Member Article

Given the rash of moment-by-moment challenges presented by the COVID-19 pandemic, it is understandable that many companies have not been focused on what is likely coming when the crisis subsides: a flood of litigation related to the devastation left in the wake of the virus.

While the thought of trying to plot a course months in the future while managing a host of urgent issues might some daunting, there are measures companies can take now to better protect themselves for what’s to come.

Below are 21 recommendations companies should consider as they navigate these trying times.

1.Adapt and Communicate Document Retention Policies. With large percentages of the company’s workforce operating remotely, determine what changes need to be made to existing document retention policies (and if you don’t have an existing policy, consider implementing one asap). Understand that inconsistent approaches to document retention will be a potential headache for the litigation to come.

2.Encourage communications through company systems. Recognize that employees might be inclined to communicate through text and personal email when operating remotely. Encourage them to use company systems whenever possible, and to adhere to document retention policies when other avenues of communication are required.

3,Urge consistency in information reporting. Another risk of remote operations is the tendency to resort to more informal reporting and documentation measures. Make clear to employees that working from home does not mean abandoning existing templates for recording and reporting of information such as sales transactions and communications with vendors, customers and others.

4.Protect against expected vendor-related litigation. As the virus continues to spread, expect this to be the area of greatest exposure going forward. Consider the effect of contractual and common law defenses to your or your opposing party’s failure to perform contractual obligations, includingforce majeure, impossibility of performance, frustration of purpose, failure of consideration and prior material breach. Review your vendor contracts to determine whether you are obligated to purchase a certain amount of goods or services. If your circumstances suggest that you will not be able to meet those obligations (e.g., you rely heavily on longer supply chains), understand what steps need to be taken now to protect the company.

5.Be mindful of other types of contracts. While vendor contracts are likely to represent a significant percentage of litigation to come, remember that a full range of exposure is likely. Be aware of expiration dates on service contracts, building permits or construction contracts. If you promised to complete a project, or were promised that a project would be completed by a date certain, recognize the likelihood that the project will not be completed timely. In some cases, you will need to be aware of your rights under contracts with other private parties, but in others you will need to be aware of certain government requirements (e.g., the need to seek approval for the continuation of a building permit).

6.Understand where HIPAA and OSHA intersect. For those who don’t deal regularly with HIPAA and OSHA issues, keep in mind that actions which appear to be logical and necessary in this new environment can give rise to exposure. For example, are you prohibited by HIPAA from disclosing that an employee tested positive, or obligated to do so under OSHA? Before deciding whether to disseminate or withhold information about any employee, consider the HIPAA and OSHA implications. Get advice about the statutes’ reach, and document the reasons why particular steps were taken.

7.Anticipate challenges in obtaining judicial relief, now and going forward. Virtually all courts are shut down at this point, at least for in-person hearings, and it’s not clear how long that will continue. Expect to be heavily challenged in obtaining any relief that requires court action (e.g., injunctive relief, evictions) now and in the future. In particular, expect some number of outright virus-related denials of requests for injunctive relief with respect to non-compete agreements. Assuming the negative economic trends continue and unemployment begins to rise, companies seeking to enforce non-compete agreements might face challenges. Be mindful of which employees are subject to restrictive covenants when considering any workforce reductions, and factor those challenges into the decision-making calculus.

8.Have a continuity plan. Unfortunately, none of us know when we might contract the virus and, if so, how severe the health consequences will be. Take measures to ensure that the business can continue on in the event critical business leaders or key personnel is required to quarantine, or worse, is incapacitated. This means thinking now about redundancy and a particularly robust emergency succession plan.

9.Be circumspect in forbearance efforts. Due to these uncertainty of contractual defenses to defaults, limited access to the courts, and the inability to exercise remedies as a practical matter (e.g. monetize collateral) in the current market, companies may be considering forbearing on exercising contractual rights, at least temporarily. If the company is contemplating forbearance, consider executing a robust forbearance agreement that acknowledges the parties rights and obligations (e.g. debt), contains a release of any prior claims against you, and expressly reserves rights and remedies. Even without a formal forbearance agreement, be careful to reserve all rights in (preferably written) communications to others.

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