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Pandemic: A pandemic's greatest threat, of course, is to public health. Pandemic-related legal issues, however, are numerous, complex and significant. This article will touch briefly on some of those that are among the most likely to arise. 1. The Inevitability of Busine ss Disruption Experts anticipate that a pandemic will disrupt business for multiple reasons. Most obviously, many workers will fall ill; some will die. Even among those remaining healthy, many will have family members to tend to and some will be confined voluntarily or otherwise to their homes or to medical facilities to diminish contagion. Schools and day care centers may well be closed. Business disruption is also likely because of local, state, or federal governmental actions. Although isolation and quarantine are the most widely known examples, governments have many other emergency powers, equally or more important. Governments can close borders; exclude or detain aliens; close businesses; seize property; restrict travel; forbid access to buildings, streets, or entire neighborhoods; issue evacuation orders; terminate or limit use of public utilities; control the use, sale, production, and distribution of commodities; and even suspend alcohol sales. Business as usual will be impossible. 2. Labor and Employment What are the rights and responsibilities of workers in a pandemic? How are employers to understand and apply rules respecting wages and hours, travel, benefits, leave, and discrimination? Requiring medical testing, or vaccinations or treatment, will raise still other questions. What if an employee alleges injury by side effects of employer-required treatment? Employers will need to consider workers' compensation questions and ADA, FMLA, OSHA, and FLSA problems. Under the General Duty Clause of the Occupational Safety and Health Act, for example, an employer must "furnish to each of [its] employees employment and a place of employment...free from recognized hazards that are causing or are likely to cause death or serious physical harm..." 29 U.S.C. § 654(a)(1). What steps, if any, does this Clause require an employer to take in a pandemic? To the extent our foresight permits, it would be prudent for employers to identify and resolve these issues in advance of need. 3. Contracts with Customers, Suppliers and Others Contracts are generally binding. Many contracts excuse non-performance under circumstances beyond the control of the parties, such as natural disasters or the outbreak of war. But jurisdictions vary in how they interpret such clauses. Of 27 states in whose Codes the term force majeure ("greater force") appears, a definition is provided in only seven. "Force majeure" is variously defined, but is generally understood to be an unavoidable force that interrupts the expected course of events. The definition in Black's Law Dictionary (5th Ed. 1979) refers to causes outside the control of the contracting parties that cannot be avoided by the exercise of due care. To maintain the sanctity of contract, such clauses may be construed fairly narrowly. If a force majeure clause mentions hurricanes, fires, and earthquakes, but not floods, a flood may be no excuse. In some jurisdictions, factors beyond the reasonable control of a contracting party that render performance impossible will excuse non-performance. In others, however, non-performance is excused only if the force majeure was both beyond the party's control and unforeseeable. Given viral and human biology, meeting this second test may be difficult in a pandemic. In some states, where harm results partly from a force majeure and partly from human inaction, the non-performing contractor is still liable for that portion of the damages attributable to human fault; in others, it may be fully liable. Companies should examine their contracts and determine what if any protections they provide against pandemic-related claims. 4. Insurance Many businesses maintain insurance against all sorts of risks, including business interruption. Query, however, whether business interruption insurance will cover losses attendant to pandemic. Many potentially applicable policies are conditioned on destruction of plant and equipment. Infections, of course, however hazardous to humans, have no such effects. The insurance industry is taking the position that coverage generally does not apply. On the other hand, insurers typically argue that they are not liable for harms caused by airline hijackings, either, yet some courts have rejected that position. Should a pandemic arise, coverage litigation between companies and their carriers is likely. 5. Communication If and when a pandemic hits, a company will need to communicate with a variety of constituencies. These may include employees, suppliers, customers, shareholders, regulators, lenders, and the media, among others. Those charged with communication duties will be under pressure both because the need to communicate will be urgent and because the information immediately available may be far more incomplete, and less accurate, than is optimal. Moreover, the usual channels of communication may well be compromised. In mock disaster exercises, for example, conference calls have proven unwieldy, but radios were often in short supply. Heavy Internet traffic is apt to cause significant slowing. Both commercially and legally, a failure to communicate often aggravates problems; miscommunication may do the same. 6. Litigation Finally, in our litigious society, we should anticipate that companies forced out of business by pandemic, or that lose large sums of money, may well be sued by shareholders asserting that these companies were under a duty to prepare, or to prepare better than they did. This is particularly true if it can be shown that competing companies that had done a more thorough job of preparing were better positioned to continue operations, and kept their doors open, or lost less money, as a result. Disasters often trigger claims. Those injured, and the estates of those killed by the 9/11 terrorists, for example, were able to sue airlines, airport security companies, the Port Authority of New York and New Jersey, World Trade Center Properties LLC, and even Boeing for their losses, in part because, according to the court, hijackings and hijack-related crashes were foreseeable. In re September 11 Litigation, 280 F.Supp.2d 279 (S.D.N.Y. 2003). Plaintiffs' lawyers may try to analogize to such cases. That a pandemic is beyond human control precludes neither litigation nor liability. After Hurricane Katrina, Gulf Coast property owners sued petroleum companies for damages from an oil spill, alleging that the companies were under a duty to store their products in a manner appropriate for such a storm-prone region. Other post-Katrina suits have been brought against hospitals, alleging negligence in failing to provide back-up power sources for life support equipment whose failures were linked to patient deaths. Companies in those sectors of the economy identified as part of the so-called Critical Infrastructure may face particular risk. On December 6, 2005, the Secretaries of DHS, DHHS, and Commerce signed a letter to the leadership of companies in those sectors, asserting that such companies had "a special responsibility to plan for continued operation in a crisis and should plan accordingly." Cabinet officers cannot create law by writing letters, and no one knows the metes and bounds of the alleged "special responsibility" they purported to impose. We can be virtually certain, however, that an enterprising plaintiffs' lawyer will use pronouncements such as this to attempt to establish a duty, from which he can then argue that a breach of that duty harming shareholders is actionable. Conclusion No pandemic plan is perfect, but a company creating even a fairly rudimentary plan is apt to fare better than one failing to plan at all. To the extent they can, companies should factor in legal issues as they develop their plans and otherwise prepare for pandemic. About the Author |