The outbreak of an infectious disease can bring terrible consequences to large numbers of people in a short period of time. We have prepared this alert for the resource industry to help it prepare for or minimize the impact of an infectious disease outbreak.
For many businesses, its labour force is a critical part of its success and cannot be easily or quickly replaced. So considerations that negatively impact a company’s ability to have a productive and available workforce in place should receive a high priority. The resources sector is particularly vulnerable to this reliance and management cannot usually step in to maintain company operations in the event of a disruption. While companies worldwide struggle to deal with the risks and take steps to protect their employees against the impact of an infectious disease outbreak, some solutions simply do not work in the resource sector. For example, while some companies can ask employees to work from home to minimize the risk, this option is not available in the resource sector. It is important to remember that recent issues and situations are not new. Companies should already have thought through these situations in connection with threats such as tuberculosis, hepatitis and HIV. So what should a resource company do, or be prepared to do, to minimize the impact of an Ebola outbreak?
Employment Related Issues
- Safe Workplace – In most jurisdictions, employers have an obligation to provide a safe workplace. In the event of an outbreak or potential outbreak in the workplace, an employer has to assess whether or not they are still meeting those obligations. What are your obligations under local labour laws and regulations and collective bargaining agreements? Don’t wait until a situation arises before you know what your company’s obligations are.
- Under such local labour laws and regulations and collective bargaining agreements, do employees have a right to refuse to work if there is a risk of an outbreak?
- Are employees entitled to request or demand danger pay for performing their normal functions in an environment that involves a risk of contamination? If so, how are you going to respond to that demand and negotiate it collectively on an expedited basis?
- Have you done everything appropriate to ensure your employees have the right equipment and protections in place to do their jobs?
- Have you determined in advance what steps, if any, it will take to assist the family of any involved employees so that such assistance can be provided quickly when it is most needed?
- Have you assessed your company benefit plans and policies to determine if co-workers should be provided with counselling in the event of an outbreak?
- Are employee health costs associated with an outbreak covered by government or company health plans?
- Do you have a properly trained response team in-house or on retainer in order to immediately react to an outbreak in the workplace and secure the local environment?
- Your company should assess what the company’s liability is in the event of an employee contracting Ebola during work related travel or activities.
- If reasonable in the circumstances, your company should make information regarding Ebola readily available to employees so that they can educate themselves with respect to self-reporting and self-evaluation procedures.
- Does your company have a developed no-fly list and contingency plan for employees when travelling if a country is suddenly listed as a high risk jurisdiction?
Human Rights & Discrimination
- One of the most common questions right now is: If I have a person returning from an affected country or a neighboring country, should I make them stay at home? The answer, generally, is no. While it may seem prudent, doing so could expose the employer to a discrimination related complaint. A better approach is to follow the advice of government agencies specifically trained in handling such situations, such as the U.S. Center for Disease Control and Prevention.
- Employers should also be wary of questioning employees who have ties to high risk areas.
- Even in the event of an employee being possibly exposed to an infectious disease, employers are often restricted in what they can ask. In many jurisdictions, such enquiries can only involve inquiries into medical conditions which are job-related and consistent with business necessity.
- Your significant contracts should be reviewed to assess whether an outbreak could be considered a force majeure or act of God under the terms of the contract:
- What exactly is the wording of the force majeure clause and is it open or closed ended? Is the event specifically contemplated or only covered by general catch-all wording.
- Does the clause allow either party to terminate the contract? Is there a cure period before such right becomes effective?
- What threshold is required to be crossed – is a potential threat sufficient?
- With respect to remedies, are they limited to financial damages?
- Do you or involved contractors have any obligations to mitigate? If so, what is the reasonable assessment or plan to do so? How will such steps be monitored and recorded?
- Does an event of force majeure impacting one component of a project allow you to argue force majeure with respect to a default in another component of a project?
- If the outbreak materially impacts your company’s operations, consideration should be given as to whether notifications need to be made under the company’s financing arrangements to avoid triggering an event of default.
- As a best practice, it is generally advisable to keep stakeholders informed.
- Does the departure or removal of employees in these circumstances constitute abandonment or suspension of a project or facility?
- Do the security documents contain any additional relevant provisions that impact the project’s assets?
- Is such an event considered an event of default? Is there a material adverse event or material adverse change qualification?
- Does a government mandated restriction on travel or transportation impact the application of this provision?
- Do the finance documents contain project milestones that can or should be adjusted as a result of these events?
- In certain lending arrangements, lenders may consider that their ability to rely on a market disruption clause should act as a draw stop event. Consider whether a continuing default or failure to make a required representation constitutes a drawstop, which can sometimes be triggered by a force majeure event.
- Do you have direct agreements with critical parties such as contractors?
- Review the project contractor agreements to determine if there are any provisions which require the contractor to notify any party of a force majeure event or project suspension or of any other facts surrounding the events.
- Such contracts may contain estoppel provisions in the event of termination or suspension of a project which may provide financiers with the opportunity to participate in discussions with project stakeholders.
- Review contractor contracts with respect to “walk away rights” and determine if at any point a contractor can walk away without penalty or has to renegotiate with a contracting party.
- Evaluate what, if any, provisions of FIDIC (International Federation of Consulting Engineers) standard form contracts apply to the events and what claims such contracts permit contractors to make.
- If your company is subject to public issuer securities law requirements, you should consider whether the outbreak is a material or significant event that requires disclosure.
- Consider whether your suppliers have a right to refuse to deliver to your worksite due to a perceived risk to their employees from doing so.
- Do your supply or offtake agreements provide for a cost adjustment to deal with cost increases related to an outbreak?
Project Development Agreements, Exploration Licenses, Tenements or Claims
- Review your project development agreements’ milestones and commitments.
- Assess whether force majeure provisions, if any, contemplate events beyond the control of your company.
- What interruption or suspension periods are permitted before the relevant government can terminate a project development agreement or revoke a license or tenement.
- Review your government concession agreements relating to transportation or other infrastructure and determine how an event of force majeure impacts such agreements.
- As with every other material event, internal communications policies should specify who will speak for your company and when.
- You should determine whether any outbreak involving your employees has to be reported to local medical authorities. Before doing so, it should ensure that such reporting also complies with local privacy and employment law restrictions.
- Internally, your company should not single out employees who have travelled to high risk areas as doing so may expose them to additional privacy related claims.
- Co-workers' concerns should be handled carefully as well. In many jurisdictions, the law is very insensitive towards employers concerned about co-workers and disclosure of employee information at the request of concerned coworkers can have ramifications.
- Are the consequences of an outbreak covered by your company’s insurance policies? Does your insurance provide for property or business interruption risks?
- Director and officer insurance policies generally exclude shareholder claims related to sickness and bodily injury, but each policy should be specifically reviewed.
- Where an event of force majeure affects the project revenue stream (by delaying construction or impacting operations), counterparties (such as contractors and off-takers) may be relieved from liquidated damages or take-or-pay obligations under their contracts.
- Evaluate what coverage is available pursuant to the terms of lender’s project related policies.
Directors and Officers Liability
- Directors and officers should consider shareholder lawsuits in the event their companies are inadequately prepared to handle an outbreak or pandemic that hurts your company’s business. Considering the issues set out above, and maintaining adequate records of the decision making process and depth of discussions, will help defend against such actions.
- Litigating shareholders may allege that directors and officers failed to provide the necessary contingency planning and/or disclose the risks an Ebola outbreak could have on your company’s business and financial results.
Shipping and Transportation
- Appropriate actions will vary from one scenario to another. For example, a recent joint statement from the International Chamber of Shipping, the International Maritime Employers’ Council and the International Transport Workers’ Federation called on Masters of vessels calling in West African countries to restrict shore leave, enforce the ban on unauthorised persons boarding ships and be aware of Ebola symptoms and report them promptly to the person in charge of medical care should they occur.
- The World Health Organization has also published recommendations for precautions that owners and operators can take to protect their ships and crew.
- A ship owner’s duty of care and the related obligations with respect to crew safety require separate analysis, but recommendations do attract the same common sense approach and may involve some of the same employment related considerations set out above, as well as:
- Develop a plan in advance of an incident, as medical assistance might not be readily available miles out to sea. Ensure that crew are aware of the risks and know how to reduce exposure.
- Adhere to International Ship and Port Facility Security Code standards in order to deal with the problem of stowaways.
- Restrict shore leave while in high risk ports.
- Avoid making crew changes in the ports of high risk countries, both for the protection of the departing and onboarding crews.
- The question of what is a safe port is not always an easy one and involves many factors.
- Does the time charter contain express or implied safe port warranties, which will continue to apply despite a Master’s duty to follow a charterer’s lawful orders?
- Exactly what governing law applies to the determination of port safety?
- Does applicable law focus on the physical safety of the vessel and its cargo or the health of its crew? The interesting legal issue that may arise is whether it is enough if there is a risk to the crew but no physical risk to the vessel. The ultimate determination will involve a consideration of whether the port is legally considered unsafe as well as a consideration of the Master’s obligations to the charter party.
- Liabilities for delays will depend on a variety of factors, including insurance provisions and the specific wording in charter party agreements, bills of lading and other relevant facts. As noted above, the force majeure provisions of relevant contracts will be worthy of review.
- Causes of delay may include refusals to grant free dealings with a port, refusal of pilots to board vessels arriving from high risk areas, the placing of vessels under quarantine, complete or partial port closures, the refusal of crew members visit affected ports and requirements by port operators to provide health related declarations and documents in advance of arriving in port.
The impact of an infectious disease incident on your project may be far reaching and significant. It is unclear how much longer this will present a risk to the public, so companies and their management should assess the risks and address them to avoid additional exposure. Baker & McKenzie has practitioners all around the world that collectively can address all of the risks set out here and help your company minimize them.