You Are Viewing

A Blog Post

Coronavirus News Alert: Managing the Legal and Business Impacts

Interesting times from a legal perspective! As the COVID-19 coronavirus outbreak continues to develop and escalate, we are beginning to get the sense that the level of disruption to our day-to-day lives will only continue to grow. We are already fielding a lot of questions from some of our concerned clients about the potential legal impacts of the coronavirus on individuals and businesses – and we agree that now is the time to start planning for the impact of the virus. With almost 135,000 confirmed cases over the world and nearly 5,000 fatalities, particularly for Australia the situation is predicted to only get worse as we enter the cooler months.

In today’s post, we will offer some initial thoughts on some of the legal impacts of the virus and some solutions. Keep an eye out for follow up posts that will provide more in-depth analysis on some of the key legal challenges that the coronavirus is presenting.

Travel and Personnel Interruptions

With travel restrictions abound and many industry events being cancelled or delayed (including this week’s announcement that EXPOMIN in Chile will be postponed until the last trimester of 2020), most companies are cancelling all non-essential travel. As an agile firm with offices in Sydney and Santiago, with additional employees and partners throughout Latin America, our team is well-equipped to deal with the possibility of travel restrictions, however, many other companies may not have this capability. What happens if a METS or mining company is unable to send a manager from Perth over to Chile to deal with an issue on the ground? One of the solutions we are already offering to clients that has worked well in other situations is having our lawyers step in and act as attorneys in the true sense, acting on the other side of the world when you or your team can’t physically be there (and as a bonus, we already speak the language!).

Employment Law Issues

Beyond international travel restrictions, from a HR perspective, a number of Australian businesses are needing to direct their employees to work from home, or if this is not possible, directing them to take leave (be it sick leave, annual or unpaid). There are a number of employment law-related issues that companies will need to consider on this point.  At this stage, we are in unchartered waters and not all the answers are available, however, broad guidelines have already been issued by the Fair Work Ombudsman in regards to businesses’ response to dealing with coronavirus. This includes:

  • Full time and part-time permanent workers are entitled to paid sick leave if they are unwell with coronavirus. Similarly, they should be able to take paid carer’s leave if they need to look after a family member with coronavirus.
  • Some workers may be sent home without pay. If an employer thinks that a staff member is at risk of having coronavirus (due to travel or due to contact with a sick person), they can ask them to stay home or seek medical clearance. While full-time or part-time employees would generally be paid in this scenario, the same is not true for casuals who may be sent home without pay.
  • Workers may need to work from home or not work at all if they are at significant risk.
  • Workers who are impacted by travel restrictions (either stuck overseas or forced to enter quarantine) should let their employer know as soon as possible so they can come to a solution. There are no specific rules to deal with this kind of solution, so how employers respond will depend on the role of the person and their specific circumstances.

Completing Contracts

Even if your immediate team is not sick, this doesn’t mean you won’t see disruptions. Many Australian companies are already having difficulty fulfilling business contracts. As one example, this has already been seen with businesses trying to replace computer servers with companies like Intel, whose plants are partially closed across China meaning they are facing difficulties meeting orders on time. This has a flow-on effect to their Australian customers who may not be able to provide their own services if their IT systems aren’t functioning properly.

What happens in these circumstances will depend a lot on the private contracts between the parties. Typically, contracts will provide for “acts of god” under the force majeure clause, which will include typical disasters such as fires, floods, terrorist acts, and similar. However, public health crises and virus outbreaks are far less common items to be included. This is currently unfolding in one of the biggest contracts in the world – as it looks more and more likely that the Tokyo Olympics will be cancelled or at least moved, the contract for the game’s force majeure clause does not actually provide for these circumstances, complicating the need to make changes to the event.

What are the solutions? Firstly, you should already be dusting off your old contracts and getting your solicitor to look over them so you are prepared in case you can’t fulfil the contract as it is written, or alternatively if one of your contractors is unable to meet their own obligations. Depending on what the individual contract provides, you may have a range of options of relief available, such as, delaying, rescinding or otherwise modifying the contract and its performance. On the other hand, if the contract does not provide for force majeure due to a public health crisis, you will likely need to work through the issue with the other party to the contract. We recommend being proactive and reaching out to the other side early to work through any existing or expected issues with completing contracts, and that all business actors adopt an understanding attitude. Our team is “commercially minded” and very experienced in negotiating these kinds of situations, and have many times been able to avoid unnecessary litigation for our clients (which will regularly not only not be able to provide the best commercial solution, but will also likely be extremely costly and represent a huge distraction). Litigation should be the absolute last option, not the first or second!

Tax benefits for small and medium businesses

Fortunately, there is some positive news for Australian businesses in terms of government support available! With many businesses already feeling the financial strain and impacts of coronavirus, the Federal Government has announced they will be pumping billions of dollars into the economy in an attempt to steer Australia away from a recession. Under the Coalition’s stimulus package, small and medium-sized business will be directly targeted with a mixture of cash payments and tax incentives. It is important that businesses are aware of these benefits and incentives so they can take full advantage and maximise their impact.

Almost 700,000 small and medium business employing around 7.8 million people will receive cash payments ranging from between $2,000 to $25,000, designed to support these businesses in paying existing wages and salaries or taking on additional staff. These payments will be made by the Australian Taxation Office and will happen automatically based on tax withheld.

In addition, tax incentives have been introduced to encourage businesses to invest on equipment. The existing instant asset write-off, allowing businesses to claim a tax break for spending, has been expanded significantly. Presently, the scheme is restricted to companies with turnovers of up to $50 million for a maximum investment of $30,000. As part of the stimulus package, this will be lifted to allow companies with turnovers of up to $500 million to make assets write-offs of up to $150,000.

Conclusion

The conditions of the outbreak and its trajectory are changing and developing on a daily basis. This mandates businesses to stay agile and adaptive as part of their reaction. It is important that businesses plan not only for the immediate impacts of the virus, but also the longer-term challenges that the pandemic will present. This public health crisis is already having unforeseen implications on businesses, so now is the time to make sure you have an adequate response-plan in place, and are taking advantage of the stimulus packages announced by the Federal Government. If you have a question or issue in relation to managing the legal impacts of the coronavirus on your business, we encourage you to get in touch with our innovative team today.

Harris Gomez Group is an Australian law firm with 25 years experience based in Sydney, with sister offices in Santiago and Bogotá. We specialise in technology law, cross-border issues and corporations law. Many of our clients are technology companies, service providers and engineering companies that focus on the mining, energy and infrastructure markets.

To better understand how we can support your management team, please contact Harris Gomez at hmg@hgomezgroup.com. Our Sydney office is located at Level 7, 92 Pitt Street, Sydney NSW 2000.