As issues arise in many areas of the business because of the crisis, it is critical for the legal department to be as prepared as possible.
Whether it’s a global pandemic, economic shock or natural disasters, global organizations’ crisis planning comes sharply into focus when confronting these challenges. For many legal teams who are busy enough with “business as usual”, it is only when a crisis hits that policies are dusted off and general counsel have little time to align with the wider organization’s response teams.
While the approaches to crisis response may vary by geography and sector, the broad principles remain the same.
1. How resilient is your supply chain?
To analyze and manage the supply chain and customer arrangements, companies should look at the contracts governing those relationships to capture and analyze key information needed to make informed decisions, including termination provisions, liquidity, insolvency, bankruptcy and penalties. Also seek an understanding of your suppliers’ financial viability and attitude to the crisis facing your organization. When evaluating alternative suppliers, identify whether there are exclusivity clauses in current supplier contracts that may complicate switching. Also consider whether amendments to customer agreements are needed as a result of supply chain changes.
2. Do the “force majeure” or hardship clauses in your contracts apply?
Assess whether preconditions (e.g., governmental notification or insurance acceptance) must be fulfilled to enable the organization to invoke Force Majeure. Also, it is critical to evaluate whether your company’s own terms and conditions form the basis for its key commercial relationships or whether differing Force Majeure clauses may be at play. Where contracts are at risk of breach or termination, it is important to understand all risks in terms of liability and potential damages actions.
3. Do you have a pathway for the legal entity to function?
Standard governance practices and procedures may not always be feasible in times of crisis. Where the rules do not anticipate a particular situation, an alternate path forward may need to be defined. For example, are remote board meetings permissible under the rules? Also, do the rules contemplate director vacancies and how to manage execution and filing challenges when signatories or notaries are not available?
4. Do you know your obligations to employees?
Employment contracts, policies and procedures should be reviewed and summarized to help ensure compliance across all employee types in all jurisdictions. The review should include procedures for employee and contingent workforce leave and the company’s obligation to provide appropriate technology and equipment when employees are working at alternative sites. Share these summaries, including reporting obligations to regulatory authorities, with local teams. Also, consider how you will provide information and fulfill your consultation obligations toward trade unions, work councils and other employee representative bodies.
In the case of health-based emergencies, identify whether a protocol exists to handle sensitive personal health data, including in circumstances where employees may not self-report travel to restricted areas. Also, seek to understand whether you are obliged by employment contracts or legal regulations to continue to pay employees while they remain in quarantine or absent from work due to circumstances beyond their control.
5. Have you provided for proper communication and information sharing?
Within the legal team decide who will be responsible for regular liaisons with and updates from key teams within your organization. Make sure any delegation includes alternatives in case the primary delegate is unable to execute their task.
Establish what input and alignment your legal department will have regarding internal and external communications, including social media, to prevent reputational risk, leaks or disinformation affecting the company brand. While speed is important, it is critical to balance it with accurate legal advice. Also, review the method for employee guidance and regular updates, including health and safety, taking into consideration the fact that employees may not be present in an organization’s offices and facilities.
6. What does your insurance cover?
The validity and enforceability of insurance contracts and assessed coverage in a crisis context should be evaluated. More specifically, understand how the health or critical insurance policy interprets a crisis and under what circumstances will it suspend payments.