Business owners who do not have an allowance for force majeure in employment agreements moving forward would be wise to consider this now.
Force majeure allows employers to be excused from contractual obligations to employees (or any other contracted party) due to enforced ceasing of business due to pre-specified external forces.
Effectively, force majeure enables employers to be excused from contractual obligations to an employee under certain conditions where they are prevented from following certain usual business practices due to significant circumstances beyond their control preventing business operations.
Force majeure is not straightforward – there are strict and precise rulings around the use of this clause.
In wording a force majeure clause to include temporary business closure due to coronavirus or any other communicable disease, one must have specifically included pandemic, epidemic or outbreak of disease in the force majeure clause. It is worth noting that an epidemic – while serious in its own right is not the same as a pandemic.
Importantly, Force Majeure covers specifically what the parties agree on – so the clause must be very specifically and carefully worded. There is no overriding governance or independent doctrine on the intention of the force majeure clause and any legal challenge will rest solely on the working of the clause in question.
Force majeure must render business operations not possible to continue.
The one thing that is clear however is that the event or situation enabling enactment of the Force Majeure clause must be significant and must render business operation or operations by impacted employees either physically or legally impossible.
The other factor that is clear is that the nature of the force must be out of the control of the business owner – and not possible to work around in any way.
It is also worth noting that where business operations are made very difficult due to employee restrictions, this is not the same as being rendered impossible. Force Majeure may only be put in place where business operations are physically or legally not possible.
In summary, force majeure is a specialised area of HR where employers really need to seek specialist advice to ensure the Employment Agreement is written to include specific situations, and must be very clear about the fact that the specified situation must be unavoidable, be out of the control of the business owner and must prevent business continuance.
Traditionally, Force Majeure would have included Acts of War (which would include terrorism, but there is no harm in specifically including terrorism), a change of law or government required restriction of trade and ‘acts of God’ – which would include all natural disasters, but not necessarily include business closure due to communicable diseases.
Indeed, where Coronavirus is the cause of business closure – and the closure meaning that the business is not able to trade in any capacity, a force majeure clause must specifically state that cease of trade due to a pandemic is covered.
In the case of a pandemic being the ‘external force’, the clause should go into further detail in the instance of an employee being prevented to work due to quarantine requirements – even though business operations may be able to continue in some way.
In its own right, this example must be a mandated requirement. The following of recommended advice from health experts in quarantining, for example, would not suffice.
So – force majeure, while straightforward in principle in enabling an employer to be excused from obligations to employees, is not at all straightforward in implementation. The clause must be broad enough to cover most possible situations, yet specific enough to state the exact situation and action agreed and allowable.
Finally (and importantly), a force majeure clause must be both reasonable and not be off putting to a potential employee.
Please contact us for assistance in this area. Our team of HR experts will be happy to discuss this with you.