Canada:
COVID-19 And Litigation Risk: Does Your Back-to-work Strategy Plan For Litigation Risks?
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In the first instalment of our three-part series covering
litigation and COVID-19, we discuss some of the potential COVID-19
related litigation risks that businesses may face in the upcoming
weeks and months, and need to be aware of and plan for as part of a
comprehensive back-to-work strategy.
Introduction
Canadians have heard it over and over: we must flatten the
curve. To do so, non-essential businesses were shut down and
employees were asked to work from home. Most Canadian provinces,
including Québec, Ontario, Alberta, and British Columbia
have now announced frameworks for the reopening of businesses and
the return of employees to physical workplaces. This is welcome
news for many businesses who are experiencing significant financial
hardship as a result of the COVID-19 pandemic.
Now that it is time for business directors to develop a
back-to-work strategy, we are publishing a trilogy for the
re-opening of businesses, which will discuss: (i) potential
exposure to COVID-19 related litigation; (ii) how to mitigate the
risks of potential litigation exposure; and (iii) what to do should
you face a litigation-precipitating event such as a COVID-19
outbreak in your workplace.
This post highlights some of the potential COVID-19 related
litigation risk that businesses may face in the upcoming weeks and
months, and need to be aware of and plan for as part of
comprehensive back-to-work strategy. This publication does not
purport to address all relevant considerations and we encourage our
readers to discuss their own particularities as well as their
back-to-work and/or current strategies with their legal
advisors.
Types of Potential Exposure to COVID-19 Related Litigation
Businesses may face COVID-19 related litigation. It is most
important that directors and officers be aware of the different
areas from which risks might arise, which we have identified as
follow:
-
Health and safety: Some workplaces may find it
challenging to address the risk of potential exposure to COVID-19
through measures such as social distancing. Under provincial and
federal occupational health and safety legislation, businesses have
various obligations including obligations to assess risk and to
take all reasonable precautions in the circumstances to protect the
health and safety of workers. Determining the sufficiency of
precautions will depend on a number factors specific to the
circumstances of each case. Government orders and emergency
legislation may also set out certain health and safety requirements
businesses are to follow in order to open and operate their
workplace. Businesses may also have a duty of care towards
non-workers such as visitors and clients, especially where products
are sold.
Failure to have appropriate health and safety policies and
procedures in place may leave a business exposed to onerous
regulatory orders, work refusals, workers compensation claims, or
liability in the event of prosecutions, health and safety tort
claims or class actions by persons who have attended the workplace,
bought or consumed a product. Legal proceedings related to COVID-19
also come with a risk of reputational damage and the challenge of
appropriately managing communications with various stakeholders and
customers.
-
Employment issue: Employee layoffs and
terminations create various litigation risks, including potential
claims for statutory, contractual, and common-law entitlements.
Further, employers should consider any statutory and/or contractual
requirements when recalling employees from a layoff. Consult our recent blog post which details further
considerations for employers. -
Contract: In this climate, it may be difficult
for parties to business contracts to perform them. We expect that
many businesses will face contract-related litigation should they
fail to perform their contractual obligations. To learn more about
the principles of force majeure and frustration as they
may apply to contracts, consult our blog post. -
Consumer protection claims, including deceptive
advertising and business practices, and securities class
actions: As we explained in this recent blog post, the pandemic poses high
risks of consumer protection class actions, including alleged
unfair, deceptive or unconscionable business practices, and
securities-related class actions. These types of class actions have
already emerged in the United States. Any statement made to the
public pertaining to outlooks for the corporation in the context of
COVID-19 should be carefully reviewed. Branding, packaging,
labelling, and marketing should be given the same precautions. -
Claims against Directors and Officers: In light
of the foregoing high-risk litigation areas, and in the context
where directors and officers will have to re-think the way the
company does business, often under tight time constraints, we
anticipate that claims, including class actions, will be made not
only against businesses, but also against their directors and
officers. D&O insurance policies offer liability coverage for
directors and officers to protect them from claims that may arise
from the decisions and actions taken within the scope of their
regular duties. As a result, we also expect an increase in
litigation regarding insurance coverage for directors and officers
faced with COVID-19 related claims. We encourage readers to consult
our recent blog post discussing directors’
duties and key considerations in the context of the COVID-19
pandemic.
Conclusion
Now that we have outlined the potential risks, stay tuned for
our second publication which will discuss best practices for risk
mitigation.
To view the original article click here
Originally published by McCarthy Tetrault, on June
2020
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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