With the current health emergency, our nation's businesses face unprecedented issues. Closing stores, limiting hours, changing order patterns, remote work - all of these issues have joined basic survival as businesses contend with unpredictable challenges during the coronavirus pandemic. And while retailers have many issues to deal with right now, there are legal and ethical issues presented by the current crisis that need retail attention regardless of size and legal expertise.
Issue #1 - Employees
One of the first business decisions you'll likely face is employees. Regardless of your company’s size, employees are worried right now about job security. As a business owner, you should communicate with your employees frequently, even if your business is temporarily closed. Let employees know you’re committed to your business and their health.
Issue #2 - Building Lease
As every business owner knows, even if there’s no revenue, there’s still overhead. Leases hang over the heads of so many businesses and with tight margins, small businesses may be even more at risk. Some landlords are granting temporary moratoriums on rent, which could help businesses survive. You should consider approaching these lease issues from a business perspective first. Make sure to read the lease's fine print to determine if there any clauses that apply to the current situation and have a conversation before presuming the landlord will be inflexible. Picking up the phone is a good start.
Issue #3 - Annual Meetings
Many businesses hold annual meetings this time of year. In the current environment, you may want to hold “virtual” annual meetings to avoid or reduce in-person attendance or may find it necessary to change the date or location of a scheduled meeting.
Issue #4 - Incentive Compensation
If any of your employees have incentive compensation arrangements, especially for incentive arrangements that have an annual or shorter performance periods, you should look to determine whether the metrics still provide a proper incentives and align with desired outcomes. If your business has not yet finalized performance metrics, you may want to consider the impact of COVID-19 in benchmarking performance targets.
Issue #5 - Force Majeure In Contracts
The invariably dormant and boilerplate force majeure and acts of God clauses (“FM Clauses”) are now center stage. Here are some items to consider:
- If a contract has an FM Clause, the precise language and scope are important. Is there a precise definition for “force majeure” and “acts of God”?
- Does the contract specify what performance is excused, and for how long?
- Does the contract state what efforts the nonperforming party must make to overcome the force majeure and/or acts of God event?
- To what extent if any must the other party mitigate the damages in these circumstances?
Going forward, it is vital that your contracts include (or, depending on your perspective in the contract, exclude) “epidemics” in the definition of force majeure and acts of God and careful consideration be given to each party’s obligations and rights.
