Business Regulations, Law & Practice | |
Business Regulations, Law & Practice | |
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Wednesday, 22 April 2020 / 04:07AM / By Oserogho &
Associates / Header Image Credit: Resolution Law Firm
Introduction
The World Health Organisation ("WHO") recently declared the outbreak of the Coronavirus, which is also known by the name of COVID-19, as a global health pandemic.
The resulting shutdown of Cities and land borders to human traffic as a
result of the COVID-19 pandemic, have naturally impacted negatively on
businesses and their employees, most of whom live from one pay check/cheque to
another pay check/cheque.
The temporary closure of businesses will have significant financial
consequences especially for Small and Medium Scale Business owners, and
employees. Business owners, large or small, and employees must therefore now
proactively explore as many legal options as may be available to them in
restructuring their business models and payroll obligations post the COVID-19
pandemic. Some of such legal options are explored in this memorandum.
Related Article: Contracts
Tainted With Coronavirus - What You Should Do Now -Banwo & Ighodalo
Employment
Contracts
Employment Contracts
The first and most immediate major challenge to most businesses who are
unable to generate any revenue during and after the COVID-19 lockdown or
stay-at-home restrictions will be on how to settle their employees' payroll
obligations. This is especially as a majority of the standard employment
contracts do not have provisions which regulate periods when a City or Country
is on lockdown as a result of a public health pandemic, and therefore unable to
earn any income.
Voluntary Redundancy
Employers and Employees can through recognised Trade Unions or Workers
representatives, if they have any, explore negotiating and entering into some
voluntary redundancy agreements. Redundancy is the involuntary loss of
employment as a result of excess man-power when compared to the actual
profitable work available.
The Redundancy rules in most jurisdictions require that the last
employees engaged will have to be the first employees disengaged. This is
commonly known as the "last in, first out" labour principle.
Re-negotiate Contracts
In order to reduce massive retrenchment or loss of employment, Employers
and their Employees can also re-negotiate their employment contracts to match
present-day commercial realties, post COVID-19.
Related Article: Coronavirus
(COVID-19): advice for employers and employees - ACAS
Force
Majeure
Though Force Majeure or "acts of
God", which is an unforeseen and unavoidable natural event which interrupts or
terminates the performance or fulfilment of a valid contract, must be enshrined
in the terms and conditions of a contract, any affected party can explore
relying on this legal defense, combining it with other legal defenses like
Frustration, to plead the unenforceability or the temporary suspension of a
contract during the COVID-19 pandemic lockdown period(s).
Frustration
of Purpose
A Contract would be said to have suffered from Frustration of Purpose
and therefore unenforceable where a post-contract event like the COVID-19
pandemic occurs, which makes the continuing performance of the terms and
conditions of such a Contract impossible or very difficult.
The defence of Frustration to the impossible continuing enforcement of a Contract will not however exempt any prior contractual obligations, especially where aspects of a Contract have been part-performed, before the unfortunate and unforeseen post-contract event like a COVID-19 pandemic, occurred.
Also, contracted sums with any reasonable overhead expenses will also
not be exempted from being paid because the doctrine of Frustration only
applies to post-contract intervening events.
Insurance
Insurance
Businesses that have any subsisting Insurance Policy, like a Business
Owner's Insurance Policy, which is a combination of numerous insurance policies
like the Business Interruption Insurance Policy, General Business Liability
Insurance Policy, Property and Motor Vehicle Insurance Policies; in addition to
the statutory compulsory insurance policies like the Employee's Compensation
Fund; will do well to review the fine prints of the insurance policies that
they have vis-a-viz their applicability to a COVID-19 pandemic stay-at-home
event.
This is especially as most incidents arising from virus and bacteria
related claims may be excluded from most insurance policies executed post the
last SARS epidemic.
Employee's Compensation
Contributors to the compulsory, statutory Employee's Compensation Fund
will also do well to contact this Fund where any of their employees fall ill
and or dies as a result of the COVID-19 pandemic.
Consumer
Protection
FCCP
The Federal Competition and Consumer Protection Act, 2018 ("FCCP"), as with similar Consumer Protection legislations in your jurisdiction, may have consumer protection reliefs for damages arising from the COVID-19 pandemic. A good example of such a right is a Consumer's right to cancel any advance booking, reservation or order, of any goods or services subject to a reasonable cancellation charge deducted by the service provider.
Conclusion
Business owners must be aware that Contracts remain in force during a public health pandemic unless it is established that the public health pandemic has made the continuing performance of such a Contract temporarily or permanently impracticable or impossible to continue to remain in force.
Proactively preparing for and managing a crisis like the COVID-19
pandemic must be an integral function of any long-term business strategy.
Business owners are therefore encouraged to carefully review and restructure
their businesses using some of the legal tools proffered above.
Disclaimer:
This is a free educational material. It does
not serve as a source of solicitation, advertisement or the offering of legal
services or advice of any kind. No Client/Attorney relationship is
therefore created. Readers are strongly advised to always seek from qualified
Legal Practitioners, competent legal counseling to their specific factual
situation.
Intellectual Property Protected!
This material is protected by International
Intellectual Property Laws and Regulations and has been published under
permission/partnership publishing. This material can therefore only be
reproduced or re-distributed for non-profit educational purposes under the
strict condition that our Authorship of this material is explicitly
acknowledged, and above Disclaimer Notice is prominently displayed. [ contactus@oseroghoassociates.com
]
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