BUSINESS STRATEGIES TO LIMIT LIABILITY FOR COVID-19 THROUGH USE OF WAIVERS

Posted: September 9, 2020 | News

Once again, California’s Governor Gavin Newsome, is establishing re-opening rules. With employees returning to work and many companies now reopening their doors to customers, employers are looking for ways to limit liability related to potential COVID-19 cases contracted in the workplace.

Many are considering waivers for not only their employees, but also for customers. Such waivers, however, are somewhat limited in their effectiveness and employers should consider the pros and cons before attempting to implement them. You may also want to consider an alternate strategy that may offer you some of the assurances you seek, without many of the negatives associated with waivers.

No waiver or other attempt to limit liability can replace the need to maintain a safe workplace. As an initial matter, employers should ensure they are in strict compliance with local orders, state regulations, and guidance from government agencies, including  the Centers for Disease Control and Prevention (CDC), Occupational Safety and Health Administration (OSHA), Equal Employment Opportunity Commission (EEOC), and local health authorities.  

What Are Waivers?

The term “waiver” has more than one meaning. In this context, employers may use a waiver and release of liability agreement. This consists of a series of contractual provisions to mitigate certain risks of liability. Such an agreement not only includes a waiver clause, but also includes additional protective provisions like clauses for assumption of risks, covenants not to sue, and identification. If enforceable, they would eliminate liability for the risks enumerated.

Employee Waivers

On the other hand, waiver agreements between employers and employees have long been viewed with skepticism and disfavor by courts. The rationale for disfavoring employee waivers is the obvious unequal bargaining power between employer and employee. Employers typically have superior bargaining power, and employees either sign, or they are not hired. In most states, employee waivers are limited in applicability, they do not apply to gross negligence, willful, intentional, or wanton conduct, as employers cannot waive such liability.  The policy of the law is to encourage employers to act responsibly and a waiver for liability for egregious conduct, tends to encourage not discourage, egregious conduct.

Employee waivers are even further circumscribed due to workers’ compensation statutes, where California as with other states, requires medical expenses, lost wages, and rehabilitation costs be provided to employees who are injured in the course and scope of their employment. For work-related injuries, employees generally cannot legally waive their worker’s compensation claims. While employees may have trouble proving they contracted COVID-19 in the workplace, California has created a rebuttable presumption, that workers who contract COVID-19 are presumed to have a workplace injury covered by the workers’ compensation system.

Waiver agreements with employees also do not protect employers from OSHA complaints or enforcement action for a dangerous workplace. The President, however, recently signed an executive order directing federal agencies like OSHA to make exceptions for employers who attempt in good-faith, and to follow agency regulations during the COVID-19 pandemic that may ease concerns about agency actions.

There is also the practical issue of how employee waivers may affect employee recruitment. Requiring employee waivers could discourage employees from returning to work, which could impair returning operations to normal. Employee waivers, where required, could also result in negative reactions and publicity concerns. The media has reported examples of this occurring across the nation.

Due to the COVID-19 pandemic, it remains unclear whether California courts and other states will allow employers to enforce employee waiver agreements. Past legal precedents may not be as useful in predicting courts’ rulings in this unprecedented time.

Whether or not a business institutes COVID-19 employee waivers for a returning workforce, businesses should develop return-to-work plans. This includes taking steps to train employees on any exposure danger and how to eliminate those dangers, as well as adding best practices to stay safe.  

Customer Waivers

Waivers for a business’s customers may have greater success in limiting a company’s liability associated with COVID-19, but they could also hurt a business. Businesses should evaluate and weigh the benefits of liability waivers for customers against the potential downside for their company.

• Benefits of customer waivers:
  • Limit or may prevent certain liability, such as common lawsuits for negligence
• Showcases to customers the lengths a business will go to protect customers and warn them of risks
• Downsides to customer waivers: 
  • They don’t apply to willful or intentional conduct or gross negligence. Consequently, they are less effective at preventing all forms of negligence claims.
  • They only apply to language specified in the waiver and must be carefully drafted. Broad examples likely will be ineffective.
  • They may not apply to entire industries that have a duty to the public in states like California.
  • They might scare customers away to competing businesses that don’t require waivers or cause them to question the sanitation, safety, or integrity of a business.
  • Customers may be fearful they are signing away legal rights.
  • They could create negative press in conventional news and online.
  • They may require refund of membership fees to those clients who refuse to sign.

Businesses should evaluate how a waiver will affect its operations. This requires a thoughtful look at the company’s industry, clientele, geographic area, and how customers or the public will react. Most customers don’t expect to sign a waiver before dining or shopping. But in other businesses, especially one involving unusual dangers, waivers are common (e.g. skydiving, renting scuba gear, parasailing).  Throwing in a COVID-19 clause with waivers of risk of death may never be noticed.  Clearly customer waivers could impact a business well beyond simply mitigating liability risk. Accordingly, businesses should consider the potential for unintended consequences.

What Else? Notices and Questionnaires

For many businesses, alternative strategies to limit liability may have greater benefit than waivers.   Businesses may avoid offending or scaring customers by requiring waivers by using notices or questionnaires. This option may ask entrants to the premises questions about whether they have any of the symptoms of COVID-19 or were exposed to someone who contracted COVID-19 or had symptoms. Similarly, a questionnaire could also communicate the businesses’ reasonable actions taken to comply with government guidelines for sanitation, social distancing, mask wearing, and other efforts a business uses to keep guests and employees safe. This strategy could allow the business to show how it took affirmative steps to exclude sick people from its workplace. 

First, however, it’s important to consider how customers may react to such a questionnaire. Would such a questionnaire deter some customers who may find it invades their privacy? Or is it just an unpleasant reminder of the pandemic they had hoped to escape from during a nice evening dining out?  Others may feel safer coming to a business that they know screens all entrants. The point really is to know your customers and their businesses very well.

Second, let’s consider sending your client a notice. That provides a simple approach. Notices can communicate the same information as a questionnaire about a company’s steps to keep its premises safe, but without requiring the individual to physically sign away any perceived rights. They communicate the rules and restrictions, but without asking intrusive questions or calling for a signature that could spook customers. Notices require fewer actions by employers and customers.

Both notices and questionnaires requires businesses to provide a handout or to post signage at all entrances to the building, to communicate safety information or actions and prohibit sick or exposed persons from entering the building. These strategies allow people to feel safer and accept the risks when they enter the business. Legally, notices of risks mean the customer may assume the risk and find it harder to succeed in a lawsuit, where he or she knowingly assumed the risk.

Choosing A Strategy

Waivers have limited, but potentially valuable benefits, if enforceable. Companies should weigh those benefits against the potential impact on the business and carefully consider all their options, such as questionnaires or notices that communicate information and allow guests to assume risk.   

No strategy can eliminate a company’s obligation to take reasonable actions to protect its employees and customers. The CDC, OSHA, and state or local authorities publish guidelines and guidance that businesses should follow. Demonstrating you followed such guidance will be the best proof your company acted reasonably in responding to COVID-19 risks.

Whether a business institutes employee or customer waivers, they should develop written plans for a successful reopening. These plans should include training for employees on these guidelines and specifically communicate their efforts to comply. Ignoring these guidelines will make workplaces less safe and potentially expose employers to civil suits and government enforcement actions

The attorneys at North & Nash, A Professional Law Corporation would be happy to guide you through the legal issues related to re-opening a business, including how to minimize liability for COVID-19 claims.

Author: Partners at North & Nash, A Professional Law Corporation