COVID-19: Business and Legal Impacts of the Virus

The current Covid-19 pandemic is, above all, a human tragedy. At the time of writing, we know that the virus has led to at least 170,000 deaths across the world – and the true total is probably higher, with many cases likely going unrecorded by official statistics. 

Secondary to the toll on human life is the impact on economic activity. Many entrepreneurs are seeking to defend years of work and investment, while employees struggle to protect livelihoods. Let’s have a look at some of the areas of greatest significance for businesses. 


Labor law 

Many employers have had to lay off staff in response to ebbing demand for their goods and services. Businesses should ensure that any redundancies follow labor law as it applies in their state, as well as having due regard to any obligations set out in employment contracts. 

Employers will have to consider the virus’ impact on their obligations under the Occupational Safety and Health Act 1970 for some time to come, even after any re-opening of the economy (given that the virus is likely to still be present in most areas). The Department of Labor has prepared guidance on preparing workplaces for Covid-19. Employers should remember that while many of their employees may not be in at-risk groups, they may still have strong fears of contracting the virus if they have vulnerable relatives or household members who they could in turn infect. 


Insurance and business interruption 

Insurance has been a tricky issue. Eric Dinallo, chair of the insurance regulatory practice at global New York law firm Debevoise & Plimpton, told CBS that he believed that while 30% of small businesses had business interruption insurance, in the vast majority of cases insurers had specifically excluded pandemics. There have been some moves by state legislatures to get insurers to pay out: but any action is likely to address prospective policies, not those already in place. 

Current pressures may lead to many businesses being forced to amend their relationships with partners, suppliers, creditors and others. Communicating clearly, openly and early is crucial: often, neither side wants a relationship to collapse completely and accommodations can frequently be reached. Businesses should ensure that their relationships with other parties are on a clear footing in uncertain times – using contract templates from companies such as Prosperolegal may be preferable to verbal agreements.


Stocks, prices and real estate 

Stock prices have fallen during the pandemic, and oil futures briefly turned negative in value. Real estate values have also taken a hit. These effects will all seriously impact certain industries.


How long could this continue?

How long the fallout of Covid-19 will last is currently very uncertain. Many countries and states have seen the growth of infection rates slacken in response to lockdown measures, but we do not yet have a clear picture of post-lockdown life. The virus could re-emerge – possibly leading to measures being reintroduced.

A McKinsey report predicts that if the virus is brought to heel in Europe and America while remaining controlled in China, world GDP could recover fairly quickly. If, however, it continues to advance in America and Europe while re-emerging in China, then world growth may stall for several years. It is also difficult to predict how governments across all three regions will respond if there are renewed outbreaks.

In short, we are at the mercy of two great unknowns: a little-understood virus, and an unpredictable political environment. This means that even once the immediate government measures move into the next phase, businesses are likely to have to consider the virus’ implications for some time to come.


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