The news on swine flu is not getting better. According to
the New Zealand Herald, this country can no longer count
how many cases it has. Below, Jennifer shares advice on
how to prepare and plan for business continuity in the face of
mounting uncertainty.
There is worldwide concern about the reach and possible impact
of the swine flu pandemic. But beyond the headlines, how relevant
is it to your business? The impact could potentially be far
reaching and more complex than you might at first think.
This update addresses some of the key issues for businesses to
consider in relation to swine flu. Some of them are employment law
issues, some commercial legal issues, whilst others are general
business issues. However you choose to address the risks posed by
the pandemic to your business, it will be important to ensure that
your senior management team is abreast of the issues such as the
ones identified here.
Does your business have continuity plans in place?
- Is the business equipped to handle a partial or total
closure?
- Does the business have sufficient cash-flow to cope with
closure?
- Can the business maintain "business as usual", despite premises
closures or staff absences?
- How will you notify staff if you need to close the premises and
what are your contingency plans?
- Has the business developed a policy on business continuity
planning for a pandemic, and has the business consulted with
employees in relation to the implementation of the policy?
- Do you need to notify your insurers?
- Will a pandemic give rise to a breach of any banking covenants
or a notification requirement?
- Do you have "material information" which requires disclosure to
the market in respect of a listed issuer?
- Will a pandemic give rise to a "force majeure" under your
commercial contracts?
Whilst some businesses will have continuity plans in place as a
matter of good business practice, a number will not. It is
important to address this now before it's too late.
Employees
The lifeblood of most businesses are its employees. So, how will
your business cope if a member of staff is infected with swine flu?
Consider:
Can you send sick employees home, if they choose to come in to
work? What are your responsibilities to well colleagues if you let
a sick worker stay at work?
In the current economic climate, employees may be reluctant to
use sick leave as they may be worried about what impression that
might give their employer. The legal position is that, as an
employer, you have an obligation to take all practicable steps to
ensure the health and safety of employees. This may include sending
sick employees home, to minimise and, where possible, eliminate the
risk of them passing any illness on to other employees. This is a
lawful and reasonable direction with which you could reasonably
expect employees to comply. At the very least, from the employee's
point of view, you are less likely to look like a "shirker" if you
are directed to stay home by your employer.
Can you send home well employees who wish to work if a
colleague has been diagnosed with swine flu?
If you are required to close your business as a result of a
direction from the Ministry of Health, you can legitimately direct
employees to remain away from the workplace.
Generally speaking however, employers cannot, as a matter of law,
require employees who aren't sick to stay away from work,
ostensibly on sick leave, or to take annual leave on less than 14
days' notice. Doing so risks a claim from the employee that they
have been unlawfully "suspended". If you are unable to make the
workplace safe for employees, you could seek to rely on the Health
and Safety in Employment Act 1992 and your obligation to take all
practicable steps to prevent harm to employees as a legitimate
reason for requiring them to remain at home.
In any event, decisions should be made following consultation with
the affected employees, where possible.
Do you have to pay employees who are well, but stay home,
either because they have been quarantined, or to take care of
family?
Under the Holidays Act 2003, employees are entitled to use sick
leave in situations where they are sick or injured, or where their
spouse or someone who depends on them for care is sick or injured.
If an employee has to stay home to care for a family member who is
sick or injured, this is likely to be a legitimate use of sick
leave.
Where an employer directs an employee to remain at home, then it
is likely that there will be an obligation to pay the employee,
although there may be special circumstances where that is not
required.
Where the employee wishes to remain at home, at the employee's own
election, a compromise may be to allow the employee to use sick
leave in the first instance, followed by annual leave and/or unpaid
leave.
Can you require staff who are sent home, to work, if you are
going to pay them?
Whether an employer can require employees sent home to continue
to work will largely depend on any "location" provisions contained
in the relevant employment agreements. In the absence of a location
provision which envisages the employee working from home, consent
will be required. A related issue is whether the employee's home
will be a safe working environment.
Do you have to compensate employees for costs incurred should
they work at home?
We recommend that working remotely from home and the associated
costs are negotiated and agreed with employees. For example, if an
employee elects to work from home and is not incurring any extra
cost in doing so, compensation should not be an issue. That said,
where the employee is directed to work from home and incurs extra
costs, in most situations these should be borne by the employer to
prevent a possible disadvantage claim.
Health and safety
As noted above, the Health and Safety in Employment Act 1992
requires an employer to take all practicable steps to ensure that
the workplace is free of hazards, including health hazards such as
swine flu. Whilst employers must look at how employees are deployed
as part of this inquiry, other matters, including factors relating
to the workplace itself, must also be considered. In essence, it is
the employer's responsibility to ensure that its employees, and the
place of work which it controls, do not pose an unnecessary risk to
employees, and visitors. Consider whether your business can be said
to have taken "all practicable steps".
Premises
As swine flu has been declared a pandemic, this affords health
authorities extensive powers, including the ability to force people
to quarantine themselves and requiring that all premises (including
businesses) within a certain area be closed. Accordingly, the
closure of your premises, or absences of employees, may be beyond
your control.
Will you be compensated by the Ministry of Health if you suffer
loss, for example, lost profits?
There is no ability to apply for compensation in situations
where premises are closed due to the spread of a pandemic or
infectious disease.
Supply and customer issues
Ensure that your business has considered the potential impact of
customer and supply issues, such as local or international
suppliers being unable to meet orders, or the business being unable
to meet an order. If your business is unable to meet an order, this
may have flow on effects for servicing of key clients, key
contracts, sales and cash flow. In turn, these issues may, as a
worst case scenario, impact on the financial viability of the
business.
Is swine flu a "force majeure" event?
Consider:
If you default on a critical contract for an important customer
because you had to close your factory or office due to swine flu,
are you liable?
Many commercial contracts contain a "force majeure" clause,
which may be invoked in the event of a "force majeure" event,
otherwise known as an "Act of God". In many situations, force
majeure clauses will capture swine flu related interruptions given
the unprecedented and unforeseen onset of the pandemic. That said,
swine flu will not be able to be used as a 'get out of jail card'
in all cases. There is wide variation in how "force majeure"
clauses are worded. Where a business fails to take reasonable steps
to mitigate the risks posed by a pandemic, the courts may be
reluctant to allow force majeure to operate.
Do your commercial contracts contain force majeure clauses? What
about your suppliers' contracts? Are they drafted in such a way
that swine flu could fall within the definition of a force majeure
event?
What if it's your supplier who fails to deliver because their
plant is closed or operating at half strength, and that causes you
to miss a major business opportunity?
Continuous disclosure
Consider:
If yours is a listed company, in what circumstances will you
need to notify NZX of a swine flu related event, for example, a
plant closure?
- Under the Securities Markets Act and the NZX Listing Rules, an
issuer must immediately release material information to NZX, once
it becomes aware of it (with limited exceptions).
- Material information means information that a reasonable person
would expect, if it was generally available to the market, would
have a material effect on the price of quoted securities of the
issuer.
Notification under your financing documents?
The global economic recession has placed financing, and
refinancing at the forefront of many employers' minds.
Consider:
- Is swine flu within your business a "notification event"?
- In what circumstances would it amount to a material adverse
change?
- What do you need to tell the bank and when?
Advising your insurer
Consider:
- Have you checked the terms of your insurance policy
recently?
- If you suffer loss as a result of swine flu, is that covered by
your insurance?
- Do you need to advise your insurers?
Could it get any worse?
There is the possibility that if outbreaks of swine flu continue
to increase, decisions about the deployment of employees may be
taken from employers and made under the powers of the Civil Defence
Emergency Management Act 2002 (CDEM). However, until then,
employers need to consider the flow of information to and from
employees and the impact on the business.
Are you up to date
With the number of reported cases increasing overnight and
development in Health Officials' understanding of the transmission
of the virus, it is important to ensure that your business is up to
date with developments. The latest information being released from
the New Zealand Government and the Ministry of Health regarding the
status of the pandemic can be obtained here.
International information can be obtained here.
Swine flu has the potential to cause serious disruption to
businesses. Responsible business owners ought to act now to take
steps to put continuity plans in place and to ensure that they are
taking reasonable steps to avoid the spread of the disease in the
workplace.
Acknowledgement
Minter Ellison Rudd Watt's Employment Team has
extensive experience in all matters relating to employment law,
including industrial relations, human resource management,
corporate governance and dispute resolution. They provide practical
advice to clients regarding all areas of employment legislation
such as parental leave, KiwiSaver and flexible working
arrangements. They also develop, and regularly conduct, training
courses for employers and line managers on the practical
application of employment legislation.
For more information please contact:
Employment:
Jennifer Mills, Partner T: 64 9 353
9919
Megan Richards, Partner T: 64 4 498 5023
Corporate:
Cathy Quinn, Partner T: 64 9 353 9951
Lloyd Kavanagh, Partner T: 64 9 353 9976
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