COVID-19: Legal obligations for businesses to their employees

The COVID-19 pandemic has seriously affected many industries and companies, whether because they are losing business like the tourism industry or have had their supply chains disrupted like the automobile industry. Salary freezes, large-scale layoffs, and business closures are common in the news these days.

However, the pandemic does not absolve companies of their legal responsibilities towards employees. During this period, as business leaders consider how best to strategize, they should also remember to consult the local employment laws where they operate, and ensure that their cost control and business continuity measures do not inadvertently cross out of sound practice.

Here are some areas where companies should be cognizant of their legal obligations to employees.

Comply with regulations around business travel and social distancing

Governments around the world have put in place heavy restrictions on travel. While the details vary across countries and states, the general gist is that all non-essential business travel should be deferred and employees returning from overseas or from specific countries must observe an isolation period. Many countries have imposed strict social distancing as well, prohibiting large gatherings and ordering the closure of locales where people congregate socially.

While many countries have imposed hefty penalties including jail time for individuals who don’t comply, what’s less well known is that companies can be penalized as well. In Canada, for example, a company can be fined if its employees break social distancing regulations, and its directors may also be held liable for individual penalties imposed on the employees. Unsurprisingly, some companies have resorted to firing employees who knowingly break such regulations. This is legally permissible under most countries’ employment laws.

Provide a safe and healthy workplace

Almost every country in the world has occupational health and safety legislation that obligates employers to provide a safe and healthy working environment. In some jurisdictions, such as France or the Philippines, this also includes psychological health, and in others where the law does not explicitly state psychological well-being, such as Malaysia, it is nevertheless interpreted to cover mental health as well.

During this pandemic period, maintaining a safe and healthy working environment involves taking steps to reduce employees’ exposure to infection and stress from fear of getting infected. This might include extra cleaning, restricting visitors to the premises, providing additional protective equipment, or simply ordering everyone to work from home.

Accept that people will be concerned about their health

Employment law in many countries contains various clauses that give workers the right to ask about whether their workplace is safe, to request that it be made safe, or to ask to be reassigned if they find the workplace is unsafe. In some countries such as New Zealand, they may even decline to work and still receive their pay if the working environment is unsafe and their requests for reassignment are denied.

Companies should not be surprised if the number of such questions and requests rise sharply during these few months, and while giving a reasonable reply and offering accommodations to concerned workers is of course ethically correct, it is also the legally correct thing to do.

Continue providing medical benefits to affected employees

Employers in many countries are legally required to provide some form of medical benefit to their employees, even if this only involves paying for their medical insurance. Depending on the jurisdiction, employees may be entitled to paid sick leave, reimbursement for medical consultation, accommodations for medical conditions, and other benefits. The COVID-19 pandemic does not change this; for example, if the law or the employment contract states that employers must cover the cost of their employees’ hospital visit, they need to do so regardless of whether the visit is due to a COVID-19 infection or some other condition.

Employers in some countries may receive assistance from the government in the area of medical costs. For example, the Singapore government has committed to covering certain medical bills for those who have contracted the coronavirus. However, such assistance still does not relieve employers of their legal responsibilities.

Continue paying salaries on time and in full

Employment law in most jurisdictions gives companies the freedom to raise and lower the salaries of employees as they see fit, subject of course to applicable laws and the terms of the employment contract. And indeed, many businesses are already cutting bonuses, freezing wages, or effectively implementing pay cuts by asking employees to take unpaid leave.

While the law may permit this, any salaries owed, along with any other statutory requirements such as social security contributions, must still be paid within the window of time permitted by the law and/or the employment contract. Not doing so is considered an offense; employees can seek legal recourse, and employers caught in the act will typically end up paying large penalties unless the company has already been declared bankrupt. Some countries, such as Thailand, even require the employer to pay interest on late salaries.

Nevertheless, it is common enough for companies, especially SMEs, to rely on the goodwill and understanding of employees to let delayed payments pass during periods of financial difficulty. As easy a solution as this may be, it may still be considered illegal in some jurisdictions and companies should refrain from exploiting it wherever possible.

Adhere to regulations around retrenchment

As seen in the massive layoffs now taking place across the aviation and hospitality industries globally, many companies are retrenching staff to cope with the downturn. Like salary reductions, this is permitted by the laws in most countries. But as most employment law stipulates, the company must show just cause for the retrenchment, such as genuine financial constraints or restructuring. The COVID-19 pandemic in itself is unlikely to be sufficient legal cause for laying employees off.

Furthermore, companies must observe any requirements for retrenchment benefits. This will vary widely between jurisdictions. In most jurisdictions, severance pay is pegged to the length of an employee’s service, subject to a cap. Some countries, such as Indonesia, subcategorize it into multiple types of compensation, including not just severance pay but compensation for other forms of benefits such as unused leave or housing benefits. Still other countries, such as Singapore, have no statutory retrenchment benefits at all and employees must depend on whatever had been previously agreed in the employment contract.

Continue behaving ethically during this period of disruption

Many of the legal obligations listed above are also ethical obligations that a good employer will do its best to fulfil, intended to protect employees, the company, and society at large. Although this time of disruption is profoundly trying for many companies, and will likely continue to be so for several months, employers can do their part to control the spread of the virus, reassure employees, and help keep society together.