Governments around Europe are easing lockdown measures as the spread of COVID-19 comes under control and they look to restart their stalling economies. Whilst full business operations will eventually resume, COVID-19 will continue to impact business globally for the foreseeable future.

For many companies, the return to work will involve facing a 'new normal' including continued disruptions and potentially long-term changes to working practices.

In addition to the practical challenges, navigating today's working environment carries potential legal and regulatory risks. Below we identify some of the most pertinent legal considerations for private equity sponsors, and the boards of portfolio companies, as they switch the lights back on. We also look at potential solutions to some of the most pressing problems.

1. Clear Communication and Sound Governance

Open and effective communication with all stakeholders will be one of the most important strategies. Employees, in particular, should feel that they can raise and escalate concerns as lockdown measures are eased; visible and effective whistleblowing policies are being refreshed by many portfolio companies for this reason. This capability serves a dual purpose: building trust and credibility, and helping to identify potential risks at an early stage.

Many businesses, including portfolio companies, are also adopting communicable disease policies. These outline the steps a company is taking to protect employees and customers from contracting COVID-19 (or other infectious diseases) on its premises. We have also seen such policies serve as a basis for communicating externally about the company's plans.

In addition, directors of portfolio companies must pay particular attention to their duties when overseeing the return to work. Under English law, directors must act in a way in which they consider, in good faith, would be most likely to promote the success of the company. However, in doing so, they must by law consider the interests of the company's employees. As a result, it is necessary to balance shareholders' interests in the resumption of full operations with ensuring employees' safety.

2. Reasonable Workplace Precautions

When resuming operations, private equity sponsors need to take reasonable precautions to prevent the spread of COVID-19 in the workplace, while being aware of the risk of claims for negligence or wilful failure if they do not do so. It is worth noting that an employer's duty to provide a safe working environment may extend to third parties, such as operators, vendors, or suppliers who visit company premises. Mitigation techniques include:

  • Social distancing on all company premises
  • COVID-19 testing of symptomatic employees and testing before entry onto company premises (either mandatory or encouraged, depending on the rules in each jurisdiction)
  • Clear protocols for self-reporting of COVID-19 symptoms
  • Policies to encourage working from home or flexible working where possible

Working with the building landlord or management company before a return to work is also critical. Many of the major landlords are implementing building-wide policies, including elevator occupancy restrictions, one-way traffic on floors, or restrictions in communal areas such as kitchens.

3. Protecting Privacy and Sensitive Data

Risk mitigation strategies and policies should be sensitive to privacy and data protection considerations. While certain medical examinations (e.g., taking an employee's temperature) may be permissible given the threat posed by COVID-19, many kinds of medical examinations cannot be made compulsory.

Further, any health data which is collected must be carefully stored and protected. Inadvertently disclosing an employee's confidential medical information can lead to significant liability. This is a particular concern within the European Union and the UK, where the General Data Protection Regulation (GDPR) places stringent obligations on the processing of information pertaining to an individual's health.

The return to work at any company is likely to happen in stages, and some employees may continue to work from home to a significant extent over the medium-to-long term. Remote working brings a heightened risk of data loss, as well as cyber intrusion and attacks. Such breaches can have regulatory consequences under market abuse and data protection rules, as well as contractual implications if confidentiality obligations are breached. Companies need to consider the provision of IT equipment for employees, and suitable IT and data security policies should be put in place.

4. Taking Care with Information Sharing

When navigating uncharted territory, portfolio company managers may wish to have discussions with other companies in the same industry to discuss best practice for the return to work. Such discussions, while commendable in spirit, can have competition law implications if care is not taken.

European competition authorities have stated that there are no special rules or exceptions for information sharing or collaboration during emergencies. Therefore, companies should consult with their legal departments or outside counsel before sharing details of their practices or plans with competitors, even in the context of government-sponsored task forces or working groups. Further, any information sharing should be limited to what is directly related to safe return to work, and should generally not include forward-looking or competitively sensitive information, including decisions concerning customer discounts, furloughs, lay-offs, or staff reductions.

5. Conclusion

The risks of returning to work, if carried out in accordance with guidance from government authorities and health practitioners, can be managed. As indirect employers of millions of European citizens through the companies they own, private equity sponsors will face particular scrutiny. Yet strong corporate governance, the adoption of appropriate policies, clear communication and focus on working practices can significantly reduce the risk of any missteps.

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