10 best practices to keep your business healthy during the Coronavirus outbreak

While the number of confirmed Coronavirus or COVID-19 (“Coronavirus”) cases keeps rising worldwide, businesses of all sizes, industries and geographies can benefit from preparation and assessment during this unprecedented situation. The following tips are designed to keep your business running and your employees and stakeholders healthy and engaged during this Coronavirus outbreak.

1. Keep your employees safe

Assess capabilities and establish a plan

Create an internal plan to address business continuity challenges. Assemble a multidisciplinary, cross-functional team of internal and external experts to address any issues that may arise in conjunction with the Coronavirus crisis. Continually communicate with employees so this team and its resources are available to meet any need as the situation evolves.

Prevent and control the spread

Assure that facilities possess sufficient cleaning supplies (disinfecting wipes, hand sanitizer, trash bins, etc.) to prevent the spread of Coronavirus. Remind employees and visitors alike often of good hygiene (such as handwashing) to prevent the spread of Coronavirus. Post signage in common areas regarding these approved practices.

Reassure and encourage employees to stay home or “self-quarantine” when ill. Require that any employee returning from a place with confirmed cases of Coronavirus work remotely for the incubation period (currently assessed to be 14 days). Inform third parties (such as suppliers) about the paramount importance of staying home when ill. Consider canceling or postponing unnecessary travel, meetings or gatherings, particularly those near or at Coronavirus-affected places.

Assess your business’ current employee PTO policies and consider enhancing them. Specifically, evaluate remote work policies and relax any requirement of physician sign-off for “sick day” qualification. Also, consider broadening PTO policies to enable employees to take off or work remotely in the event of child care facility and school closures. Develop quarantine procedures for impacted employees, while tracking illness and recovery.

Treat employees with respect

Remember to treat employees equally. Asking employees about medical conditions or travel plans may be prohibited. Be mindful of asking or referencing anything related to national origin, ethnicity or any other protected status. Consistent with any labor contract, collaborate with any applicable union to keep employees safe and secure.

2. Review contracts

Consider if the impact of Coronavirus constitutes a force majeure under existing contracts, and include a force majeure clause to contracts currently being negotiated. For existing contracts, examine the consequences of declaring a force majeure event (for example, mitigation requirements, termination of exclusivity or consequences for mistakenly identifying a situation as a force majeure event).

For contracts that are not final, include force majeure provisions that explicitly relate to both: (a) postponements of products from Asian countries and other places that have been primarily impacted by the Coronavirus, and (b) public health emergencies, epidemics and pandemics, including travel restrictions and quarantines.

Contemplate whether the impact of Coronavirus will affect your company’s ability to meet its outstanding obligations, whether due to a direct impact within your organization, or due to an outside supplier’s obligation to you. Advise potentially impacted third parties (including customers, suppliers, etc.) as soon as it is feasible and develop contingency plans.

3. Evaluate infrastructure and systems

Consider whether you can arrange to have many employees work remotely on a temporary basis. Ensure that employees can, if their jobs require it, communicate with customers and suppliers seamlessly. Enhancing and supporting phone and video conferencing capabilities can ease any strain on relationships, while minimizing travel.

4. Review insurance coverage

Analyze the totality of your insurance to ensure that your business is covered for damages resulting from public health emergencies, epidemics and pandemics. Examine P&C, business interruption, business income, employee, general liability, director and officer liability, cyber and specific disease-related policies. Promptly provide any required notices.

5. Examine supply chains

Prepare for disruption to your supply chains, particularly if your business depends on a supplier impacted by a large outbreak. Investigate and validate alternative solutions to the extent possible. Have a candid discussion with impacted suppliers and customers. Assess the impact on pricing due to limited supplies.

6. Strategize on mergers & acquisition activity

Be realistic in your approach and timing in reviewing and closing potential transactions. Be mindful of travel restrictions and quarantines and minimize in-person meetings, in favor of video and telephone conference calls. Acquirers should consider the target entity’s: (a) risk management team and risk-related policies and procedures, (b) supply chain, (c) infrastructure capability, data privacy, licensing and regulatory issues related to remote work, (d) ability to suspend or terminate agreements under force majeure clauses or other provisions, and (e) insurance policies related to pandemics and epidemics, business interruption, and employees. Assure that any transaction is priced accordingly.

Carefully review any material adverse change or material adverse effect clauses to include the impact of Coronavirus. Sellers should ensure that they have strong risk management programs, infrastructure for remote work (both for day-to-day business and for the transaction) and insurance coverage in place, and should enlist outside resources as needed. With any disruption, unique M&A opportunities can be uncovered.

7. Assess the impact of financial and stock markets

Unpredictability in the financial and stock markets is a disruptive byproduct of Coronavirus. Prepare for the potential effects on interest rates, borrowing costs and property and asset values. Examine all financing documents (equity and debt) to evaluate how Coronavirus could impact your ability to finance your company currently or in the future. Proactively communicate potential impacts with lenders and investors, even if not technically required to do so.

8. Delay or extend litigation

Proactively seek extensions for deadlines. Determine the extent that any court or discovery dates can be conducted via telephone or video conference, rather than in-person. Determine upcoming deadlines, and secure and preserve documents and witness testimony in the event that Coronavirus impacts the availability of any witnesses or materials.

9. Review real estate agreements

Analyze leases for possible impacts, including rent abatement. Evaluate the impact on properties and their values. Communicate with tenants regarding how to prevent the spread of Coronavirus and any steps taken to combat against Coronavirus (for example, limitations on large gatherings and amenities, better technology to allow for remote working and security measures). If you are a tenant, discuss concerns with your landlord and be mindful of any Coronavirus-related effects on property improvements, such as move dates.

10. Provide leadership and continue to monitor the situation

As with any crisis, there is often a crisis of leadership. Calm, thoughtful advice can diffuse and prevent magnification of any ambiguous, complex situation and dispel misinformation and rumors while enhancing a firm’s and its leaders’ reputation. Continue to monitor the Corona outbreak, its spread and governmental responses and seek advice from any of the numerous authoritative organizations, including the World Health Organization, CDC and local health organizations.

If you have questions about how Thompson Coburn can help develop a response plan for your organization or help analyze business risks of Coronavirus’ impact, please reach out to your Thompson Coburn contact or the authors below.

David J. Kaufman is an attorney in Thompson Coburn’s Corporate & Securities Practice group and represents and advises clients on a variety of business, transactional and contractual matters.

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