Coronavirus/COVID-19 Updates for Businesses and Community Associations
The
coronavirus situation is changing rapidly and each change has the potential to
affect your business dramatically. Gatherings of 50 people or more are now
prohibited statewide as of March 23, and the Mecklenburg County health director
on March 24 instituted a stay-at-home order (although many
business are deemed essential by the order and therefore are exempt.) How
is your business affected? Because the COVID-19 situation is rapidly evolving, businesses
must stay informed. Your course of action may be governed by focusing on
employee morale or health, a desire to slow the epidemic, a need to address
customer demands, public perception, and other imperatives. Your response will
also vary depending upon your type of industry such as service or manufacturing. In this article, Moretz Law Group addresses several
areas of law and stakeholder groups that are most heavily impacted by the
pandemic response.
New Employee
Leave Laws – The Families First
Coronavirus Response Act ("FFCRA") has become law and takes effect
April 2. What do you need to know as an employer?
·
Applies to all private
employers with 500 or less employees. Note that this is much broader than the
FMLA, which excludes employers of 50 or less employees.
·
Adds “Emergency Paid
Sick Leave” (a new mandate) and “Emergency Family and Medical Leave” (an enhancement
to currently-required FMLA leave.)
·
Emergency Family and
Medical Leave: Expands the FMLA to require
paid leave for employees who are unable to work (including working from home)
because they have or may have COVID-19 or are seeking a medical diagnosis, or who
must stay home to care for such a person, or who must stay home to care for
children whose school has been cancelled due to coronavirus concerns.
o
Employee must have been
employed for at least 30 days.
o
Only applies when the
employee cannot work from home or at the office.
o
The first 10 days are
unpaid, but the employee can use paid time off if the employer offers it;
maximum period, as with the FMLA, is 12 weeks.
o
After the initial 10 days,
the employee must receive pay at a rate at least 2/3 their regular pay, not to
exceed $200 per day or $10,000 total.
o
The employer will be
reimbursed by the federal government by a quarterly credit to the employer’s
payroll tax liability, including the employer’s share of any health insurance
premiums if any.
·
Emergency Paid Sick
Leave: Requires paid sick leave
for employees who are unable to work (including working from home) because they
have or may have COVID-19 or are seeking a medical diagnosis, or who must stay
home to care for such a person, or who must stay home to care for children
whose school has been cancelled due to coronavirus concerns
o
All employees are
covered even if just hired.
o
Only applies when the
employee cannot work from home or at the office.
o
Two weeks of paid time
off in which the employee must receive pay at a rate at least 2/3 their regular
pay, not to exceed $200 per day or $10,000 total.
o
Employee cannot be required
to use other PTO first.
o
Does not apply where the
employee is laid off, furloughed, or the business closes – in those cases, the
new stronger unemployment insurance should apply.
o
The employer will be
reimbursed by the federal government by a quarterly credit to the employer’s
payroll tax liability for the full amount paid to the employee, including the
employer’s share of any health insurance premiums if any.
Public
Health Law and Stay-At-Home Orders - On
March 10, Governor Roy Cooper declared the a
state of emergency in North Carolina due to the COVID-19. NC G.S
Chapter. 166A-19.3(6) defines an emergency as “[a]n occurrence or imminent
threat of widespread or severe damage, injury or loss of life or property
resulting from any … public health, … incident.” This declaration increased funding to address
COVID-19 (e.g. monitoring, investigating, testing, disinfecting) and kicked in
some of the consumer protections laws (for example, against price gouging). The laws clearly outline who has the authority
to take specific actions to protect the public by cancelling events, closing
schools and other facilities, and restricting the movement of individuals. Public health law allows county health
directors to take very wide-ranging steps to protect public health. The steps
taken so far, including
today’s lockdown in Mecklenburg County through April 16, appear initially
severe, but there are often helpful exceptions. For example, many businesses
are excluded from that order as “essential” – please
review the FAQ information carefully, especially the list of essential services
on page 3, and determine if your business is excluded.
Negligence – While too complex to fully discuss here,
we are being asked whether a business could be sued if an employee or customer
were to contract a communicable disease at the employer’s workplace, or from a
co-worker or customer. It depends on whether the business took reasonable
actions to protect its employees and customers in light of the information
available to it – in others words, whether the business was negligent. Tort
law, or the law of negligence, applies in this situation. It holds that a
person can be liable to another person to whom the first person owes a duty if
the first person commits an act which is unreasonable (or fails to take a
reasonably necessary action) which could reasonably be anticipated to cause
damage to the second person, and the second person did not help cause the
wrongful act or omission. For example, the Governor has prohibited all “mass gatherings”
or 50 or more people; therefore it is legal (at least in most counties, as of
this writing) to have mass gatherings of less than 50. But would this be
reasonable in light of the CDC’s warnings
against gatherings of more than 10 people? It depends on the situation, but
reasonableness is the touchstone given all the facts and circumstances involved.
Failure to abide by local orders or regulations, when they are aimed at public
safety, has been held to constitute negligence in the past. We can help by
drafting waivers or releases, for example, if you do need to hold a gathering
or are concerned about liabilities to employees or customers in the current
situation. Don’t hesitate to call or email us.
Contract
Law and Force Majeure Clauses – Many
contracts contain a force majeure clause, which translates from French
as “superior force.” It refers to
uncontrollable events that are not the fault of any party and which interfere
with a party’s ability to complete its end of the bargain or receive what it
bargained for in the deal. Common examples are hurricanes, riots, labor
stoppages and war. At first blush, it
would appear that a pandemic would constitute a force majeure, but the terms of
the contract control. You must review the specific language of the contract in
question. Language such as “circumstances outside our control” is very broad
and will cover the current situation and allow the party benefited by the
provision to avoid the contract. More
specific language such as the common “acts of God, war, insurrection, civil
strife, riots or labor disturbances” may not be as helpful depending since the
list arguably excludes pandemics. Common law force majeure, or the doctrine of
impossibility, may also apply if it is impossible or illegal for the parties to
carry out the purpose and intent of the contract. Send you contract to us for
review if you have issues or concerns. If upon reviewing your contracts, you
find provisions which do not suit your needs in the current climate, do not
forget that you may amend the current contract or at least change it going
forward. We can quickly supply you with
alternative language and have already done so for some of business clients.
Insurance – Business Interruption Insurance, a type of
property insurance, applies when a business is damaged from an insured peril
(e.g. fire or flood) and the collateral damages such as decrease in
orders/sales, loss of customers, employees leaving result. Business interruption insurance protects
against financial loss and allows businesses to insure its income. The
application of Business Interruption Insurance to the pandemic is not clear in
all cases. Often an exclusion is written
into an insurance contract. For example,
the ISO policy exclusion form CP 01 40 07/06 is frequently included in
commercial insurance policies. It states, “We will not pay for loss or damage
caused by or resulting from any virus… that induces or is capable of inducing …
illness or disease.”[i] Whether business interruption insurance applies,
and what losses it may cover if it does apply, will vary from case to case. For example, if a manufacturing plant closes
down upon governmental order, coverage may be available as loss due to a
competent authority’s denying access, rather than due to a virus capable of
causing disease. Statutes, executive
orders, and the rulings of administrative agencies can affect the
interpretation of contract language based on particular circumstances. Please contact us if we can assist.
Employment
Law Issues
Employment
law in the face of the COVID-19 is certainly wide-ranging and beyond the
general scope of this update. We can provide specific advice for your
particular issues, but typically concerns involve the Americans with
Disabilities Act. Employers cannot take actions which might single out those
with disabilities or which would require employees to disclose specific
conditions which could potentially lead to discrimination, including being regarded
as having a disability even if there is no actual disability. The questions we
are hearing most often are:
- May employers monitor the health of employees at work? Yes, but this must be done even-handedly and in the same manner for all employees. Employees may not be asked about pre-existing conditions or personal attributes which may make them more susceptible to the virus, but may be asked general questions applicable to all employees. See this guidance by the EEOC: https://www.eeoc.gov/facts/pandemic_flu.html
- How about monitoring asymptomatic employees? Yes, this can be done via questionnaire which is worded in a general manner. See the example on the EEOC website above.
- Can an employee with a cough or other symptoms be sent home? Yes.
- If so, with or without pay? Whatever the employer’s specific policy is with regard to sick leave. North Carolina employers are not required to provide paid sick leave, but if your company does, any such leave should exhaust all PTO prior to becoming unpaid.
- How should an employer treat an employee who becomes infected or one who has been quarantined? What measures should be taken in the workplace to avoid stigma? Private, personal information of employees is required to be kept confidential pursuant to N.C. Gen. Stat. § 75-66 and other statutes. All information and records which may identify a person who has or may have a disease required to be reported by the North Carolina Commission for Public Health must be strictly confidential. N.C. Gen. Stat. § 130A-143. Therefore, any information that an employee may have tested positive for COVID-19 or any other communicable disease should be kept confidential.
- HIPAA, while generally not applicable to employers since they are not health care providers, does apply where employers have private personal medical information in their records. Such information is required to be maintained in a separate, locked file only accessible to those with a genuine need for it. Thus, such information cannot be disclosed formally or informally.
Realtors – The NC Real Estate Commission has allowed 90 extra
days to complete all continued ed, and all continuing ed must now be completed online
or via webcast, not in person. See https://www.ncrec.gov/ More
information also available from the NC Association of Realtors - see https://www.ncrealtors.org/nc-realtors-coronavirus-information/
Real Estate
Transactions – Recording of deeds
and other real estate documents is continuing electronically and we have in
fact recorded a transaction just this morning electronically, which proceeded
as normal with no significant delay from the Register of Deeds office. No in-person
business can be conducted at the Register of Deeds office – call and make an
appointment if you need a marriage license or your notary commission renewed,
for example.
Legal Proceedings
and Courthouses – Courthouses are still
open but running on skeleton staffs. We are able to file lawsuits, motions,
pleadings and the like, but no hearings will be held until the stay on all but
emergency court hearings is lifted by the N.C. Supreme Court and the N.C.
Administrative Office of the Courts. This does not change or extend any statutes
of limitations! In addition, any filings which were due between March 16 and
April 17 have now been extended until close of business on April 17. The legal
system is considered an “essential service” and is therefore not directly
affected by Mecklenburg County’s stay-in-place order issued on March 24, 2020.
Landlords,
Homeowners Associations and Lenders – Your
tenants, members and borrowers are still required to pay you and nothing is anticipated
to change that at this time. Residential borrowers may receive special
dispensation from the federal government but that is unlikely to apply to any
private mortgage transactions. Lawsuits, liens and foreclosures may still be
filed, but no hearings will be held until the stay on all but emergency court hearings
is lifted by the N.C. Supreme Court and the N.C. Administrative Office of the
Courts. We can assist you in getting things filed so that matters can be
immediately heard once the stay is lifted.
Homeowners
and Condominium Associations – Annual
meetings are likely to have to be postponed since most associations require these
to be held in person. Board meetings can, and should, be held telephonically in
the current situation – all directors must be able to hear each other for the
meeting to be valid. No such allowances exist by law in North Carolina for annual
membership meetings to be held electronically. Boards should be meeting
regularly by teleconference to adjust and react to current events. (Contact us
if you need a review of your governing documents to see if there are ways to
accomplish meetings electronically or other than in person.) Regarding common
areas, be sure to read the section about Negligence elsewhere in this article.
There is now plenty
of information available from the CDC and others for best practices in
keeping common areas clean and avoiding personal contact to quell the spread of
disease – disregarding them could constitute negligence, making the association
liable.
Taxes - An delay from April 15 to July 15 was
announced by Treasury Secretary Steven Mnuchin for federal income tax filing for
all taxpayers and businesses. North Carolina has also extended its state tax
filing deadline to the same date. No specific written guidelines or rules had
been published at the time we wrote this update, so be sure to consult your CPA
for further details before relying completely on this informal announcement at
this time.
Breweries, Distilleries and Other ABC Licensees – The
NC Alcoholic Beverage Commission has issued very specific rules in response to
the Governor’s COVID-19 Executive Orders. These new rules need to be followed strictly
in order to ensure that you are not both in violation of the Executive Orders –
a class 2 misdemeanor – as well as putting your ABC license in jeopardy. See
the ABC Commission announcement: https://abc.nc.gov/PublicResources/LegalAnnouncement/261
Unemployment Benefits – This is an important
change which provides a streamlined process to access benefits for those newly
unemployed or with reduced hours or wages. Employees should be sure to specify
that they are temporarily out of work or working reduced hours due to COVID-19
when filing a claim to make sure they are eligible for any extra benefits and
to ensure that the employer’s unemployment insurance account is not charged for
these benefits. Employers should be sure to indicate that the separation was
due to COVID-19 when/if they receive a request for separation information from
the NC Employment Security Commission. Details here: https://des.nc.gov/need-help/COVID-19-information
Parties, Events and Mass Gatherings - On March 23,
2020 Governor Cooper issued new Executive Order No. 120 adding further
restrictions to businesses and prohibiting all mass gatherings of 50 or more
people - down from 100 or more previously. Read the Executive Orders
here for details.
Briefly, the Governor's orders cancel public
schools (K-12) until May 15 and prohibits mass gatherings of 50 or
more until further notice. The prohibition of mass gatherings has specific
definitions and is worthy of clarification. These orders have the
rule of law - violation constitutes a Class 2 misdemeanor
pursuant to N.C.G.S. 14-288.204. There are more details on our website
here.
Stay tuned for more legal updates from us on this
continually evolving issue.
Resources for Businesses to Stay Informed:
Moretz Law Group is prepared to help you with
your business needs in this situation. We are fortunate to have Marjorie Benbow as part of our firm
due to her expertise in virology and public health. Prior to receiving her J.D. and M.B.A degrees from Wake Forest, Marjorie
received her Masters of Science in Public Health from UNC-Chapel Hill. She worked as a virologist
at Burroughs Wellcome after finishing her coursework. She also worked
for
the state's health agency in the areas of epidemiology focusing on communicable
diseases. Marjorie is also a registered patent
attorney and assists our clients with trademarks and copyright matters as well
as with brewery and distillery law. Marjorie can be reached here. Reach Zac Moretz here. Our coronavirus updates
are here.
