think hurricane reporters, only much dumber). Stick to reputable written sources of information like major newspapers (e.g., The New York Times, The Washington Post, The Wall Street Journal and their international equivalents) and websites like the Centers for Disease Control and Prevention, the American Medical Association or Web.MD. Getting accurate information will help you help the company. And, don’t be the source of – or the exporter of – rumors about the pandemic. Get your facts straight before you talk or write about it and be firm, but calm and polite, with those that are off into the Land of Oz with the latest speculation or wild-ass rumors.
3. Take care of the employees. A huge amount of your time should be focused on how best to help the company’s employees (starting with your own team). Make sure the company is communicating frequently (and accurately). Understand upfront that different employees will have different concerns (along with different levels of ability to process the information). Don’t act like everyone has a law degree from a top university. Bring things down to a basic level and don’t judge when some employees seem to be going nuts. They don’t live in your world. Respect, patience, and concern should underpin everything you and the company are doing when it comes to your employees during a pandemic. Here are a few things to think through (and where outside employment counsel can be valuable):
- Treat everyone the same! Do not discriminate in what you do, what you say, what you offer. Avoid references to national origin/ethnicity (or other protected status). Here is an excellent checklist of what companies should do if an employee tests positive for the pandemic.
- Review relevant laws and regulations that might impact what the company does, e.g., OSHA, the ADA, and FMLA. If there may be reductions in force, be sure to consider any regulatory obligations like the WARN Act in the U.S. (including state equivalents which can vary significantly) and “TUPE” in the EU.
- Review HR policies and consider relaxing them to provide more flexibility when so many employees are impacted and there is so much uncertainty. At the top of the list should be PTO/sick leave. Don’t forget that for most employees their children are likely at home as schools have closed. Err on the side of the utmost flexibility (without jeopardizing company operations). If the company shows compassion and flexibility, you will earn the gratitude and loyalty of your employees.
- Do you need to implement travel restrictions, especially to high-risk areas of the world? And what do you do with employees returning from such areas?
- If you are a manager (or the general counsel) check in on your team regularly. Ask if they need anything or if there is anything you can do for them. Everyone’s resources and support system are different.
- If your workforce is unionized or has a worker’s council, coordinate and cooperate in an appropriate manner with the best interests of your employees coming first.
- To the extent the office is open, take care of the basics like hand sanitizer and instructions on how to properly wash your hands, clean your workspace, and an iron-clad rule that anyone who feels unwell should not come into the office.
- Recognize that the fallout of the pandemic may mean people lose their jobs or significant income. If there are ways to mitigate this, encourage the company to go that way.
- Don’t forget to get a handle on any contractors working on-premise. Coordinate with them directly or through their staffing service on the appropriate next steps.
4. Review key contracts. Start looking at your contracts, both existing and pending, to determine what happens (or needs to happen) given the pandemic. If there are pending contracts, be sure to deal with the issues presented by the pandemic in real-time, i.e., acknowledge the elephant in the room (and it may be time to beef up your electronic signature process). For existing contracts, look at those with your most important customers and vendors first (as those probably have the biggest impact on the company). The most important clause is likely the Force Majeure provision which excuses the performance of one or both parties under the right circumstances. This can either be bad or good for you – or a combination of both. You’ll need to analyze whether the pandemic triggers the clause and, if it does, what does it mean? Is payment excused? Can either party terminate? Will supplies be disrupted? The Paul Hastings firm wrote an excellent client alert on these contract issues: Coronavirus and Contracting, Performance and Litigation Risks. Also, don’t forget about Restatement (Second) of Contracts Section 261 and the “Default Rules” concepts of “impossibility” or “impracticability” (along with “frustration of purpose“) as these might apply as well. Next, look at your leases (as lessor or lessee). For example, who is responsible for cleaning and ensuring a safe space? If you are in the middle of an M&A transaction your deal may be impacted by the pandemic, including offsite due-diligence and any material adverse condition clauses that could change the price or let the buyer out of the deal altogether. Similarly, review any loan or financing documents to determine if anything is triggered either by your actions or those of your customers and vendors. And it’s always a good idea to speak with your lenders and investor just to make sure everyone is on the same page and understands the company’s strategy to deal with the pandemic. Finally, consider whether the issues caused by the pandemic lead you to rethink clauses and language in your contracts. Do you need to add or change language to better protect the company in the future? For example, a common problem I have seen is most Force Majeure clauses do not exclude payment obligations which can be a real problem when the other side wants to use the event as a reason not to pay even though their ability to pay is not truly affected by the event.
5. Check your insurance. A pandemic that causes the company to cancel events, shut the office, or deal with customer cancelations will likely be covered by business interruption insurance. But, don’t stop there. Now is the time to pull out all of the company’s insurance policies and determine whether any of them provide protection against the problems caused by the pandemic (e.g., you may need to become an expert in your company’s property or health insurance policies). The company’s insurance broker(s) can be really helpful here. Even if you don’t think there is coverage, double-check with the broker (as I have been surprised before).
6. Litigation. It’s highly likely that a pandemic will play havoc with any pending litigation. Courts may close, jurors may not be available, and lawyers (yours and the other side) may be unable to work properly. Likewise, expert witnesses, court reporters, e-discovery vendors, mock juries, arbitrators, and other litigation-related services may be unavailable. This means you may need to plan on lengthy delays and think through the implications this may present (good or bad). If major litigation is impacted, make sure that everyone who needs to know (C-Suite, Board of Directors) is brought up to speed on what’s going on and why, and the expected impact. If you have litigation you are thinking of bringing, the pandemic may cause you to hold up until there is a “better” time to file. This is a discussion to have with your outside litigation counsel. Additionally, if your company is publicly traded, anticipate that the plaintiffs’ bar will be ginning up lawsuits around alleged failures to properly disclose the risk of the pandemic. Finally, you can help prevent litigation by watching out for (and advising against) price gouging and/or unsubstantiated marketing claims about how the company’s products and services can help fight/kill the pandemic virus. Many companies will ignore this advice and, rest assured, there will be a reckoning.
7. Shareholders. Just about every company with in-house lawyers has shareholders. While many are publicly traded, most are privately held either by a small group of individuals or private equity. Regardless, there are certain things that must be done in the wake of a pandemic:
- Consider whether and how to hold virtual meetings of the board of directors.
- Do the company’s by-laws or governing statutes provide for written consent for shareholders and board of directors votes?
- If you must have an annual shareholders meeting, can it be done virtually as well?
- For public companies – how are you disclosing risks and material matters related to the pandemic? You may need to file an 8-K vs. waiting until the next quarterly filing. And, as noted above, whatever you disclose will likely be heavily scrutinized by plaintiffs’ lawyers and regulators. So, use extra care to get it as “right
as you can make it.
- How will you update shareholders about company efforts to deal with the pandemic? Again, if your company is publicly traded pay attention that you disclose anything material to all shareholders within the parameters of the rules. This may be a good time to touch base with your outside securities counsel.
8. Get the communications right. Do you remember who is generally really good at writing? Yep, you and the rest of the in-house legal team. Put those skills to work and help craft the inevitable (and necessary) communications. Someone on the legal team should be reviewing every piece of substantive communication that the company intends to send out. This likely means you’ll be teaming up with corporate communications, investor relations, and human resources. Yet another chance to show the value of the legal department. You will have two audiences and you need to focus on the different needs of both:
- Internal – this is primarily the employees (and their families) but also includes the board of directors and any onsite contractors. The keys are a) accurate information; b) sent in a regular and timely fashion; c) with clear guidance on the issues that matter most (policies, procedures, pay, benefits, who to contact, “what to do if,” and similar information). Ensure that you have a way to communicate to/through non-company provided devices (e.g., smartphones) and channels (personal email addresses) so everyone can get updates.
- External – this is “everyone else” you need to communicate with: customers, vendors, public markets, social media, the news media, shareholders, and regulators. As to the latter, consider reaching out to your regulators proactively just to touch base and let them know how your company is dealing with the pandemic. They will appreciate your reaching out to them and keeping them up to date. For everyone in the group the communication rules are pretty straightforward – keep it simple and truthful. Have your facts straight. Ensure that only authorized representatives of the company are speaking with the media and that they are well prepared before doing so.
9. Work from home procedures. Pandemics will require that exposed employees not come into the office, not attend client meetings in person, and eliminate work travel. Likewise, there may be employees who simply don’t feel comfortable coming into the office under the circumstances (or “social distancing” may simply require that offices close). Legal should take the lead on ensuring that there are clear procedures and guidelines for working remotely, including reimbursements of costs, the use of VPN (especially if using public-area Wi-Fi) and multi-factor authentication, and ensuring all employees know – and they should already – that there should be no expectation of privacy when they use company systems. Ensure that you protect trade secrets, e.g., instructing employees know that any hard copies of company documents must be secure at all times and then shredded before thrown away (or just save them and bring them back to the office for proper disposal). This is also an excellent time for the legal team to check in with the IT team around ensuring there is a solid infrastructure in place to allow for the spike in remote workers. For example, video conferencing will likely surge – meaning Microsoft Teams, Skype, GoToMeeting, Zoom, and other services will be in high demand. You may need to obtain additional licenses for software, rework existing vendor contracts – including service level agreements, increased insurance coverage, and a host of other steps. Also, if you have hourly employees working from home you will need to find a way to track their hours and, if triggered, pay overtime. Many companies will set up a website for employees where they will post the latest news and updates. This will be critical for those working remotely.
10. Data privacy and security issues. Anytime you start dealing with employee health information, remote workers, or a crisis in general, you need to consider the data privacy/security issues presented by all three. For example, employee health information is considered a “special category” of personal data under the GDPR (and HIPAA as well). Before such data is collected, transferred, or even discussed, make sure the company knows what is required under the law. If you need to send an employee home because they are affected by the pandemic, respect their privacy. Make sure that everyone understands that, in most cases, there is no need to discuss any individual’s medical condition. In addition to the WFH issues identified in No. 9, remind employees to be extra watchful for phishing attacks, malware, and other nefarious shenanigans of hackers. A pandemic crisis provides the perfect cover for the alarming emails and text messages (disguised as company communications or public service announcements) trying to fool employees into clicking on a toxic link. Make sure all employees are warned, have updated anti-virus and malware software installed, and know who to contact/what to do if they receive something suspicious.
While much of the above is written with the COVID-19 virus in mind, it all applies to any pandemic or general health scare your company may face, regardless of where your company is located. I have included links to several excellent articles and alerts if you want to go deeper, but the above will get you started down the right path. The most important points are to take care of the company’s employees and step up to help lead the company through the crisis, i.e., run to the fire! It’s also important to step back from being a good in-house lawyer and up your game on being a good person. Be extra kind and understanding with everyone during a pandemic crisis. Check on your neighbors, especially the elderly, and see if there is anything you can do (or share) to help them (including pointing them to services like onHand in London). Make a donation to the local food bank (there will be lots of people who need some extra help). Don’t hoard. Don’t spread rumors. And most importantly, wash your hands. A lot. It’s going to be a little crazy for a while, but we will all get through this.
March 16, 2020
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