Thursday, 26 March 2020
Employment Termination during Pandemic
What are my legal contractual obligations towards my employees who are unable to work due to the novel coronavirus pandemic that has caused the government to shut down many businesses, including mine?
There are actually two possibilities:
1. Force majeure (French for "superior force") – In order for this to apply, it must be included as a clause within a written contract of employment between parties.
Essentially, force majeure is a contract provision or clause that allows the affected party to suspend or terminate its obligations under the agreement when certain circumstances beyond their control arise, which, in turn, makes performance:-
i. inadvisable – the legal definition for this term is the same as it is in the dictionary, which basically means that it is imprudent or lacking good sense or judgement.
ii. commercially impracticable - this legal doctrine is triggered when something happens that makes performance of a contractual duty excessively burdensome, unbearably difficult, or extremely expensive, for the party committed to such performance
iii. illegal – this occurs when continued performance will be an illegal act; an example would be operating a bar or casino despite the government passing a law to shut such businesses during the CoViD-19 pandemic.
iv. impossible – this occurs when a party is not able to physically perform its contractual obligations. For example, many flight attendants would be unable to fulfil their contractual obligations due to the fact that several countries have closed their borders, thus halting international air travel.
A typical list of force majeure events might include war, riots, fire, flood, hurricane, typhoon, earthquake, strikes, lockouts, slowdowns, pandemics and acts of state or governmental action prohibiting or impeding any party from performing its respective obligations under the contract.
2. Frustration of contract – Under this common law doctrine, a contract can be voided when a party to the contract is incapable of performing its obligations due to an unforeseen event, which is no fault of theirs.
I anticipate that most employers will find favour with terminating contracts due to frustration; however, the option of temporary layoffs for the duration of the novel coronavirus pandemic is also a viable option in order to possibly save jobs for when we are all able to return to our regularly scheduled programming.