SPECIAL NEWSLETTER – CORONAVIRUS AND ITS IMPLICATIONS
As is already general knowledge, the World Health Organization (WHO) declared, last Wednesday (March 11, 2020), the existence of a global coronavirus pandemic. The WHO made a series of recommendations and suggested the adoption of preventive measures, in an effort to curb the proliferation of the virus, which has impacted the routine of the worldwide population and has affected the dynamic of the business world and the labour market.
In view of this situation, we are being consulted by our clients regarding the action that may be taken by companies, in order to adapt to this new reality.
The purpose of this newsletter is to offer general guidance on the matter, in an attempt to assist them to face possible crisis situations arising from the coronavirus.The suggestions should only be implemented after consideration of the specific case.
IMPACT ON LABOUR RELATIONS
Law 13979/2020 and Portaria (Ordinance) 356/2020
On February 6, 2020, Law 13.979/2020 was enacted, which provides for action to be taken to face the public health emergency of international importance arising from the coronavirus and to protect the population.
In order to face the crisis, a number of measures may be taken, including isolation, quarantine, compulsory medical examinations, laboratory tests, collection of clinical samples, vaccination and specific medical treatment.
The Law further established that the period of an employee’s absence from work resulting from the measures referred to in the preceding paragraph is to be considered justified, guaranteeing therefore to the employee receipt of his salary.
For the purpose of regulation and implementation of the Law in question, the Ministry of Health, on the same day as the WHO announcement, issued Portaria 356, establishing inter alia the criteria for isolation and quarantine.
Preventive measures to be adopted by companies
Apart from increased insistence on the precautions that employees should take in order to avoid infection in the workplace and in ordinary life, such as social distancing, constant washing of hands with soap, use of alcohol gel and non- sharing of utensils of personal use, we suggest that the company reinforce prophylactic measures in the working environment, including alcohol gel in places where many employees circulate.
Furthermore, the company must advise its employees to consult a doctor, if they show any symptom of the coronavirus, and to communicate the result immediately, so that additional measures may be adopted if necessary.
As a preventive measure we also suggest the adoption of the “home office” system for positions/functions that do not require the employee’s physical presence at the workplace, controlling, if necessary, by alternative means, the working day of those submitted to time control. Employees who exercise a position of trust, external functions and teleworkers (article 75 of the CLT) are already excluded from the control of working hours, for which reason the home office system will not affect them. If possible, the employer should provide the means necessary for the employee to work at home. As a precaution, we suggest that this exceptional situation (which has nothing to do with telework regulated by law) be provided for in a formal document.
In addition to the above recommendations, the company should avoid business trips by its employees, cancelling events and meetings with a large number of people, or, if the meeting is indispensable, it should be held by telematic means, thereby avoiding travelling, exposure to risk of infection and/or personal contact on a large scale.
Sick leave resulting from coronavirus
If the diagnosis is confirmed and the doctor so determines, the employee must be granted sick leave and must remain in isolation, for an initial period of 14 days, renewable for a similar period, in the event of transmission of the virus. The isolation should be complied with, preferably, in the employee’s home. The employer must pay the first 15 days of the employee’s sick leave, after which he is entitled to receive sickness benefit from the INSS (B-31).
It is recommended that employees, even if asymptomatic, on returning from trips abroad, whether of a business or private nature, remain for at least 14 days away from the workplace, thereby avoiding contamination.
If the employee contracts the virus at his workplace or as a result of his work, including when travelling on business, the illness will be regarded as a labour accident, giving rise to the same consequences already referred to, except in relation to the type of sickness benefit to be provided by the INSS, which in this case will be B-91 (accident).
If the number of employees on sick leave is very high and compromises the regular operations of the company, temporary labour may be taken on for the purpose of making up for the deficiency, subject to the rules in Law 6019/1974.
Partial or total suspension of business activities
If the company decides, on its own initiative, to suspend its activities totally or partially, in consequence of the harmful effects of the coronavírus, this fact may possibly be considered as an event of force majeure (article 501 of the CLT).
In the event of quarantine imposed by the Government, we are of the opinion that this would undoubtedly constitute force majeure, an exceptional situation that authorizes the adoption of exceptional measures, without being regarded as an injurious amendment to the contract.
The employees may be granted collective vacation, in which case they will be subject to the provisions contained in a special chapter of the CLT, including payment of the period of rest and prior communication to the trade union and the competent authority, currently the Ministry of the Economy.
An alternative may be the grant of paid leave to the employees, such leave being set off against overtime, up to the limit of 2 hours, as authorized by article 61 of the CLT, subject to the limit of 45 days for the setoff.
Moreover, the company may amend, by means of collective negotiation with the appropriate trade union, special conditions for the period of sick leave and later, including the temporary reduction of salary and working hours, as authorized by article 611-A of the CLT, and article 7, VI, of the Federal Constitution.
IMPACT ON COMMERCIAL RELATIONS
With the change in the dynamic of social relations, various questions arise with regard to ongoing business transactions.
What is the position of ongoing contracts, involving the supply of products or services? Is it possible to cancel such business? If the vendor or service provider fails to comply with its obligations, can the purchaser or customer demand a contractual penalty or indemnity? If payment has already occurred, is reimbursement due? In the event of suspension of continuing contracts, may the payments also be suspended?
There is no single reply to these and other similar questions.
In principle, the new coronavirus pandemic may be considered as an unforeseeable and irresistible event, capable of leading to the impossibility of complying with contractual obligations.
In Brazil, the Civil Code establishes, in article 393, that “the debtor is not responsible for losses resulting from act of God or force majeure, unless he has expressly undertaken liability therefor”. The same Code then explains that “act of God or force majeure consists of a necessary fact, the effects of which it was not possible to avoid or prevent”.
It can be seen that Brazilian law refers to two categories of event (act of God and force majeure), but in practice their effects are the same, for which reason we make no distinction here between these two categories, referring to both simply as force majeure, since this is the name adopted by the majority of countries.
Bearing these points in mind, Brazilian law permits the conclusion that failure to comply with an obligation by reason of force majeure relieves the debtor from liability for losses. However, it does not explain what happens in relation to such obligation. This gives rise to the need to evaluate, in each separate case, whether non-compliance with the obligation is absolute or relative.
Absolute non-compliance is that in which compliance with the obligation (total or partial) becomes impossible, while relative non-compliance occurs where the debtor may still honour the obligation.
If non-compliance is absolute, the majority of jurists take the view that the party affected by force majeure must be exonerated from any liability, and is relieved permanently from that obligation. On the other hand, if non-compliance is relative, the party is temporarily relieved of the obligation, until compliance once again becomes possible.
But things are not always so simple. There exist numerous other situations that may arise from the impossibility of complying with contractual obligations, such as the inter-connection of the contract affected with various other transactions and commitments that extrapolate that relationship. The inability to manufacture a single part of an automobile for reasons of force majeure may paralyze that entire segment of the market, including processing industries, automakers and dealers, with a risk of bankruptcy of businesses, laying-off of employees, lack of customer services etc.
There is no general rule for resolving all these situations. It is necessary to consider on a case-by-case basis everything that is related to that contract in which the obligations are affected by an event of force majeure. It is important to know, for example, whether the contract contained any specific rule for the type of event, if there is, in fact, a causal link between the obligation not complied with and the event of force majeure, if there are alternative ways of mitigating the impact of that event. In international contracts, it is also crucial to know the applicable law in the case of any dispute, whether there are conflicts between two or more judicial systems, whether the contractual clauses violate any rule of public policy of the country of any of the parties involved.
It is evident that the situation is fraught with challenges, which depend on careful evaluation so that the parties involved in contracts not performed because of events of force majeure may take their decisions.
In any case, in an extreme moment like this that we are experiencing, the parties involved in contracts that are not being performed should make every effort to find alternative solutions, with good sense and mutual cooperation, not only to ensure that the impact is less serious for all concerned but also to avoid the enormous uncertainties, costs and long battles that may arise if the disputes go to court.
Stüssi-Neves Advogados are at your disposal for any further explanation that you may require in relation to this matter.
São Paulo, March 18, 2020.