COVID-19 Developments and Legal Updates

Rick Dunlop, Jennifer Thompson, Alycia Novacefski, Kyle Hartlen, Scott Campbell and Rebecca Saturley

The impact of COVID-19, commonly referred to as coronavirus, will vary by organization. Each organization, however, should consider various legal issues associated with COVID-19- induced disruption to two resources central to any organization:

• The people (who perform the work).
• The materials and services (that are likely dependent upon a complex supply chain) that the people require (to perform the work).

This article summarizes:

• Tips and issues that organizations should consider in determining how to keep their people (or as many people as possible) working, while reducing the legal issues.
• Two legal concepts (force majeure and frustration of contract) that may be relevant if an organization’s people or materials and services or both are disrupted by COVID-19.

1. People tips and issues

The human resources related issues raised by COVID-19 are complex and will vary with each organization. The following are issues and tips worthy of consideration.

• Be well-informed – Check the official advice – do not act based upon misinformation or unreasonable fears.
• Establish systems to inform employees – Update employees with the latest accurate information regarding COVID-19.
• Take steps to reduce the risk of infection at the workplace – For example:
  • Increase the number of hand sanitizer dispensers available at the workplace.
  • Increase the frequency of cleaning high-traffic areas and items such as handrails and door handles.
  • If possible, limit human interaction by encouraging employees to work from home.
  • Prohibit business travel to high-risk areas.
  • Require employees who have travelled or intend to travel to high-risk areas to disclose such travel and require them to “quarantine” themselves for 14 days after such travel.
  • Require employees who have come into contact with an individual who has travelled to a high-risk area to “quarantine” themselves for 14 days.
• Consider how absences due to COVID-19 will be treated under absenteeism/sick leave policies – 
  • Employees who have contracted COVID-19 will likely be entitled to sick leave benefits.
  • Employees who have not contracted COVID-19 may also seek to claim sick leave benefits. The wording of any sick leave benefits policy will be important in these circumstances.
  • Review applicable employment standards legislation to determine entitlement to statutory leave of absences.
  • Consider how to address the employees who are not sick but who you require to self-quarantine or who are otherwise required to quarantine in accordance with the law.
• Be prepared for work refusals under occupational health and safety legislation – 
  • Employees may refuse to work if there are reasonable grounds to do so.
  • Employers should immediately investigate the refusal and take steps that do not result in a violation of the applicable occupational health and safety legislation.
• Be prepared to address human rights issues – 
  • Colds and flus are generally not considered to be disabilities and therefore are not protected by human rights legislation.
  • COVID-19 may, however, constitute a disability and trigger the duty to accommodate to the point of undue hardship.
  • The same principles apply where there is a perception that an individual has COVID-19. Requiring an employee to self-quarantine due to the risk that they may have COVID-19 without pay may be problematic.
• Privacy issues – 
  • Given that the symptoms of COVID-19 are comparable to those of a normal cold or flu, employers may consider, despite some privacy reservations, asking potentially affected employees to provide confirmation from a medical professional that the employee does not suffer from COVID-19. However, the long incubation period means that there is a risk of employees being wrongly cleared to work.
  • Employers are also justified in asking employees about travel plans to high-risk areas.

2. Force majeure/frustration of contract

Regardless of the steps¹ an organization may take to limit any COVID-19-induced disruption to the resources central to its operation, an organization (or its material and service providers) may be unable to satisfy its contractual obligations. In such circumstances, an organization should consider how the following contractual principles may apply to such disruption and prepare accordingly:

• Force majeure clause – This clause “generally operates to discharge a contracting party when a supervening, sometimes supernatural, event, beyond the control of either party, makes performance impossible. The common thread is that of the unexpected, something beyond reasonable human foresight and skill.”²The following issues often arise in a force majeure situation:
  • The wording of the force majeure clause. (Depending upon the wording and context, the force majeure clause may not be governed by Canadian law.)
  • The factual matrix and the context in which the contract was intended to be performed has significantly changed as a result of the circumstances beyond the parties’ reasonable control and foresight.
  • The party invoking force majeure must typically provide notice to the other party of its intention to rely on the clause.
  • The extent of any obligation to mitigate.
• Frustration of contract – Even if a contract does not contain a force majeure clause, courts may relieve a party of an obligation due to frustration if circumstances have changed since the formation of a contract, such that the performance of the contract has become impossible, impracticable, or so “radically different” from what the parties expected that the party claiming frustration should be excused from contractual performance.³Frustration is generally more difficult to establish than a force majeure event because the parties have not turned their minds to it during the negotiation of the agreement.The following issues often arise in a frustration of contract situation:
• • Unforeseen circumstances have arisen.
  • The unforeseen circumstances have rendered fulfillment of the terms of the contract fundamentally different from those which were negotiated at the time of the contractual formation.
  • While the doctrine of frustration is relatively limited in scope, it may be available in situations such as those caused by COVID-19 where, for instance, the people necessary for the completion of contractual obligations are not reasonably or safely available.

While the scale of the impact of COVID-19 on Canadian organizations is currently unclear, organizations should ensure that they have considered possible scenarios and determined how these may impact their organization, including its people, to enable them to put plans in place to reduce the impact as far as possible. As noted, there are many decisions that can be considered ahead of time to enable your organization to respond effectively as the situation evolves. Members of our Corporate/Commercial and Labour and Employment Groups would be pleased to assist your organization with these preparations.

¹ The following article outlines practical steps businesses should consider in preparing for the disruption to the supply chain: https://www.forbes.com/sites/loracecere/2020/02/13/coronavirus-impact-how-to-prepare-your-supply-chain/#3ffb6b6e79c1
² Atlantic Paper Stock Ltd. v. St. Anne-Nackawic Pulp & Paper Co., [1976] 1 SCR 580
³ Naylor Group Inc. v. Ellis-Don Construction Ltd., 2001 SCC 58

This article is provided for general information only. If you have any questions about the above, please contact a member of our Corporate/Commercial Group or our Labour and Employment Group.

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