Wed, Jul

Considerations beyond Covid-19

With what seems like the whole of life changing at the speed of light it’s hard to keep abreast of everything that’s impacting your business right now, but here are some key issues that need your attention.

Covid and Brexit aside, there’s a lot for business owners to think about in what looks like being another challenging year. Alec Colson, a partner at Taylor Walton and who specialises in employment and industrial relations law, provides timely advice on issues you may have missed during lockdown.

1. A spring break?

The Chancellor has confirmed that the next Budget will be on 3 March, 2021, and that it will “set out the next phase of the plan to tackle the virus and protect jobs”. At the moment the Coronavirus Job Retention Scheme (CJRS) is in place until 30 April 2021, but that may again be extended so it’s worth holding on if you can.

2. Tribunal tribulations

Before we even reach the end of the furlough period, the effects of Covid-19 on the Employment Tribunal service has been catastrophic, with a backlog of over 40,000 cases. It is unlikely that many claims submitted during the last six months will be heard before the end of 2021, and maybe 2022, but if a claim is made against you do not delay in responding. (See ‘Legal Eagle’ in the ‘Forum’ section)

3. DSAR changes

Data Subject Access Requests (DSAR) from employees or former employees can often be nothing more than a ‘fishing expedition’ to establish if the individual can claim against their employer. But you need to be careful, as refusing or ignoring to respond to a DSAR could result in a fine.

The ICO has recently updated its guidance on dealing with DSARs, firstly by extending the one month time limit to respond, by a further two months for complex enquiries. Also, if an employer requests clarification about the scope of their DSAR, the time limit for responding is paused until the individual has responded.

Where an employer deems a DSAR to be ‘manifestly excessive’, the employer could charge a reasonable fee or refuse to respond. Dealing with a DSAR requires balancing the right of the employee to personal information against the time and cost to deal with it, making legal advice a sensible path to choose when you face any tricky such requests.

4.  New National Living Wage 

A reminder that the National Living Wage (NLW) and the National Minimum Wage (NMW) rates will increase from 1 April 2021. The NLW will increase by 2.2% from £8.72 to £8.91 and will be extended to 23 and 24 year olds for the first time. For workers under 23, the Low Pay commission recommended a smaller increase in recognition of the risk to youth employment in the current economic climate.

5. Contract consultation

The Government has recently issued a consultation on measures to reform post-termination non-compete clauses in contracts of employment, as it seeks to boost innovation, create new jobs and increase competition to support the UK economic recovery.

Most director service agreements and contracts for senior staff include some form of restrictive covenants which prevent departing employees from working for a competitor for up to 12 months, therefore it will be interesting to see if the Government takes this issue further.

6. Review terms and conditions 

Global supply chains have been impacted hugely, not just by the outbreak of Covid-19 and the resulting pandemic lockdowns, but by the confusion concerning where responsibility lies for delayed, missed and incomplete deliveries.

The problems again illustrate the underestimated importance of contract clauses, like ‘force majeure (FM)’, designed to address issues arising from unexpected future events beyond the reasonable control of the contracted parties.

Due to the time to reach court, we are yet to see significant judgments in large FM claims arising from the pandemic, but the courts have already handed down judgments on injunctions related to FM clauses and actions for breach of contract, stating each FM clause should be considered on its own words and in within context of the specific circumstances.

This is a clear warning for businesses to ensure their FM clauses are drafted very carefully, especially if they hope to rely on them to defend a breach of contract, whether it is caused by natural disasters, wars or compliance with government restrictions during a pandemic.

7. Check ‘force majeure’ clauses 

When including an FM clause, it should enable the business to invoke a rights of suspension and/or termination of its duties and obligations under the contract.

The inclusion of the words ‘epidemic’ and/or ‘pandemic’ in the clause may be sufficient to trigger FM. Where these terms have not been included, the emergency measures to address or contain any outbreak, like a travel ban or quarantine zones, may be sufficient to trigger FM.

If a business seeks to invoke an FM clause, it must show that any failure to perform its contractual obligations cannot be attributed to other factors, such as any additional cost of performance.

Any FM clause cannot be taken in isolation, but interact appropriately with the other terms of the contract, such as any obligation to mitigate loss, and the procedure to notify the other party.

8. Key actions for 2021 

The first step is for every business to review existing standard terms and conditions of supply and/or purchase, carefully scrutinising all proposed new contract terms, especially to see if FM is expressly included within the contract.

Consider what is included as an FM event and what procedural steps are involved in relying upon FM, such as the obligations to notify the other party. You should also consider what effort to perform/minimise loss will be required on the part of your business or your supplier.

Finally, consider the overall impact on the contract as a consequence of FM being triggered, like termination rights. Then check your insurance position regarding a supplier invoking an FM clause or you having to, hoping to protect your business.

Remember, if a contract does not include an FM clause, it may in limited circumstances be possible to seek redress on the basis of frustration, but this is a complex legal matter with very strict requirements to be met.

9. No magic bullet 

In order to minimise potential loss in FM scenarios, it is vital to give a prompt, contractually compliant notice to the other party of possible or actual disruptions to performance, to allow them to prepare and to act appropriately to mitigate loss or damage.

It will also be prudent for businesses to consider if there is any alternative way of performing the contractual obligations, rather than leaving the client with the problem, which could help protect the long-term relationship.

Retaining written evidence of any disruption is essential, as either party may wish to take matters further, once the contract to supply has been terminated or suspended.

Whilst we await the outcome of Covid-19 FM claims, there is plenty for businesses to consider, from checking contract clauses cover all possible eventualities to checking they have adequate insurance cover, but a review of standard contract terms and conditions is a crucial first step.

10. And finally… 

This is not a complete list and many issues, most notably business immigration in a post-Brexit UK will require greater consideration. Seek advice where you are at all unsure.

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