BREAK GLASS HERE: COVID-19 Business Interruption Panic Kit

Stock Legal International > Corona Virus > BREAK GLASS HERE: COVID-19 Business Interruption Panic Kit

by John Stocker

What do businesses need to do to protect themselves from the effects of the current COVID-19 epidemic, you might ask? This article explains in a no-nonsense manner just that.

Firstly businesses must appreciate that they cannot control the results of the pandemic. They can, however, take steps to mitigate the effect on their businesses.  The UK government has rolled out support in the form of loans and grants for businesses and suggests we adopt a form of epidemic suppression for a period of 18 months or more. But what will this mean for your business?

It’s unlikely most businesses will have insurance cover in place to compensate for the current conditions and the epidemic might be considered a “Black Swan” event. An event so extraordinary and unpredictable that it is not conceivable or likely that business could have prepared themselves. It’s advisable to address areas where risks arising from the pandemic have not been fully accounted for such as engagements and time sensitive supply or service agreements. Monitoring of working locations and the fact that these might not be able to remain open, especially if the UK enters a lock-down like Italy and France, must be considered. In times of difficulty cash-flow and the ability to remain credible, in the eyes of consumers, will become critical.

It will be a matter of firefighting for businesses to deal with problems arising from the consequences of COVID-19. A business continuity plan must therefore develop in accordance with circumstances. So what are the fires that businesses will be putting out?

Key risks are employee, supply chain, insurance and taxation but worthwhile mentions include compliance, financial (cash-flow) and security (if things get really out of hand). Businesses have a duty to protect their employees. Having facilities to allow employees to work remotely will have to be established and those working in retail and other sectors might have to adopt strict procedures to protect against infection. Company policies will have to be updated in light of the new risks. The definition of deemed incapacity in respect of statutory sick pay has been extended to include the circumstances of self-isolation under the SSP regulations in the UK, which is good news for workers.

Can employers suspend employment in light of the current circumstances and do employers have to pay for the time spent in isolation?

The answer is maybe, yes and no. For workers who can work from home pay will be given but for those who can’t, depending on the terms of their employment agreement, they may lose out. Where supply chain contracts cannot be fulfilled, as a result of the pandemic, it is unlikely that a breach of contract will succeed given a party is likely frustrated from performing or alternatively a force majeure clause could provide relief. However in both cases above, no automatic right or relief applies, and each will need to be assessed based on the circumstances and judged on merit. It would help for businesses, in the meanwhile, to seek legal advice of changes necessary to arrangements to make sure they are protected. It’s always better to anticipate a problem before it becomes unsolvable.

Business insurance policies are unlikely to cover the effects of a pandemic, but it’s important to check the policy to be sure. Businesses should also be aware of Keyman insurance to make sure it covers both the loss of, or absence, of any person critical to the business.

Chancellor Rishi Sunak announced a £12 billion package to support the UK in this time of strife. He vowed that the government would do whatever it took to protect its citizens. This included a business rates holiday for the retail, leisure and hospitality firms. Businesses should also be able to claim relief due to the expense of the pandemic but be aware that failure to comply with regulations might not be condoned, especially if unrelated to the pandemic. Businesses should take swift advice on how to overcome these new challenges and be proactive in tackling the issues head-on and not take a reactive attitude as this might prove costly in the long run. A good approach is to hope for the best, but plan for the worst, and hence assume that these challenges our businesses currently face, might just continue for the foreseeable future.

John Stocker is a Chartered Corporate Governance Professional  (GradCG) and business continuity specialist as well as a specialist construction, engineering and major projects lawyer with 18 years of experience advising in the field and who speaks regularly at conferences and seminars and has published several articles.

John is a chartered GradCG through the Chartered Governance Institute (ICSA) and is admitted to practice law in England and Wales (2003) and in the High Court of South Africa (2002).

John Stocker

+44 (0) 20 8877 0425

+44 (0) 759 274 7332

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