Three Real Estate Contract Questions to Consider Now

Whether you hold an interest in an industrial, commercial, retail, residential asset class; whether you are an owner, buyer, seller, landlord and/or tenant, lender or borrower, property manager, or homeowner; and whether your real estate is business or personal, there is a need to address COVID-19’s immediate impact on real estate agreements.

Generally, real estate agreements reflect the business climate and risk assessments at the time the contracts were made. In negotiating, executing, and performing their contracts, parties relied on their relationships with the parties on the other side of the transaction. However, when an unforeseeable or disruptive event occurs, parties must look back at their agreements and reassess their standing, rights, remedies, recourse, and relationships.

Now is the time to check on provisions of your real estate contracts. Below are three common questions you may be asking:

1. Which provisions of a real estate purchase and sale contract, lease, or loan document might offer protections or provide guidance at this time?

The following is a sample list of applicable contract provisions:

  • Force Majeure/Acts of God – Force majeure and other provisions in real estate documents that address the parties’ rights and obligations if events occur beyond their control. Some may cover national emergencies and governmental orders.

  • Defaults – Define which actions or inactions will result in a default under the relevant document and whether the defaulting party has any right to notice and an opportunity to cure.

  • Taking – What happens when all or some material right to utilize your real estate asset has been taken away or restricted in a way that diminishes the property value or prevents you from utilizing it for your intended purposes.

  • Access – Property owners will often have certain rights to enter and inspect leased premises and may have the right to restrict access. Purchasers and sellers of a property may have ongoing rights or obligations to allow access to properties to complete due diligence. These provisions may or may not address how circumstances may change in exigent circumstances.

  • Covenant of Quiet Enjoyment – The covenant of quiet enjoyment provides tenants with the assurance they will be able to peaceably use and enjoy their leased premises. These provisions may or may not specifically address a situation where a landlord voluntarily or involuntarily restricts access to the property.

  • Maintenance – Leases allocate maintenance and repair obligations, including but not limited to cleaning. Purchase and sale contracts may contain obligations of various parties on how the owner or operator must maintain the property through closing. These provisions may or may not address who pays or the additional costs of implementation of precautionary measures.

  • Payment Obligations – Payment and closing obligations are often excluded from a force majeure clause with specific clauses that provide that time is of the essence or require payment, despite any other provision that would excuse it.

  • Notice and Cure Periods – Leases, purchase contracts, and loan documents are often very specific about the required protocols for tendering notices, which then trigger specific cure periods. Failure to give or receive proper notice might impact deadlines for cure or performance and termination rights. Cure periods may be extended as a result of the inability to perform or governmental mandates.

  • Environmental – Environmental clauses in contracts may provide additional options.

  • Remedies – Real estate agreements often provide stringent remedies for nonperformance and default. Available remedies should be analyzed in the context of the overall climate in the courts and marketplace. Different parties may be able to avail themselves of certain defenses. Essential businesses may be entitled to certain protections at law and equity. Remedy rights may be expanded or contracted temporarily by governmental entities at the municipal, state, and federal level.

  • Duty to Notify – Parties may have an express or implied duty to notify other occupants of employees, agents, and/or visitors who have been diagnosed or are experiencing symptoms of the virus and were present at the property.

  • Performance, Contingency, and Delivery Periods – Contracts related to real estate may have performance, contingency, or delivery periods. Those dates (often expressed as a number of “days” or “business days”) should be carefully reviewed to determine whether voluntary or mandatory building closures affect the number of “days” or “business days” allowed for performance. Governmental mandates might offer tolling or temporary waivers of obligations.

  • Operating Covenants – Sellers of businesses and real estate or tenants may have obligations to keep operations going or risk default. Check contracts for provisions which require “continuous operation.” Parties may or may not have the right to close buildings, cease services, or implement security or screening measures. Some contracts may require notices of material change to representations and warranties, valuations or business operations.

  • Abatement/Self Help – Agreements may provide abatement rights or self-help rights for missed delivery dates or failed obligations on the part of the other party. It is possible that governmental actions, force majeure, and common law doctrines might already or soon will provide protections or require reasonable extensions.

  • General Deadlines for Performance and Termination/Extension Rights – Carefully watch dates and deadlines in contracts. Extension and termination rights are often narrowly construed, especially where there is a “time of the essence clause.” Some deadlines may allow for tolling in the event of a force majeure, but others may not.

2. What else should purchase and sale, lease, or loan parties consider as we all move forward from this point?

The following are some additional considerations:

  • Reliance on Third Party Providers – Not all third party providers whose services are necessary to perform obligations under a transaction will be classified as essential workers. Governmental orders may prohibit or allow such parties to provide services or restrict the providers to provide services remotely. Check the applicable and evolving ordinances and contact the providers directly to determine if services are available remotely. Assess how deadlines (including, but not limited to, filing deadlines, IRS Section 1031 deadlines, due diligence deadlines for inspections, title, and survey) may be impacted.

  • Electronic Signatures and Notarization – Some states have adopted legislation related to electronic signing and notarization procedures. Not all jurisdictions and providers have equivalent technology available at this time.

  • Recording Office Delays – Buyers, sellers, lenders, and borrowers are reminded that there will likely be delays in conducting recordings. Local recording offices may not be open for business or may experience a backlog. Electronic recording is available in some, but not all, jurisdictions.

  • Closings – Check with the title company on whether electronic signatures, electronic notarization, insurance over the gap period between closing, and electronic recordings are available during periods where there might be restrictions on face-to-face closings. There are fluid situations where maintaining a physical office may not be permitted. For example, the governors of California, Pennsylvania, New York, and Illinois have issued “stay at home” orders for residents in those states and restrictions on businesses. Discuss contingency plans if title companies and lenders are not able to fund on time. Essential service providers will be stressed, and electronic transfers of funds can be delayed.

  • Insurance Coverages – Do the parties have coverages for economic losses, including business interruption/business income and loss of rents? Are there any issues that are covered by commercial general liability insurance? Most standard form insurance policies will not provide business interruption/business income insurance coverage for forced/voluntary shuts down caused by pandemics, but the parties should carefully review all of their insurance policies with their risk management teams to see whether the relevant policies are non-standard forms that do include such coverage.

  • Evolving Federal, State, Municipal laws, Ordinances, and Doctrines – New laws and ordinances will result from the most immediate public needs and will continue to evolve as contract provisions are interpreted differently by different parties whose interests differ. Our Coronavirus Task Force has analyzed several legislative updates including this one on the Families First Coronavirus Response Act.

3. From a practical perspective, where should I start?

Discuss your specific situation with your attorney. Apply good business judgment. Everyone is suffering through this together. It is important to understand the applicable contract documents and assess your relationship with your transaction parties. Courts and Congress may end up taking unusual positions and taking protective steps in the coming months to avoid recession, flatten the curve, and share the loss in ways that today’s contracts might not have contemplated.


© 2020 Schiff Hardin LLP

What Employers Need to Know About HIPAA

As the COVID-19 pandemic continues to affect everyday business operations across the country, employers are confronting a variety of issues on how to handle these disruptions. The intent of this Legal Update is to educate employers about under what circumstances they are permitted to disclose information related to an employee’s or patient’s positive test for COVID-19 under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and the Americans with Disabilities Act (“ADA”).

It may be difficult in some circumstances to discern whether health information was received by an employer through its ordinary status as an employer or through its status as a self-insured health plan. Employers should take care in making this determination based on the facts and circumstances of each situation and seek legal counsel as needed.

Covered Entities under HIPAA

  • HIPAA defines “Covered Entities” to generally include health care providers, health plans, and health care clearinghouses.

  • Covered Entities may not disclose protected health information (“PHI”) unless permitted by HIPAA. An individual’s health status related to testing positive for COVID-19 is considered PHI.

  • One permitted disclosure under HIPAA is that Covered Entities may disclose PHI to public health authorities to the extent relevant to the authority and purview of public health authorities. This includes disclosing positive test results for COVID-19 to state and local health departments, HHS, or the CDC as appropriate.

  • Covered Entities may not disclose PHI to the media.

  • Unless an employer is otherwise a Covered Entity as described above, it is not subject to HIPAA’s restrictions on disclosures of PHI.

Confidentiality under the ADA

  • The ADA requires employers that obtain medical information through inquiry or examination to maintain it in a confidential medical file and keep it separate from the employee’s personnel file.

  • Employers have been encouraged by the CDC and EEOC to question their employees regarding travel, exposure, or symptoms related to COVID-19. Any medical information disclosed as part of this dialogue should be treated as confidential.

  • If a positive case is identified in the workplace, the employer is encouraged to investigate the exposure of others in the workplace without disclosing the name of the individual or any personally identifiable information about the person.

  • The confidentiality requirements under the ADA do not prohibit disclosure to state, local, or federal health departments.

Employers with a Self-Insured Health Plan

  • Notwithstanding the discussion above regarding employers, a self-insured employee health plan maintained by an employer is a Covered Entity under HIPAA (i.e. the plan itself, not the employer, although we acknowledge this distinction is difficult to make for most employers). As a result:

    • If the employer obtained the information through its status as a plan (i.e., as the payer for the employee’s health care services), then such information is PHI and subject to HIPAA (see first bullet above for Covered Entities).

    • If the employer receives the information in the ordinary course (e.g. voluntary disclosure by the affected employee), then the second bullet above regarding employer permitted disclosures is applicable.


©2020 von Briesen & Roper, s.c

CMS/HHS Issues FAQs on Essential Health Benefits and COVID-19

As the President issues a state of emergency in response to the Coronavirus (COVID-19) outbreak, the Centers for Medicare & Medicaid Services, U.S. Department of Health and Human Services, issued frequently asked questions (FAQs) on COVID – 19 and essential health benefits (EHB) coverage through the individual and small group insurance markets.

These FAQs state first that EHB generally include coverage for the diagnosis and treatment of COVID-19. However, the exact coverage details and cost-sharing will depend upon the individual’s plan, and some plans may require preauthorization before these services are covered. Under current regulations, each state and the District of Columbia generally determines the EHB that plans in their locality must cover. Moreover, many states are encouraging, and some are requiring, insurance carriers to cover a variety of COVID-19 services, including testing and treatment, without cost-sharing or preauthorization.

The FAQs went on to say that medically necessary isolation and quarantine required by and under the supervision of a medical provider during hospital admission is generally covered as EHB. However, quarantine outside of a hospital setting, such as a home, is not a medical benefit, nor is it required as EHB.

Finally, the FAQs addressed the possibility of a future COVID-19 vaccine. Although not yet available, all vaccines are analyzed by the Advisory Committee on Immunization Practice of the Centers for Disease Control and Prevention, who will recommend whether the vaccine should be included as EHB without cost sharing and before any applicable deductible. Current guidance indicates that the process of evaluation and final implementation as an EHB can take over a year, but plans may voluntarily choose to cover a vaccine before that time. The FAQs also note that participants may use the plan’s drug exemptions process to request the vaccine be covered.


© 2007-2020 Hill Ward Henderson, All Rights Reserved

Can the Government Really Shut Down My Business and Make Me Stay Home? Questions Answered Relating to Declarations of Emergency Due to Coronavirus

As companies face shutdowns and citizens are encouraged to stay home due to the coronavirus (COVID-19), businesses and people may be asking questions, such as can the government really do that? Those who followed China’s response to the outbreak—which involved using martial law to keep millions of citizens in their home—would have seen references in those stories western democracies being unable to use such extreme measures. Yet, it may now seem to some that our own democratic leaders are doing just that (and should be). Can they?

The short answer is yes, they can.

But fear not, because you are not likely to see tanks rolling down the streets enforcing martial law. There remain strong protections for citizens, even in times like these, preventing arbitrary government action. Unlike the famous Dunder Mifflin manager Michael Scott “declaring” bankruptcy in a building parking lot, when Governor Murphy declared a state of emergency in New Jersey he did not simply open the window of his office, shout “this is an emergency!” and then start issuing a list of edicts. His authority, and that of any executive, is restricted by the laws authorizing such a declaration.

A brief review from civics class:

To prevent abuse, the power to make laws, enforce laws, and interpret laws are separated into three branches, i.e., the legislative, executive, and judicial branches. That means the governor cannot simply do what he wants (like a king or dictator), even if he feels those actions are best for the people. He must do only those things which comply with the laws enacted by the legislature (as interpreted by judges). So upon declaring a state of emergency, Governor Murphy—and any other executive declaring an emergency—issued a series of executive orders invoking specific New Jersey legislative enactments. Those statutes pre-authorized the executive branch (which the Governor heads) to take certain, specific actions when the state is facing an emergency.

Most declarations of emergency in recent memory pertain to snowstorms or hurricanes. In those instances, the State invoked more familiar provisions of the statutes governing declarations of emergency, including freeing up money earmarked for emergency use; calling on the national guard to help with the effects of the storm; and allowing the police to redirect traffic. But the Governor’s statutory powers during an emergency are broad, flexible, and include the ability to “make such orders. . . as may be necessary adequately to meet the various problems presented by any emergency,” including “[t]he designation of vehicles and persons permitted to move during. . . emergency,” “[t]he conduct of the civilian population during the threat of and imminence of danger or any emergency,” and “[o]n any matter that may be necessary to protect the health, safety and welfare of the people. . . .”  N.J. S.A. App. A:9-45.  Violations of these orders are considered a disorderly person offense and may be punished by up to 6 months imprisonment, a $1,000 fine, or both.

In response to coronavirus questions:

Governor Murphy also invoked a provision of New Jersey law not implicated by other types of natural disaster called the “Emergency Health Powers Act,” which provided additional authorization for control over medical facilities, the distributions of medical resources, and authority to “identify areas that are or may be dangerous to the public health” and cause “movement of persons within that area to be restricted, if such action is reasonable and necessary to respond to the public health emergency.” N.J.S.A. § 26:13-9. The same law allows the State to “[r]equire the vaccination of persons as protection against infectious disease;” and although the vaccine cannot be “administered without obtaining the informed consent of the person to be vaccinated,” the state may require quarantine for “persons who are unable or unwilling to undergo vaccination. . . .” N.J.S.A. § 26:13-14. And the same law states that no public entity or its agents are “liable for an injury caused by any act or omission in connection with a public health emergency, or preparatory activities. . . .” N.J.S.A. § 26:13-19

So, can the government shut down your business and make you stay home?

Yes. And they can vaccinate you, quarantine you, and are immune from suit for doing any of those things.

There are, however, other avenues and considerations of which businesses and employees should be aware during these times. Many contracts contain force majeure clauses, which businesses should analyze to determine if they apply to coronavirus-related shutdowns, especially those mandated by the Governor’s recent executive order. Others may consider whether they have insurance coverage for a business interruption caused by the government-mandated shutdown. Employees and employers alike should keep abreast of the changing legal landscape surrounding paid sick leave.


©2020 Norris McLaughlin P.A., All Rights Reserved

Coronavirus and Commerce: Possible Insurance Implications

The coronavirus pandemic and its consequences are spreading throughout the world at an alarming rate.  Governments at all levels and the private sector are scrambling desperately to mitigate these consequences even as new closures, stricter quarantines, and fresh fears develop on an hourly basis.

While some industries are more directly impacted than others (e.g., airlines and hospitality), the economic losses associated with coronavirus cut across sectors and are reverberating throughout the economy.  As companies look to mitigate coronavirus-related losses, they should carefully review their insurance policies to determine whether they provide coverage for losses associated with the disease.  While coverage will ultimately turn on the specific terms of the relevant insurance policies and the precise nature of the losses, a number of insurance lines may provide relief.

First-Party Property Insurance – Business Interruption Insurance

Business interruption insurance is a common component of commercial property insurance policies.  In general, business interruption insurance covers loss of income that a business suffers after an interruption of their business operations.  Often, business interruption coverage is triggered as a result of “direct physical loss of or damage to” insured property as a result of an otherwise covered peril.  Depending on the specifics of the claim, a dispute may ensue as to whether “physical loss” occurred as a result of the coronavirus.  The term “physical loss” has been the subject of litigation in many jurisdictions and the outcome of such disputes is not uniform.  Property that becomes unusable or uninhabitable as a result of the coronavirus may be sufficient to satisfy the requirement of “physical loss.”

Some property insurance policies also include contingent business interruption coverage.  Contingent business interruption insurance provides insurance for lost earnings resulting from a third-party supplier or distributor shutdown directly impacting the policyholder’s operations.  Typically, contingent business interruption insurance requires that the type of damage sustained by the third party be a covered type of loss for the policyholder.  Contingent business interruption insurance is often marketed to businesses such as hotels, restaurants, or food vendors that derive business from nearby properties that draw large crowds (e.g., sports stadiums).  Given cancellation of sporting events and conferences, this coverage could potentially be significant.

Specialized Insurance Policies

There are many types of insurance that provide specialized coverages.  For example, trade disruption insurance is political risk insurance that covers loss of gross earnings and extra expenses resulting from delay or failure of materials to arrive due to actions or inactions of a foreign government.  As the coronavirus and the response thereto continue to evolve, potential governmental restrictions on travel and trade will continue to be fluid.  This is just one example of more specialized insurance that could come into play.  Companies should be sure to evaluate all potentially applicable policies (or sublimits within policies) that may respond to coronavirus-related losses.

Commercial General Liability Policies

Commercial general liability insurance typically provides coverage for “all sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which th[e] insurance applies.”  This is coverage for third-party claims against the company.  Although causation may be difficult for plaintiffs to prove based on the specific facts, an important aspect of commercial general liability insurance is that it provides defense for third-party claims and the insurer’s duty to defend is broader than the insurer’s duty to indemnify.

Given the nature of coronavirus, it is not difficult to envision scenarios in which individuals assert claims against companies alleging that they were exposed to coronavirus as a result of negligent behavior by company employees.  Companies should turn to their commercial general liability insurer for both defense and, if ultimately necessary, indemnity of such claims.

Conclusion

The coronavirus pandemic is an evolving threat with catastrophic human and economic consequences.  While the first priority of companies should be the safety of their employees and customers, they should also look to mitigate the economic impact of the disease, including utilizing insurance tools as applicable.  While coverage will ultimately depend on the specific facts associated with the loss and the relevant policy language, companies would be well served to review all of their potentially applicable coverages, including but not limited to those discussed above.


© 2020 Gilbert LLP

The Coronavirus: Best Practices to Mitigate Risks in the Workplace

As impact of the Coronavirus Disease 2019 (COVID-19) continues to develop, employers and employees are increasingly concerned about the risk of contamination. Employers should consider practical steps to protect their employees, address employee concerns and maintain productivity during potential business disruptions that may result from the spread of this virus.

  • Education and communication are critical:  Employers should circulate the most recent Center for Disease Control and Prevention (“CDC”) guidance for employers, as well as state and local guidance, such as those provided by New Jersey and New York City. Review for updates from federal, state and local levels as there will be daily developments and updates. Provide significant updates to employees on a regular basis.   We recommend providing these materials via several methods, such as email, postings in breakrooms, on the company intranet, and hard copies inserted with weekly payroll. Ongoing regular communication with employees will create confidence that the business is taking their continued health seriously and help to avoid panic.

  • Encourage sick employees to stay home: When an employee calls in sick, particularly where the symptoms are associated with COVID-19, employers should err on the side of caution and encourage those employees to stay home. New York City and New Jersey both require employers to provide paid sick leave, which includes time off for employees to care for themselves, care for family members, for time off related to school closures and the like, which eligible employees may need to utilize. Employers should consult leave laws and policies that apply to the company. Moreover, employers should not require a healthcare provider’s note for employees who are sick with respiratory illnesses to validate their illness or to return to work. Relaxing such requirements is important given concerns about containing further spread of the virus and the potential inundation of healthcare providers who may have increasing limited resources.

  • Allow for telecommuting/teleconferencing: Employers should not place emphasis on in-person attendance, and should evaluate telecommuting options. This may require employers to temporarily relax current telecommuting policies, or to take steps to set up a method for telecommuting.

  • Review polices regarding travel and off-site events: Employers should review travel and off-site meeting needs and consider making in-person attendance voluntary.  If an employee voluntarily decides to attend off-site events, we recommend that employers require the employee to sign a short assumption of risk and waiver of liability.  If an employee declines to attend given concerns of the virus, employers should not treat such conduct as insubordination and should consider work around arrangements.  Teleconferencing may provide another means for employees to attend off-site functions.  The CDC guidance recommends travelers stay home for 14 days from the time the person leaves an area with widespread, ongoing community spread.  We recommend employers adopt similar policies as applied to employees returning from business or personal travel.

  • Encourage healthy practices:  Encourage employees to engage in healthy practices, such as regularly washing and/or disinfecting their hands. To the extent an employer is able to secure these items, they should  make disinfectants and hand sanitizers available to employees, especially upon entry to the work place.  Employers also should arrange for periodic industrial cleaning and notify employees of those efforts.

  • Identify areas of risk: Identify health risks specific to each work site, and a plan to address concerns.  Review CDC and the Occupational Safety and Health Administration’s guidance providing safety tips and highlighting potential areas of risk.

  • Avoid stereotyping: Employers should not make determinations of risk or treat employees differently based on race or country of origin.

  • Maintain confidentiality: If/when an employee is suspected or has been confirmed to have contracted the virus, employers should act to maintain confidentiality around the employee’s diagnosis. In addition, employers should refrain from asking employees questions about their symptoms and medical conditions or suspected conditions.

  • Train managers: Train managers on how to handle concerns and preventative steps that the company is taking to manage the potential spread of the virus.  Remind them of current policies and any changes that the business has decided to make to accommodate employees and business needs during this time. Encourage managers to promptly address all leave requests and meet with team members regarding concerns to engage in a dialogue to move forward in a way that benefits both the employee and the company. It may be prudent to appoint a single department or point of contact for COVID-19 questions or concerns that managers need to further discuss.

  • Consider other long term considerations such as:
    –  Consider creating a plan that involves how to prepare for a pandemic, including how to deal with office closures to avoid business disruption.  The CDC encourages employers to plan for a possible coronavirus outbreak and advises employers to ensure that their plan is flexible and well communicated to employees.  A formal plan may help the employer to focus on necessary steps to prepare and ensure a single message regarding preparedness is communicated to employees.

    –  Recognize that there may be legal rights associated with an employee who has the virus or who is perceived to have the virus under federal, state and local disability and leave laws.

    –  If employees are represented by a union, consider whether there are any issues that need to be addressed with the employees’ bargaining representative and whether there are any provisions in the company’s collective bargaining agreements that may be affected.

Importantly, employers should keep in mind that the U.S. is early in the process of understanding and combating COVID-19. The situation is rapidly evolving and employers will need to pay close attention to daily developments.  When in doubt, reliance on the guidance provided by health experts, government agencies, and counsel will best insulate employers from exposure to liability for discrimination, privacy or other legal claims from employees.


© Copyright 2020 Sills Cummis & Gross P.C.

For more on the COVID-19 pandemic, please see the National Law Review Coronavirus News page.

National Law Review: Coronavirus Update

The National Law Review continues normal operations
as we are a virtual company.

If you have any questions or need assistance, please contact us at Info@NatLawReview.com or at 708-357-3317 M-F 7-7 and midday weekends and holidays.
Due to the virus and surrounding legal issues our traffic has soared to over 200,000 visitors and over 250,000 page views yesterday alone. We’re on track to have 1,500,000+ visitors in March.
We sincerely hope for your family and co-workers to remain safe – if you’d like resources about how businesses and individuals are navigating the pandemic, we have a dedicated page with over 200 articles written by the nation’s top law firms on the topic.  Groups including SHRM have directly linked to this resource page.
If your company or professional association needs a consolidated, reliable resource that is updated hourly, we encourage linking to our Coronavirus Resource hub.

Options for Employers When Employees Cannot Work From Home

Despite many politicians and employers discussing the option for employees to work at home, there are millions of employees who simply cannot do that. Bartenders, restaurant servers, cashiers, and many others have no one to serve and nothing to ring up when they work at home.

Employers of such employees accordingly have a difficult decision to make when business is at an all-time low or they have been shut down. Most cannot afford to pay employees during this time period and hope employees will qualify for unemployment benefits. The question for these employers thus becomes–to fire, or not to fire.

This is where a work furlough comes into play. A work furlough is essentially a temporary layoff that qualifies for unemployment benefits.

Furloughs rose in popularity some years ago when businesses had to cut costs. Most employers knew employees who worked from paycheck to paycheck would suffer a financial hardship if the employees lost their jobs. Employers did not want to terminate employment. These employers wanted to minimize the negative impact, psychologically and monetarily, a termination brings, and the hard feelings an employee may carry following termination. Employers wanted employees who were already-trained to return to work at the end of a furlough, rather than having to start the hiring process from scratch.

Work furloughs generally have a set beginning and end date, similar to the 15-day shut-down ordered in many cities. The employer does not pay the employee during the furlough. Employees, however, generally qualify for unemployment compensation benefits.

Employers who want to maintain better relations should tell their employees to apply for unemployment benefits on the first day of the furlough. This ensures the employees will receive the maximum compensation possible. Even an employee who uses vacation time or personal time may qualify for unemployment benefits.

Usually there is a one week waiting period before an employee is eligible to receive any unemployment benefits. Many states have benevolently waived this one week waiting period for job losses suffered due to the pandemic. In these states, employees will receive benefits beginning “day 1.” The employee will receive compensation during the second week and any later weeks during which the employee is not working.

Any employee who files after the first week of the furlough must use the second furlough week as the waiting period. The employee, therefore, loses a week of unemployment compensation.

Even if the furlough period is only one week in length, employees should file for benefits. This helps the employee if the employer is forced to extend a furlough or put employees on furlough again later that same year. The one-week waiting period only applies to the first week when the employee did not work during the first furlough. The employee does not have to wait yet another week to receive benefits (compensation) during any furloughs that take place within 12 months of the first furlough.

While furloughs are an excellent option for employers to consider, any employer considering termination or a furlough must carefully consider all state and local laws; the state emergency declarations and laws issued, given the pandemic; and federal law, including any relief package or whether the number of employees furloughed triggers obligations under WARN.


© Polsinelli PC, Polsinelli LLP in California

For more on the COVID-19 outbreak, see the National Law Review dedicated Coronavirus News section.

UK’s Financial Conduct Authority Consults on New Climate-Related Disclosure Requirements following TCFD Recommendations

In March 2020, the UK’s Financial Conduct Authority (the “FCA”) released a consultation paper entitled: “Proposals to enhance climate-related disclosures by listed issuers and clarification of existing disclosure obligations” (“CP20/3”).

The proposal would introduce a new listing requirement for commercial companies with a Premium Listing on the London Stock Exchange. If implemented, these companies’ annual reports for financial years beginning on or after 1 January 2021, will have to include climate-related disclosure as recommended by the Taskforce on Climate-related Financial Disclosures (“TCFD”), and/or to explain any non-compliance. The deadline for comments and feedback on CP20/3 is 5 June 2020. Following consideration of the feedback received on CP20/3, the FCA aims to publish a Policy Statement, along with the finalised rules and an FCA Technical Note, later in 2020.

TCFD Recommendations

The TCFD is a task force established by the Financial Stability Board with the aim of establishing a global framework for companies to disclose the impact of climate change on their business with the aim of helping investors to understand which companies are most at risk, which are best-prepared, and which are taking decisive action on climate change.

Its recommendations were published in 2017, and recommend clear disclosure on the impact of climate-related risks in the following areas of a company’s business:

  1. Governance: the organisation’s governance around climate-related risks and opportunities;
  2. Strategy: the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning;
  3. Risk Management: the processes used by the organisation to identify, assess, and manage climate-related risk; and
  4. Metrics & Targets: the metrics and targets used to assess and manage relevant climate-related risks and opportunities.

In each category, the TCFD has recommended the specific topics to be described or disclosed, and it has provided additional general guidance and sector-specific guidance relating to financial companies (in particular, banks, insurance companies, asset owners and asset managers) and non-financial companies (energy, transportation, materials and buildings and agriculture, food, and forest products).

CP20/3 – Proposed New Disclosure Requirements

CP20/3 adopts the TCFD standards for disclosure wholesale. If adopted, UK premium-listed commercial companies (i.e., companies subject to Listing Rules 9 and 21) will have to become familiar with these standards and report in accordance with them on a comply-or-explain basis.

The comply-or-explain approach is the standard required by the UK’s Corporate Governance Code, and was adopted as the proposed standard for climate-related disclosure despite mixed feedback, as the FCA acknowledges that issuers’ capabilities are still developing in some areas, and they may not yet have the data and capabilities to fully comply with certain of the TCFD recommendations, particularly those relating to scenario analysis and setting climate-related targets. The FCA also notes it does not want to be overly prescriptive at this stage, given the evolving nature of climate-related disclosure and modelling frameworks

CP20/3 – Guidance on Existing Climate-Related Disclosure Obligations

The other key element of CP20/3 is the proposed issuance of an FCA Technical Note to clarify existing climate-related and other environmental, social and governance (“ESG”) disclosure. The FCA-proposed Technical Note is aimed at all issuers subject to existing EU legislation and rules contained in the FCA Handbook (i.e., all issuers with securities listed on the London Stock Exchange, not just those in the premium-listed segment to whom the proposed rule on TCFD disclosure will apply).

It reminds those issuers that even where climate-related risks are not mentioned by name, they may still be important, and required to be disclosed under more general disclosure and internal controls obligations. For example, this proposed Technical Note will advise issuers that their existing obligations under the Listing Rules, the Prospectus Regulation, the UK Corporate Governance Code, the Disclosure and Transparency Rules, and the Market Abuse Regulation, may all involve a review of climate-related risks and, if necessary, related disclosure.

Conclusion

The TCFD’s framework encourages businesses to face and evaluate the financial risk that climate change poses to their business, both in terms of physical risk posed by extreme weather and its consequences, and the “transition risk”, meaning the large category of risks posed by behavioural changes as well as policy changes related to mitigating climate change. The TCFD framework has the aim of moving towards helpful, comparable disclosures related to these risks. This should allow investors (and consumers and regulators) to add a new dimension to their assessment of companies, and modify their behaviour accordingly.

Investors across the board agree that ESG factors are now routinely incorporated into mainstream investment decisions, and companies are required to demonstrate their insight and oversight on these topics. It is still not the case that a single framework dominates reporting on these matters, but this consultation paper shows that the TCFD framework will continue to grow in importance, at least in the UK. The FCA believes its proposals in CP20/3 are consistent with the UK Government’s Green Finance Strategy, published in July 2019, and is a first step towards the adoption of the TCFD’s recommendations more widely within the FCA’s regulatory framework.


© Copyright 2020 Cadwalader, Wickersham & Taft LLP

For more financial regulation, see the National Law Review Financial Institutions & Banking section.

Supporting Diverse Attorneys: How Marketing Pros Can Become a Business Development Ally

The path to partnership, which many attorneys aspire to achieve, can be a long and challenging road. In order to get there, an attorney’s ability to generate new business is a critical component. The partnership track can be even more difficult for diverse attorneys, as this group tends to lag behind their counterparts in business development. It begs the question: Why do diverse attorneys face challenges in business development, and how can marketing and business development professionals better support their diverse attorneys?

During the Legal Marketing Association (LMA) Southwest Region Conference in September 2019, Tasneem Khokha and Holly Barocio from GrowthPlay, presented on how we can better understand and counsel diverse attorneys, and examined the main challenges these attorneys face in building and sustaining their book of business.

Some of the key challenges Tasneem and Holly discussed, include:

  • A lack of, or much smaller network of, potential business as compared to their counterparts.
  • Feelings of being labeled as the token diverse attorney to add to a pitch.
  • Feeling as though they lack a common ground with decision-makers because of different life experiences.
  • Feeling pressure to have to work harder in order to “prove” themselves.
  • Feeling uncomfortable asking for opportunities as compared to their counterparts.

So how can marketing and business development professionals help their attorneys navigate these concerns? It starts with listening and understanding. No one can make the experiences that diverse attorneys face disappear, but marketing professionals can help them turn these challenges into opportunities and set them up to handle future experiences with ease. It’s important to remember the underlying characteristics of great business development, which are:

  • Being an authentic relationship builder.
  • Having the ability to provide solutions to problems, even if you aren’t always rewarded for your efforts.
  • Avoiding pitfalls, such as rushing to sell too soon.

While some diverse attorneys may inherently have a smaller network, if they are armed with the skill set to build authentic relationships and provide solutions to problems, they will be viewed as someone others can trust – a key characteristic of someone who can build a strong book of business. As a marketing and business development professional, being able to authentically counsel diverse attorneys is invaluable. Here are some techniques:

  • Not having commonalities with decision-makers because of different life experiences is not a make or break situation. You can find commonalities in anything – love for sports? hobbies? pets? You’d be surprised the connections people can make if they listen and pay attention to the person they are talking to.
  • From a poll of the audience, some diverse attorneys may feel that being the token diverse attorney is a negative and does not allow them to be recognized for their skills and experience. Be candid and acknowledge the elephant in the room, but advise them to take the ball and run with it. Encourage them to open up about whether they like the work or prefer to do something different, but they must seize the opportunity.
  • Another common concern is that diverse attorneys are less inclined to ask for opportunities. For marketing professionals, be there to help connect the dots and nudge diverse attorneys to openly discuss what excites them and what they want more of. Diverse attorneys may feel siloed, but you can help connect them with others in the firm who can propel them further in their careers.

© 2020 Berbay Marketing & Public Relations

For more on legal business development, see the National Law Review Law Office Management section.