The global spread of Coronavirus (officially called “Covid-19”) and its current exponential spreading presents a number of challenges to the business community around the world including the business community of Cyprus. Whilst the virus has been declared as a pandemic, we recognise that companies and their business operations are already significantly affected and a significant disruption is occurring at almost all levels. It is thus essential for businesses to make contingency plans and this brief note provides a high-level guidance on key relevant considerations for companies whose business operations or part of them are governed by Cyprus law with a particular focus on their employment and contractual relationships.
Health and safety of employees; visitors and clients
Pursuant to both the provisions of the applicable Cyprus legislation as well as of the corresponding EU law, businesses in Cyprus have a legal obligation to take reasonable steps to protect the health and safety of their employees; visitors and clients. In light of this legal obligation, we have summarized herein few key actions employers may consider taking in order to protect the health and safety of their employees; visitors and clients:
It may be reasonable and justifiable for employers to put in place travel guidelines which prohibit all but essential business travel to affected regions in order to minimize the risks of possible infection spreading in the workplace. Employers should also consider implementing procedures for staff to declare any recent or planned personal travel to affected areas, or any close contact with persons from affected areas.
Flexible working arrangements:
Depending on the parameters of each case, employers may request certain employees to work remotely, where possible, for 14 days, to cover the period during which any coronavirus symptoms are likely to become evident.
However, even though such arrangement may be justified on health and safety grounds, the employer must continue paying in full the salary of those employees – this would not constitute sick leave unless the worker is actually ill. Employers should also be aware that standing employees down temporarily without pay in the event of business interruption is likely to be a breach of contract, unless the employment contract expressly permits this. Such “lay-off” clauses are rare in practice however and, even where they exist, employees may be entitled to statutory payments, including under certain circumstances statutory redundancy pay.
Requesting and processing “sensitive [health] data”:
Employers may also be justified to request and receive personal data that are classified as “sensitive” pursuant to the provisions of the General Data Protection Regulation (known as the “GDPR”) of either their employees or clients. Processing of such data however, including disclosure of the same to public authorities if needed, must always be made in accordance with the provisions of the GDPR as well as the applicable local legislation and particular consideration shall be given to the stricter provisions concerning the processing and exploitation of sensitive data.
Other measures to minimize the risk of infection:
Many businesses are putting in place other measures to minimize the risk of infection spreading to employees and visitors such as performing extra cleaning of communal surfaces; keeping everyone updated on actions being taken to reduce risks of exposure in the workplace; making sure everyone’s contact numbers and emergency contact details are up to date, as well as ensuring that managers know how to spot symptoms of coronavirus and are familiar with any relevant processes such as sickness reporting.
Businesses whose activities involve regular contact with members of the public, e.g. hotels, retailers etc may also consider taking similar to the aforementioned steps to protect their customers.
Note: There is no “one-size-fits-all” solution and, even though in general terms the aforementioned steps are in line with the legal obligation of companies to protect the health and safety of their employees; visitors and clients, the parameters of each case must always be examined.
Contractual rights and obligations
The exponential spreading of the virus has already caused parties to contractual relationships to consider cancelling various contractual arrangements. Conferences; concerts; sports and other events have already been cancelled because of Coronavirus fears and travel restrictions. With the virus not yet contained, businesses need to examine the practical implications of such unforeseen event on their contractual rights and obligations. We are already seeing an increase in questions about what contracts say about cancelling events, and how to manage the fall out.
The primary consideration in such cases is to examine whether “force majeure clauses” in contracts and/or the common law “doctrine of frustration” will either protect contractual parties in the event that the virus makes it, either directly or indirectly, difficult to fulfil their contractual obligations or whether the aforementioned principles forbid them from enforcing their contractual rights.
“Force majeure clauses” and the “doctrine of frustration”
Under Cyprus law there is no general definition of “force majeure”. It is a concept which is subject to the definition given to it by the parties in each contract. In general terms, this is a clause which sets out what happens if a party cannot perform their contractual obligations because of events beyond their control. Apart from defining the relevant triggering event(s), such clauses usually determine the effect such events will have on the contractual relationship usually being either temporary suspension or complete termination.
However, determining whether a contractual party may be able to rely on a force majeure clause to avoid or delay performing contract obligations because of the Coronavirus outbreak or associated travel and other restrictions, requires deep interpretation of the contract as whole and a careful analysis of the wording used. Much may also depend on how the virus is classified by the World Health Organisation and other related authorities, and what restrictions are in place at any given time. It is thus very important when considering relying on such a clause to examine whether this is justifiable as well as what effect the enforcement of such a clause will have on the specific contractual relationship (eg temporary suspension or full termination of the relationship). There is again no “ones-size-fits-all”.
As mentioned above, even if there is no “force majeure clause”, contractual parties may also be able to mount a defense based on the doctrine of frustration, although the courts are generally reluctant to find that a contract has been frustrated. Frustration occurs where it is impossible for a party to perform a fundamental obligation under a contract, due to an unforeseen event, or makes a fundamental obligation radically different. When a contract is frustrated, neither party has to comply with future obligations. Determining whether a contract has been frustrated requires a careful analysis of what the obligations are, and why they cannot be performed.
Importantly, parties to contracts should be aware that a “force majeure” or termination based on the “doctrine of frustration” affecting one contract, such as an agreement for the sale of goods, will not necessarily affect another connected or related contract finance contracts.
The World Health Organization is on the brink of declaring coronavirus as a worldwide pandemic. The anxiety surrounding the spread of the virus and the uncertainty of how authorities will respond will no doubt lead to a number of stakeholders taking action to protect their position or to gain a commercial advantage.
Our firm is closely monitoring the relevant developments and can provide related legal advice in case your business has been affected or you are considering taking protective measures (e.g. redefining company’s HR policies). For further information please do not hesitate to contact us.