The Three Big Legal Issues Retailers Face From The Coronavirus

With the current health emergency retailers face unprecedented issues. Closing stores, limiting hours, changing order patterns, remote work — all of these issues have joined basic survival as retailers contend with sudden and unpredictable challenges during the coronavirus pandemic. And while retailers are most likely not liable for any legal exposure, there are legal and ethical issues presented by the current crisis that need retail attention regardless of size and legal expertise.

“If you’re a company that has an HR department, make sure you have a checklist of your concerns and what you think will be your employee concerns,” said Eric Su, partner at New York City-based Crowell & Moring’s Labor & Employment Group. “If you’re a company that does not have those resources, understand that you’re making business decisions first and legal decisions second. And know that there are resources from state, federal and private organizations if you need them.”

Here are three big areas of concern that lawyers say retailers need to be aware of:

Issue No. 1: Employees

The first business decision retailers currently face concerns employees. Regardless of a company’s size, employees are worried right now about job security, and retailers need to make sure they’re acting in a transparent and informed fashion. Su said the basics are most important. Communicate with employees frequently, even if the stores are closed, as most non-essential locations are. Remind them of paid time off they’ve accrued and other benefits, be honest about the current situation and be informed about any rights that they have regarding benefits like unemployment. According to Su, at this point, engagement is just as important as employment.

“There’s usually a disconnect between what employees expect at a time like this regarding employee rights and benefits, and what a company is able to deliver,” he said. “So be engaged, communicate and keep records. Make sure you’re providing evidence of compliance and know what your state and federal government offer in terms of sick leave and family leave. Voice is important. Let employees know you’re committed to your business and their health. The bottom line for many companies is that there’s no revenue right now. Connect your messages to your business and employee health.”

Issue No. 2: Building Lease

Even if there’s no revenue, there’s still overhead. Leases hang over the heads of so many retailers that even most national chains have requesting a deferral of rent until June 30 — and with thin margins, small retailers may be even more at risk, said Katy Welsh, senior director of retail services at Colliers international, a Canada-based global commercial real estate services firm. Landlords are granting temporary moratoriums on rent, which could help businesses survive.

“Landlord groups are all having meetings trying to determine how to handle this,” said Welsh. “More than likely, the landlords are going to go along with it. They will have to in some fashion because tenants simply can’t pay rent.”

Again, Su encourages retailers to approach leasing issues from a business perspective first. Read the fine print in the lease. Determine if there any clauses that apply to the current situation and have a conversation before assuming the landlord will be inflexible.

“Start picking up the phone if you haven’t already,” Su says. “From a general knowledge perspective I would say that there are local laws that would cover evictions at this time. And I would also caution that if you are able to renegotiate terms with a landlord, don’t look at it as a free pass on rent. You will still need to plan on catching up with your bills. It’s similar to renegotiating a mortgage. The terms are different; the commitment is the same.”

Issue No. 3: Liability If Someone Gets Sick

Retailers that are open don’t seem to be liable for customer health in many states. A sweep of legal advice columns shows that adequate warnings are sufficient when the risks are considered obvious.

“However, given the difficulty of completely avoiding infection and the high standards being set for businesses during this crisis, courts may later find that more was required, including reasonable preventative measures,” said an analysis of the coronavirus situation from a legal perspective in Law 360. “Expect that essential retailers, assuming they follow best practices to reasonably inform and protect their guests, may limit liability for infections allegedly originating on their premises. These businesses would be well advised to document the steps they are taking now to protect visitors. This may be a tall task in the middle of a crisis, but it can make all the difference if they are later forced to rely on an unreliable memory of events from the chaos of a pandemic.”

What advice should other retailers follow? “Ultimately, retailers facing potential liability based on a decision to remain open will be judged against the hypothetical reasonably prudent person in the same circumstances,” the analysis said. “Courts will look to government guidance, industry best practices, the actions of similarly situated businesses, and other points of reference to determine how the prudent person should have acted.”