The family of a Walmart employee who recently lost his life to COVID-19 is suing the retailer, alleging the company did not respond appropriately when workers at the Chicago area store where the victim was employed exhibited coronavirus symptoms. The suit further alleges management failed to provide associates with personal protective equipment like gloves, and did not enforce appropriate social distancing guidelines.
This is among the first of many anticipated lawsuits related to the COVID-19 pandemic and just one example of the type of litigation companies can expect in light of the pandemic and its far-reaching workplace impacts.
From wrongful termination suits related to the more than 16 million newly-unemployed Americans and a 40 percent surge in Canada’s unemployment rate, to lawsuits filed by shareholders over inadequate contingency plans, the range of potential coronavirus-related liability for businesses is vast.
The current crisis and potential for related legal action has prompted many business leaders to review their organizations’ coverage under Employment Practices Liability Insurance (EPLI) and Directors and Officers (D&O) Insurance policies.
Clear communication has never been more critical. Without it, companies are highly vulnerable to litigation.
Companies better prepared to weather the storm will be those that have not only invested in the appropriate coverages, but that have also implemented strong risk management controls and engaged in employment best practices.
“Companies and board members need to have very sound communication practices and be responsive. Clear communication has never been more critical,” said Nicole Greene, Associate Vice President, National Brokerage Operations, Professional Liability, Burns & Wilcox, Detroit/Farmington Hills, Michigan. “Without it, companies are highly vulnerable to litigation.”
1. Have clear policies and apply them consistently
In the week ending April 4, more than 6.6 million Americans filed for unemployment benefits, bringing the U.S. unemployment rate to an estimated 13 percent. Extensive layoffs are often followed by litigation, according to Laura McCormick, Regional Practice Group Leader, Professional Liability, Burns & Wilcox, Dallas/Ft. Worth, Texas—especially when companies do not have clear criteria for layoffs and/or apply criteria inconsistently.
“Employers should clearly delineate the criteria they are using to avoid situations such as an employee claiming that they were laid off because they tested positive for COVID-19, rather than because the company could no longer sustain operations,” she said.
Clarity regarding which employees are permitted to work from home versus those required to report to the workplace is critical as well. “In the absence of clear, consistent standards an employee who is asked to report to the office while their colleague with children works from home could claim they did not receive equal consideration and received disparate treatment because they didn’t have children, for example,” McCormick explained.
Sick leave policies should be as flexible as possible at this time as well as consistent with public health guidance. It is crucial that employees understand the policies that are in place. If a company does not offer sick leave, a non-punitive emergency sick leave policy should be implemented. Employers should also be familiar with the terms of the Family and Medical Leave Act and the new Families First Coronavirus Response Act.
“Work from home policies need to be consistent and easily understood and disseminated to all management and staff. As working from home is a newer concept for many companies, regular communication and daily check-ins have never been more important. Commitments to daily communication not only help provide guidance and reassurance, they help negate misunderstandings, which are often the underlying cause when employees feel discriminated against,” Greene said.
In the absence of clear, consistent standards an employee who is asked to report to the office while their colleague with children works from home could claim they did not receive equal consideration and received disparate treatment because they didn’t have children, for example.
Greene also advises against requiring employees to provide proof of a positive COVID-19 test to qualify for sick leave as this is a violation of their privacy, unlawful, not to mention discriminative. Additionally, said Greene, who is to say that they, the employee, contracted COVID-19 as a result of being exposed to coronavirus because the company mandated the employee report to the office in lieu of working from home. This could easily become the beginnings of a class action lawsuit from employees alleging the company did not put the safety of its employees first, before its profits.
As employees cope with anxiety, grief, and other mental health effects of the pandemic, connecting workers to employee assistance programs or community resources is an important best practice. “Reminding employees that help is available is a great way for companies to stay connected to their employees and to show them that they care,” said Greene. “Showing your employees that you care about them first, and are in this together as a community is the right thing to do. This action could also prove to be a difference maker as to whether an employee decides to sue later over a misunderstanding.”
2. Stay on top of shifting operations, resources and messaging
Lawsuits related to the coronavirus crisis can also be filed by company shareholders, alleging a company’s leadership is responsible for its failure to perform as forecasted financially, failure to comply with government directives in a reasonable timeframe, or failure to manage expenses and contingency plans effectively to support operations.
“While discrimination lawsuits will undoubtedly rise, there will also be a spike in D&O claims as well, arising from shareholders and employees against companies and their board members. Allegations for failure to meet forecasted financial commitments, failure to take timely executive action to comply with governmental orders, and failure to enact contingency plans effectively for the business, its informational security, staff management etc., will be amongst the top allegations we will see brought against companies and their board members,” Greene said.
To help mitigate these risks, company leaders should be prepared to adjust policies, resources and procedures when needed to maintain critical operations. This could involve cross-training employees to accommodate staffing shortages, identifying alternative suppliers or temporarily suspending certain operations to better support others.
Companies should communicate frequently with employees and shareholders about all workplace policies, safety procedures and actions being taken in response to the coronavirus crisis, or any emergency.
“There is a potential for reputational harm to the company when discrimination allegations are made public, and company officers could be accused of mishandling employment practices as well as the disclosure of the allegations,” McCormick pointed out. “Clear and concise communication in presenting all of your policies is critically important right now. You have to be consistent in what you are doing.”
Greene encourages companies to maintain regular communication with business partners about their response plans, share best practices with other businesses in the community, businesses in their supply chain, chambers of commerce and trade associations to improve community response efforts.
3. Maintain appropriate insurance coverage
Class-action lawsuits are a particularly costly potential risk from the coronavirus crisis. In 2019, plaintiffs filed 428 new class-action securities cases in U.S. courts and market capitalization losses exceeded $1 trillion. “A class-action leaves a heavy mark on a company, and it also hurts its future insurability,” McCormick said.
Now more than ever before, during this unprecedented time, it is beneficial to obtain guidance from an expert. That is what an insurance broker or agent is going to provide.
Small businesses are especially vulnerable to being sued, Greene pointed out, and are more likely than larger companies to be pushed to the point of closure or bankruptcy as a result.
“Smaller mom-and-pop businesses do not always have the financial means to have a full human resources division on staff with expertise in employment law and best practices,” she said.
There is also uncertainty over what impact legislation could have on court cases in the pandemic’s wake. According to McCormick, the best way for companies to reduce the likelihood and mitigate the extent of losses related to the coronavirus crisis is to maintain appropriate D&O Insurance and EPLI coverage. If a change in insurance coverage is needed, consult industry experts to determine the appropriate timing, approach and coverage options.
Anticipating possible legal action, many policyholders should be in contact with their insurance brokers and agents to confirm their D&O Insurance and EPLI coverage is currently in place and reviewing policy items such as policy language for communicable diseases, and also reviewing claim and incident reporting requirements outlined within the policies. Additionally, insurers should familiarize themselves with what risk management resources are available to them as policy holders which can further assist companies to provide consist best practices, Greene explained.
Business leaders should exercise exceptional caution about changing insurance providers or policies during this time, Greene emphasized. “Be very attentive, scrutinize all of the policy language to make sure that there are no gaps in coverage, because gaps will inevitably come back to haunt you,” she said. “Now more than ever before, during this unprecedented time, it is beneficial to obtain guidance from an expert. That is what an insurance broker or agent is going to provide.”