Environmental, Social & Governance Briefs

Reopen Ready: Managing Governance and Legal Risks in the New Normal(s)

July 24, 2020

As government restrictions on business are being lifted across the U.S. and worldwide, the reopening process will vary by industry, geography, and type of workforce – and is unlikely to proceed in a straight line. In a recent Governance Watch webcast (available on-demand here), a panel of experts discussed the governance and legal challenges in “reopening for business.” Some of the insights include:

Flexibility, constant learning, and fairness are key. As companies prepare to bring back more of their office workers, they will want (i) to be flexible and adaptable, as circumstances can change quickly; (ii) to apply lessons from other parts of the business or jurisdictions that have recently opened or remained open; and (iii) to ensure that they do not appear to be treating the newly-returning office workers more favorably than those who have been coming to company facilities over the past several weeks.

Implementing a Communicable Disease Policy (CDP). Companies will want to consider adopting a Communicable Disease Policy (CDP) to address employee safety and health specifically tailored to the unique circumstances of COVID-19. The policy should address who is covered, what steps the company is taking, when employees are being brought back (perhaps based on specific tasks, not on job title or function), and where they work. A key challenge will be crafting and implementing enforcement provisions – to address those who may violate the safety guidelines (e.g., not wearing masks) and those who may not feel comfortable returning to work despite all the precautions awareness that building long-term employee trust and morale are priorities.

Role of the Board. Boards should consider formally adopting a CDP, while providing management with the flexibility to amend the policy (subject to board reporting/ratification) to be able to respond quickly to changing circumstances. It’s critical to ensure there are robust reporting systems and controls in place to keep the board informed of key developments. Boards also have an important role in setting a tone at the top, with a strong focus on restoring confidence among employees and customers, as well as ensuring that the company operates with a sense of responsibility to the broader community (e.g., not overloading public transportation systems). Given that boards will undoubtedly be taking on additional work during this time, the key challenge is to effectively use meeting time, so management should maintain a high level of communication between meetings.

Consider expanding the crisis management team. Reopening is going to be even more challenging than shutting down and will likely require an even broader team and set of expertise. In particular, reopening will require an even higher focus on facilities (including dealing with landlords) and employee physical and mental health – so bringing in more outside medical experts may be useful.

Legal issues require a broader perspective. Depending on what happens with legislation addressing corporate liability relating to COVID-19, companies may well face negligence, employment (including discrimination), contractual, breach of fiduciary, and government enforcement claims. Companies need to take steps to protect themselves – including documenting the reasonableness of the decisions they’re making – but trying to zero out legal risk is unrealistic and could result in taking actions that are overall harmful to the business, employees, customers, and society.

Data security and privacy will need even more board and management attention. Companies are going to be collecting more information about their employees’ health and personal circumstances – relating to the exposure of COVID-19, whether they fall into a high-risk category, their need for child or elder care, etc. So, boards and legal departments will need to focus on data security (protecting against unauthorized access) and data privacy (carefully controlling the use and sharing of information by those with authorized access).

Communication is key. Companies need to provide a high level of communication about the company’s plans for resuming operations with stakeholders, including shareholders, employees, customers, vendors, suppliers, and contractors. Even if you cannot provide the degree of certainty people may be looking for, this can reduce legal and business risks. Employee and customer surveys can help inform both the substance of decisions and how they are communicated.