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Covid-19: A legacy

Written by Karen Holden on Tuesday, 15 March 2022. Posted in Commercial law, Legal

As we (hopefully) emerge out of the Coronavirus pandemic, we herein consider what we feel may be some of the legacy issues from Covid-19 which may affect your business for some time to come.

Covid-19: A legacy

As we (hopefully) emerge out of the Coronavirus pandemic, we herein consider what we feel may be some of the legacy issues from Covid-19 which may affect your business for some time to come. 

Long Covid  

As of September 2021, an estimated 1.1 million people were suffering from commonly named ‘Long Covid’, according to the Office for National Statistics. As medical reports and prognosis develop the law on this area is still evolving, and it is still relatively unknown. Presently, we do not have concrete evidence on how Long Covid may, or may not, last, if this is a permanent condition and as such, what the implications are in terms of Employment Law and Employment Rights.

Research into Long Covid is ongoing and for some they are likely to satisfy the disability test under the Equality Act, affording employment protection and the employer’s need to consider reasonable adjustments , but for others they will not meet the test.  However, an employer should consider their actions carefully if they are presented with an employee with Long Covid.  Risk assessments should be undertaken and ‘reasonable adjustments’ made, where possible. The employee should be referred to a doctor or occupational health advisor for guidance and advice. All staff are entitled not to be discriminated against; to be treated under the terms of their contract and the company policies and an employer needs to be careful that should a long term diagnosis be given or an underlying disability be activated, as such it should treats its employee in accordance with a fair procedure, or it could be looking at an unfair dismissal claim; personal injury; breach of contract or discrimination. 

Finally, there have been calls for long Covid to be recognised as an occupational disease, which would mean frontline and key workers may receive compensation if they can’t work because of the illness. This is something countries such as Belgium, France, Spain, Italy and Denmark have already done. The law is moving to support employee’s so due consideration and protection should be considered by way of staff policies ; revised HR plan and strategy.

Furlough & Government relief 

Whilst the furlough scheme and various forms of Government relief provided a lifeline for many businesses to survive during the pandemic, it is estimated that over £4 billion was fraudulently claimed. Whilst it is estimated by HMRC that three quarters of this fraud will be written off, this does not mean that HMRC will not look to investigate complaints made to them about the misuse of any of the Government relief schemes they administer, being the Job Retention Scheme, Self-Employment Income Support Scheme, Statutory Sick Pay support for employers and the Eat Out To Help Out Scheme.

Some of the ways in which the furlough scheme has been misused include claiming furlough whilst an employee remained working, creating ‘phantom employees’ and uplifting claims. HMRC has significant powers including being able to claim back payments made, fines and prosecutions. It is expected that these investigations will continue for some time to come.

HMRC has already arrested and fined people for furlough fraud. Even if HMRC fails to investigate or prosecute misuse under one of the relief schemes there remains a risk to businesses who may have misused the schemes should a business become insolvent. It is highly likely that irrespective of HMRC, any insolvency practitioner engaged by a company will look to investigate the conduct of the directors regarding the use of these schemes. It remains to be seen how far an insolvency practitioner would actually go if say a director failed to claim a relief due to them which may have resulted in the business going into administration or liquidation. 

If you are concerned about any application you have made for the furlough scheme or any other Government relief, it is important to take professional legal advice as soon as possible so that you can be advised on your options. HMRC are aware that these claims were often made at very difficult times for employers but with any investigation it is going to depend on the degree of any misuse, any mitigation and why this happened. It is very important this is not just buried or forgotten about since HMRC can, in certain circumstances, go back twenty years where there is deliberate tax avoidance. 

Business interruption insurance

In 2020 the Financial Conduct Authority led a test case on a number of business interruption insurance policies to determine a standardised approach for accepting cover as a result of lockdown and forced closures.  The Supreme Court found in favour of the policy holders and declared, based on the specific wording of the policies, that cover should be accepted. This is an extremely complicated area, not least as it turns specifically on the actual wording of your policy. If you have not done so already, you should check whether you had business interruption insurance. If you did it is important that the specific terms are reviewed to determine whether it falls within the language accepted by the Supreme Court. If not, it is worth taking specific legal advice on the terms of your policy to see if cover should have been accepted, what you may have been told it covered and what is reasonable for the exclusions. 

We do not however, believe that this is the end of the story. Many of those in the hospitality industry were devastated by the lockdowns in March 2020 onwards and have been met with significant resistance and denial of claims by their insurers, despite taking out expensive policies in good faith which they believe should have covered them. There is currently momentum building. One such high profile arbitration claim is being brought by Black and White Hospitality, who owns and run the franchise rights to Marco Pierre White Restaurants supported by Gaucho. 

Some businesses unfortunately were unable to survive as a result of lockdowns and downturns. We do expect to see in an upturn in litigation in this area as insolvency practitioners fight to secure funds for creditors, which are more than likely to be driven by HMRC.

Hybrid working 

Many businesses are still carrying on remote working practices or are adopting a hybrid approach to staff working remotely and in the office. It is anticipated that this will be the case for some time to come. It is very important that any business that permits remote or hybrid working have comprehensive employment policies governing the same. Monitoring staff emails or keyboard activity is permitted if in their contract ; use of equipment , data processing , cyber security and much more needs ot be carefully considered. Further consideration should be made, and safeguards implemented, to protect any personal data and confidential information being transferred. 

Employers have the additional hurdle of trying to transition staff back to the office as well as considering the health and safety of their team. It is worth keeping in mind that all staff have the right to request flexible working and there is an obligation on the employer to properly consider this request. This does not mean that the request has to be approved but there needs to be a proper exercise and process when approaching a request of this nature. We expect to see an uptake in flexible working requests, and litigation arising from the same, as teams start to be transitioned back to the office. If you don’t already have one in place, it is very important that you have policies on flexible working with a clear process that is available to your staff. 

Mental health

For many, their mental health has been significantly affected or exaggerated by the pandemic. For any employer, it is very important that the mental health and the stress of their staff is closely monitored. As above, an employer owes an employee a duty of care to protect their health and safety, which includes exposure to stress. 

In some cases, mental health conditions will qualify as a disability under the Equality Act 2010. This in turn, means an employer should be making reasonable adjustments and someone with the condition is protected from unfair dismissal because of their condition. Further, no employer should be directly or indirectly discriminating anyone based on their mental health. 

We expect to see an upturn in employment litigation in this area. It is important that as an employer, you put in place proper structures and policies to protect against discrimination and how you treat someone with a mental health condition. This is an area where you should take professional legal advice swiftly, to try and mitigate the risk, cost and distress of a claim. 

Business sales

There have been a myriad of issues facing business owners over the last two years as a result of the pandemic. This is unlikely to stop even when a business owner comes to sell their business, whether now or in the future. This is because we expect to see a number of warranties stemming from just running a business during the pandemic. We have already seen non-negotiable warranties expected in respect of the use and claims made for Government relief and furlough. We also expect to see warranties being made around use of premises and health and safety during this time as well as staffing, staff welfare and downturn in sales etc. 

If you are looking to sell your business it is important that this be properly structured for you and pitfalls and risks arising out of the pandemic navigated. 

We expect there to be numerous longer term consequences for businesses as we come out of the pandemic, however, what is important is business owners taking advice early and putting in place safeguards at the earliest possible opportunity with policies and processes. Your policies should be workable and reflect your business, they should not just be a template no one has ever reviewed or even seen. Given what we have all been through during the pandemic, life is, and will be, different for some time to come, however hard we may try and resist. It’s important that documents designed to protect you are up-to-date and relevant for the here and now.

About the Author

Karen Holden

Karen Holden

Karen Holden is an award-winning solicitor, media commentator and founder of A City Law Firm. She was one of 100 women invited into the Freedom of the City last year, an accolade previously bestowed upon Florence Nightingale and Margaret Thatcher. Karen specialises in advising businesses about scaling-up, starting up, investments, Brexit, Covid-19 and everything in between.

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