Liabilities of directors and managers during the coronavirus pandemic
Over the past few weeks, Australia (and the rest of the world) has found itself enmeshed in the coronavirus crisis when, at the dawn of the new year 2020, no-one thought there could be anything much worse than the bushfires engulfing the east of the country.
The primary focus is – and must be – on health. Those paying attention to economic issues, for example, risk being portrayed as avaricious profiteers unconcerned about the welfare of the people. However governments are – correctly – recognising that ignoring these other aspects risks the collapse of parts of our society in different ways.
Here we take a look at the legal aspects of different consequences of the coronavirus pandemic. This item concerns the liability of managers and directors, notably in making decisions about how their organisations should respond to the pandemic.
Most premises of organisations are workplaces with WHS responsibilities
The sheer scope of the crisis means that the range of affected people and organisations covers most aspects of human activity. The liabilities of directors of companies regulated by the Corporations Act are fairly clear and specific, but here those affected include corporations not regulated by that Act; not-for-profit organisations including charities; and even unincorporated associations run by committees of management and the like, for sporting or similar activities.
The premises of many (although not all) of these organisations will be workplaces under the NSW Work Health and Safety Act, under which individual managers can, in some circumstances, be held personally liable for safety breaches.
It is not impossible (although very unlikely, given among other things the difficulties of proving exactly how an infection was acquired, and that this was the product of someone’s negligence) that legal action might be attempted against an individual having some responsibility for the management of some organisation or business.
So, where can we start in making sense of the legal liabilities of directors and managers?
Necessity of complying with public health orders
The public health response has two main aspects.
One is simply advisory: practicing social distancing, and following detailed hygiene instructions, most importantly when social distancing is not practical.
The other consists of orders, increasing almost daily in scope, directing the closure of certain kinds of businesses, organisations and institutions; and the prohibition of certain kinds of activities. Presumably the main source of authority for these measures lies in the NSW Public Health Act and its interstate counterparts.
While the exact legal basis for some measures might be questioned, the only rational and responsible reaction to some directive issued by a competent authority is to comply with it.
Restrictions apply to public gatherings but not public transport
If there is a difficulty, it lies in the fact that, while the bulk of these orders makes quite clear whether some activity is or is not prohibited, there are a number of areas where there could be arguments in either direction.
While these orders are now imposing severe restrictions on gatherings or more than a handful of people, some are clearly permitted. Public transport continues to run. Outlets for essential supplies, health products and services remain open.
At the other end of the spectrum, places where people tend to gather and to do so essentially on a discretionary basis – hotels, clubs, restaurants – have been shut down.
Risk of an activity is weighed against its social utility
In between are places and activities less easy to categorise. Soup kitchens have the character of restaurants, but patrons attend not for socialising or entertainment, but to get nutrition essential for health. Schools – serving an essential societal purpose, but fertile grounds for the spread of infection and hence the subject of considerable controversy (at the time of writing) – are another example.
If there is a principle underlying these orders, it is that the law has always recognised that a risk posed by some activity must be weighed against the social utility of that activity.
Driving motor vehicles can be risky and cause pollution, but cars are an essential part of the fabric of our society. However, this does not mean that we should not try to use them in ways which reduce potential harm: by obeying safety rules and driving lower emission vehicles.
What should directors and managers do?
If it need be said, if your organisation or activity falls clearly into a category subject to a closure or cessation order, comply.
If there is doubt, seek advice, from public health or other authorities. Apart from obviously acting in the interests of safeguarding health, compliance with an order should be an effective shield against any suggestion that a director or manager has been in breach of some duty.
You can also explore whether the service offered could be provided in a less risky way: restaurants cannot operate as usual but may be able to provide takeaway meals, and use recommended hygiene protocols in doing so. Schools can offer online lessons. Charities may be able to help their clientele in ways which avoid gatherings and close physical contact.
On the subject of personal liability, again, if a decision to continue some activity is subsequently questioned, showing that you sought advice and carefully considered a decision will leave you in a more secure position than if you made some spur-of-the-moment call.
The only responsible course is to comply with directives
In summary, it is understandable that directors and managers might feel uncertain and ambivalent, especially with organisations serving valuable purposes; businesses with cherished reputations; and businesses at risk of being unable to recover when the crisis passes.
However, the only responsible course is to comply, and to ask if in doubt.
Innovations made out of necessity may have benefits beyond the coronavirus crisis
On a positive note, necessity is the mother of invention. If thinking outside the square shows another, safe, way to conduct the business, this is likely to be a good thing, and possibly useful even after the crisis has passed.
It should not be forgotten that the frenzied activity to guard against the anticlimactic Y2K “millennium bug” had the silver lining of giving businesses worldwide strategies for securing business continuity, in times of catastrophic disruption, which might not otherwise have been developed for many years.