Covid-19: how should in-house lawyers respond?

As the Covid-19 pandemic continues to cause significant global disruption, with large sections of the world’s workforce now in lockdown, Lucy Trevelyan examines how in-house lawyers should be responding to the crisis and what they can do to prepare their organisations for life after Covid-19.

What should in-house lawyers be doing now?

The Covid-19 outbreak, says Abhijit Mukhopadhyay, Secretary of the IBA Corporate Counsel Forum and President (Legal) and General Counsel at London-headquartered Indian conglomerate the Hinduja Group, will require in-house lawyers to be creative. 

‘All their efforts should be directed to help the businesses in whichever way they can,’ he says. ‘This is challenging. While on the one hand we celebrate global integration, on the other hand this is precisely the cause for expansion of the disease. Since this is unforeseen and unprecedented, the global response is also unique and experimental.’

Mukhopadhyay is part of a global business organisation, operating in 60 countries with a workforce of 150,000 working across 11 business verticals. Since the outbreak began he has assisted businesses in interacting with lenders to restructure or renegotiate loan arrangements, helped them take advantage of stimulus being provided by national governments, and overseen compliance with domestic health and safety regulations.

‘Force majeure provisions in the agreements are something we are also reviewing, mindful of the fact that it should not lead to frustration or collapse of contract,’ explains Mukhopadhyay. ‘Similarly we are negotiating with customers to avoid the cancellation of bulk orders.’

Mukhopadhyay says that keeping the legal department together and motivated is also a challenging task. ‘The whole emphasis of in-house lawyers should be to assist the organisation in general and business in particular to become flexible and creative,’ he believes, adding that proper compliance with regulations, and if necessary, taking advice from regulators, is essential.

In-house lawyers in labour-intensive businesses with factories and/or offices across countries such as India have a key role in tracking and complying with government orders and restrictions, especially relating to periods of lockdown, says Vikram Shroff, Committee Liaison Officer for the IBA Employment and Industrial Relations Law Committee and Head of the HR Law practice at Nishith Desai Associates, Mumbai.

‘As the situation has unfolded, in-house counsel have been preparing and guiding their organisation to take proactive measures to help contain the virus and at the same time ensuring business continuity,’ he says. This can be challenging, especially as governments have had to react dynamically to the developing situation.

In-house counsels are also working closely with partners in human resources (HR) departments to ensure the safety and wellbeing of their employees, especially in light of the duty of care obligations employers have, he says.

Aoife Bradley, Diversity and Inclusion Officer on the IBA Employment and Industrial Relations Law Committee and a partner at LK Shields Solicitors, Dublin, says appropriate managing of remote teams is essential to maintain cohesion and some semblance of a regular working day.

‘Communication is vital and should be regular; use of software for video meetings and updates should be considered,’ she says. ‘Structure and flexibility are required. The expectations of remote workers should be clear, but need to be reasonable and it also should be recognised that there may be areas that need to be managed such as childcare responsibilities or intermittent issues with broadband.’

‘An agile approach to business continuity is needed for this evolving situation,’ she adds. ‘We may expect waves of restrictions in the coming months and it seems the threat of the virus is likely to continue.’ This will result in a number of ongoing requirements for social distancing and heightened hygiene, sanitation, and health and safety standards in workplaces and public spaces. The knock-on effects will include public transport issues and restrictions on gatherings of people. The ongoing monitoring of developments will be crucial to anticipate and react to developments.

With many companies in financial crisis, says Melanie Lane, a partner at CMS in London, many employers are considering staff cost-cutting measures such as voluntary leaves of absence, forced holidays, lay-offs, short-time/rotational shift working and even compulsory redundancies.

In these situations, she says, employee relations are key. ‘In-house lawyers can also assist HR teams in navigating the often complex rules and regulations of the applicable local employment law whilst seeking to maintain a loyal and motivated workforce.’

Another vital role for in-house lawyers is getting to grips with the measures that governments worldwide have put in place to support businesses and workers through the current crisis.

‘Things are moving extremely fast, schemes are continuously being introduced and updated, and many businesses are not aware of all the support that is available to them,’ says Lane. ‘The different measures and their eligibility requirements vary wildly from jurisdiction to jurisdiction, so a key role of an in-house lawyer will be keeping on top of this in all of the countries in which their business operates, and ensuring the business is aware of and can take advantage of the available support.’

There are pressures on in-house lawyers on all fronts, says Edith Hofmeister, Vice-Chair of the IBA Business Human Rights Committee.

Like many countries, the United States Congress has passed huge relief packages in response to the Covid-19 pandemic. Other governments, both outside and within the US at a non-federal level, have also passed legislation, which may or may not be complementary.

‘The new laws address a host of legal issues that will affect business tax, treatment of net operating losses, small business and contractor loans and grants, social security and payroll tax changes and early retirement withdrawals’, for example, says Hofmeister. ‘In-house counsel must understand the details of all the new legislation to keep the client on the right side of the law but also to take advantage of all benefits the legislation offers.’

The US poses its own peculiar compliance difficulties given the differing chains of command operating at the city, state and federal levels. Hofmeister’s hometown of Berkeley, for example, is subject to the jurisdiction of the City of Berkeley (which has its own health department), the County of Alameda, the State of California, and the federal government.

‘The city has more stringent “shelter in place” rules than the state and there are other contradictions, as well,’ explains Hofmeister. ‘Government entities are overlaying a quilt of edicts upon businesses and individuals that lawyers will have to make sense of. This raises a lot of preemption and federalist issues that will take time to get resolved.’

When in doubt, if you have a choice, most counsel would advise the company or individual to go with the more stringent law,’ she says. ‘But lawyers will have to be creative here.’

After lockdown ends

The in-house lawyer’s role should continue on much the same lines during the post-lockdown period, Mukhopadhyay says. The key is in assisting the business to stand up to the challenges through value addition and creativity.

‘Keeping employees motivated, especially those who have suffered due to this crisis, will pose a greater challenge,’ he says, ‘Maintaining health and safety as per government directives will be something that internal legal can help with.’

‘Settling issues of force majeure after lockdown is over will be a challenge where internal legal can help,’ continues Mukhopadhyay. ‘In short, in-house lawyers should rise to the occasion and become an integral part of the overall strategy of the organisation not only to survive but also to bring back status quo ante in the quickest possible time.’

In conjunction with HR, in-house lawyers must clarify the post-emergency plan as soon as possible, including various different measures to be taken at the ‘come out’ date, says Lea Rossi, a partner at Toffoleto de Luca Tamajo e Soci. ‘It will be necessary to keep in mind that the emergency will last for months and activities must be monitored for the whole period.’

In particular, in-house lawyers must assess risk areas – including data protection (particularly around positive Covid-19 tests), stress issues, potential layoffs or working time reductions and increased illness rates – and create a plan to manage them, says Rossi.

Measures should be put in place to prepare people to work remotely for an extended time, she says. ‘This includes evaluating people working remotely and organising teams accordingly, supplying devices and VPNs, etc. For non-remote work consider the layout of the workplace and how to ensure it complies with social distancing and the use of protective equipment. In addition, you should prepare for a potential second wave of lockdown if there is a resurgence of Covid-19 before a vaccine is ready.’

In-house counsel can use this opportunity to anticipate the new workplace challenges that will surface once the lockdown restrictions end, says Shroff. ‘They can create core groups to help prepare and front-end their organisations in time to be ready to respond. Given the employer’s duty of care obligations towards its employees, the organisation may face liability if an infected employee is exposed to the workplace.’

In-house counsel need to work with heads of HR to develop necessary methods and practices to reduce the overall risk, he says. These could include travel disclosures, reducing unnecessary travel, mandatory temperature testing, telecommuting and employee vaccination. Further, ‘access to medical facilities, flexible working schedules, training on cleanliness and hygiene standards, for instance, may soon be the new normal at a workplace,’ thinks Shroff.

Employment contracts and HR policies may also need to be revised to account for greater flexibility for both parties, should such an unprecedented situation occur in the future. ‘In-house counsel need to remind the organisation to maintain confidentiality once the workplace resumes, as any leaked information of past medical history could easily lead to situations of employee discrimination,’ adds Shroff.

With most US states projected to have hit the outbreak peak at some point in April, companies are tentatively looking to the future and to what the new norms will be in the workplace, says Amy Turci, a partner at FordHarrison.

‘In-house counsel should be working with teams [responsible for safety] to determine how best to reassure employees and customers, including determining whether masks will continue to be permitted or required, whether temperature checks will continue, and what the cleaning and sterilisation protocol will be going forward,’ she says.

Experience in China, Hong Kong and Singapore suggests it will be a long time until we are back to ‘normal’. ‘It is also probable that “normal” will mean something different after Covid-19,' says Lane.

‘Legal teams should already be considering what may be needed to support a gradual return to office work or full capacity working, particularly while social distancing or other safety requirements remain in place,’ she says.

‘We also expect that the necessity of adapting quickly during this crisis will have caused businesses – and their workers – to have developed new and perhaps strong views about what working arrangements and operating practices have worked well (or not so well),’ adds Lane. ‘It is likely that legal support will be required to align new priorities and preferences.’

Ian Stevens, a partner at CMS, says now is a good time for in-house lawyers to dust down the company’s key contracts and refamiliarise themselves with the exclusivity, termination and exit assistance, business continuity, retention of title, suspension and step-in clauses.

‘This knowledge can make the in-house legal team invaluable in supporting the operations team to make difficult decisions about withdrawing from contracts, or in being aware that others may stop performing their obligations towards the organisation,’ he says. 

‘Keeping in close contact with key suppliers and customers at this time will also increase the likelihood of advance warning of any future difficulties,’ he says.

Where performance under a contract declines, or it seems a counterparty is in financial difficulty, in-house lawyers should be ready to advise the business on the options. ‘Withdrawing from an agreement may not always be the best outcome, but if the company has the right to require invocation of business continuity arrangements, step-in to manage or perform aspects of the services itself or to bring in additional suppliers, these may be useful alternatives,’ explains Stevens.

‘Where the concern is about a customer or client, rights such as payment on account or suspension of supply until previous invoices are paid may need to be invoked to protect the business’s interests.’

Ensuring survival

In-house lawyers, says Nick Watson, a partner at UK firm Keystone Law, need to identify problems, and think about solutions quite differently from their normal approach as they strive to ensure their company’s survival post-lockdown.

‘Your legal expertise will play an important role, of course, but try not to define yourself as a lawyer,’ he says. ‘Business decisions have legal implications and legal advice has commercial repercussions. Put on your business hat and, also, just be a human being. Let empathy, ethics and common sense guide you as much as the law.’

Both strategic and tactical thinking is required, he says. This means an in-house lawyer identifying their ultimate objectives and planning how to achieve those – strategy – and also determining what steps, at a more operational level, will maximise the chances of their organisation achieving those objectives, ie, tactics.

A risk-based approach should be taken, he says, with the focus being on risk within the context of the threat that this crisis poses to business and society. ‘Do not be unduly drawn into minutiae,’ says Watson. ‘Understand that risk is a spectrum, not a binary state – things are not either a threat or harmless. Risk is a function of impact and probability. You need to understand both to determine the intensity of focus you and your organisation must bring to each issue.’

Watson also emphasises the need for counsel to prioritise, to differentiate between what can be done, what needs to be done, and what is outside their immediate ability to control or influence.’ 

Wherever possible, as with any crisis, in-house lawyers need data to take sensible, informed and timely decisions. ‘But do not become a slave to detail,’ says Watson. ‘You must be comfortable taking decisions (or, in the case of a lawyer, advising your executive team, board or crisis management team) on the basis of partial information. Can you work with ambiguity? You will need to. It goes against the grain for many lawyers, but you must control the urge to know and contain every dimension of a situation.’

The concept of necessity must be at the forefront of every in-house lawyer’s mind in tackling the crisis, believes Watson. ‘Recognise that the threshold for what is necessary has risen. You must narrow your focus to issues that are critical to survival.’

This will exclude many long-term projects or short-term everyday items that fall into the ‘nice to have’ category. The threshold for what counts as ‘necessary’ has now risen to exclude all but the most existentially significant concerns.

‘That is not to say you should take your eye off the legal, compliance and regulatory ball,’ adds Watson. ‘But try to act, and advise, holistically and in a joined-up way.’