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COVID-19: MITIGATING THE DISRUPTION; MANAGING THE RISK

Fri 22 May 2020       |       Share On

INTRODUCTION

The outbreak of COVID-19 has led to unprecedented dislocation of family life, businesses and the world economy in our lifetime and changed the way we do things, perhaps forever.

As many businesses and organisations struggle to navigate the challenges, this Client Note identifies the key areas of legal risk exposure for businesses and seeks to assist clients in mitigating the disruption, while advising on practices that should be entrenched and institutionalised in order to manage risk in a post-pandemic world.  

1.0 LABOUR AND EMPLOYMENT

 1.1 Mitigating the Disruption

 There are two categories of employees that the employer must deal with. The first category are the manual labourers/ clerical staff. These categories of staff have their employment protected at the baseline by the Nigeria Labour Act (the Act). The other category are staff not covered by the Act.

a) Wages

The employer must at the minimum, pay a day’s wages where there is a disruption that renders the employee incapable of working for one week or for such longer period approved by a labour officer. We are not aware that such a longer time has been approved. Beyond this and for other category of staff, their employment will likely be treated as disrupted by a supervening event - the COVID-19 pandemic - leading to suspension of work. In these circumstances, employers are not expected to pay wages as of right. It must be emphasised that this is only relevant where the employer cannot provide work for the staff due to the disruption. If the staff can work remotely or in any other manner, the suspension of work will not apply.

Workers who are absent from work for the purpose of quarantine or for undergoing preventive or curative medical care during an outbreak of a disease and whose salary is suspended should be granted a sickness cash benefit in accordance with international conventions.

b) Hours of Work

Where work can be provided, the Act enables an employer to make an adjustment to the number of hours a worker should put into work in unforeseen circumstances. The employer can also apply this to the other category of staff not covered by the Act as it is within the province of the employer to adjust working hours to adapt to unforeseen circumstances.

c) Remote Work

Where the employee is prevented from resuming daily at the traditional workspace provided by the employer, the employer is to enable the employee work remotely at home or at any other agreed work area.

d) Employee Compensation for Injury

An employee is entitled to compensation in the case of disabling injury whether it occurred in the workplace or outside the workplace. It is no excuse that the employee sustained the injury while working remotely.

e) Health and Safety

It is the duty of the employer to provide a safe work environment at no cost to the employee. The employer must where necessary and so far, as is reasonably practicable, provide adequate protective clothing and protective equipment, at no cost to the worker in the event of an outbreak.

Employers are also responsible for providing adequate information and appropriate training on Occupational Safety and Health (OSH); consulting workers on OSH aspects associated with their work; providing and measures to deal with emergencies.

Furthermore, workers have the right to remove themselves from a work situation that they have reasonable justification to believe presents an imminent danger to their life or health. When a staff member exercises this right, he or she shall be protected from any undue consequences.

These safety requirements are consistent with international best practices applicable by our courts in the absence of any provision in our laws.

f) Variation of the Employment Contract

This should be pursued by way of negotiations with the employees in areas of concern especially where the contract of employment is silent on it. Negotiations should cover:

g) Temporary Leave of Absence without Pay

This is useful where the employer does not want to terminate the employee. It should ideally not last for too long. The employee can procure other jobs while on leave even without terminating his contract.

h) Review of Employee’s Work and Remuneration

The parties may review the scope of work to be done by the employee and how it will be done as well as the employee’s remuneration during the continuance of the disruptive event and beyond.

i) Termination of Contract

Termination of employment is an option that may have to be resorted to either as of necessity or because of the failure of negotiations between the employer and employee. The jury is still out whether such termination occasioned by COVID-19 will technically amount to redundancy. It will mostly depend on the circumstances of each employer’s case.

1.2 Managing the Risk

The employer should make permanent the mechanism for risk management by enshrining in its policy and contract of employment, the framework to allow for the implementation of the above-stated proposals and others that might be thrown up in the event of future disruptions. Competent human resources consultant and lawyers are a necessity to achieve this.

 2.0. CONTRACTS

 2.1 Mitigating the Disruption 

    To enable businesses manage the extreme difficulty, if not impossibility, of meeting their contractual obligations, the relevant parties will have recourse to the terms of their contract, law, and apply common sense and conciliatory management skills. The first point of call should be the contract between the parties.

a)    Force Majeure Clause

    Usually, the contract will provide for force majeure event. A force majeure clause protects a party from liability for the delay in the performance of its obligations under a contract due to an unforeseen event or circumstance beyond the party’s control. Typically, a force majeure provision does not excuse a party from performance completely but only suspends performance of the obligation. However, the application of the clause and its consequence(s) will depend on the precise wording used in the clause. A force majeure clause often sets out the events which would qualify as force majeure events. Accordingly, businesses affected by the pandemic should review the force majeure provisions in their existing contracts to determine if its coverage can be extended to epidemics, pandemics and / or government orders.

    A force majeure provision will only avail a party if the force majeure event completely hampered its ability to discharge its obligations. Force majeure cannot be invoked simply because the contract has become more difficult or costly to perform.

b)   Frustration

Frustration is the premature determination of a lawful contract due to a subsequent change in circumstances which was not contemplated by the parties, and which has made performance of the contract impossible, illegal or something fundamentally different from that which was contemplated by the parties at the time they entered into the contract.

    Frustration need not be stipulated in a contract to be applicable. 

  The pandemic and the consequent government restrictions and orders were not anticipated and, will thus, qualify as frustrating events depending on the nature of the contract. 

c)    Renegotiation/Waiver 

  Another alternative available to parties in the wake of the pandemic would be to renegotiate and, where possible, vary the terms of their contract to accommodate and mitigate the disruption. Some obligations can be waived by the benefitting party.

2.2.     Managing the Risk

    Going forward, parties may adopt the following measures to manage the risks associated with epidemics/pandemics and the occurrence of unforeseen circumstances or events.

a)    Risk identification: Parties should identify the new business risks posed to their business and make provision for them in their contract. 

b)   Force Majeure clauses: A force majeure clause has become crucial in any commercial agreement. The clause must enumerate public health emergencies/exigencies as part of force majeure events.

c)    Amendment of contracts: In addition to the force majeure clause, a contract may contain provisions that allow parties to renegotiate its terms in the event of the occurrence of certain events that will be revealed by the risk analysis or an unforeseen event which impacts on the performance of the contracts.

d)   Competent legal advisers: Businesses should always engage competent legal advisers to draft and / or negotiate their commercial agreements. 

3.0 CORPORATE GOVERNANCE

3.1 Mitigating the Disruption

Companies can adopt the options below in respect of their board meetings and annual general meetings.

a) Meetings of the Board of Directors

The directors can hold virtual meetings. The directors should pass a resolution authorising such a meeting and deem a chosen venue preferably the company premises as the venue of the meeting. The need to authorise a venue is because the law requires that there must be stated in the notice of the meeting a physical venue and since the directors are likely to be calling in from different locations, one of these locations must be chosenRead more