Welcome To Simplydocs

SME Tips for Weathering the Coronavirus Storm

Freelancer Working at Home

Introduction

The outbreak of COVID-19 and the ensuing pandemic is unprecedented in recent times and its economic impact is similarly unheard of. The Office for Budget Responsibility recently warned that the pandemic could lead to the UK economy shrinking by 35% by June 2020.

For many businesses of all shapes and sizes, in a variety of sectors, the pandemic has, at the very least, necessitated changes and, in more serious circumstances, poses a threat to their survival.

There is, however, plenty of cause for optimism. The government has introduced a range of measures to help support struggling businesses and there are a number of things that businesses of all size, SMEs in particular, can do to weather the storm of the pandemic. Above all else, it is important to stay calm and organised. A clear head and an efficient approach to business will make everything else that much easier.

Dealing with your Staff

We have covered flexible and home working in a number of other articles here at Simply-Docs (check out our Working from Home with Children blog post and our recent newsletter on Home Working). We also offer a range of documents specifically designed to facilitate such arrangements. Flexible working is a boon to employers and employees alike, particularly in such challenging times. It may not be suitable in all sectors, but if the nature of your business permits it, it is most definitely worth considering if you are not already doing so.

Implementing the right policies is an important element of flexible and home working. Without the structure of a normal working day, productivity and adherence to procedures can quickly deteriorate. Nevertheless, it is also important to understand that many staff, particularly parents or those with other dependents, will be facing considerably more responsibilities at home at present. Cultivating an understanding of such pressures and offering as much flexibility as you can will be appreciated by your staff and ideally enable them to be more productive.

Technology can be a great help. Investing in the right software and hardware can make it much easier for your business to operate as close to normal as possible, enabling your staff to easily keep in touch with each other, to hold meetings, to deal with customers, business partners, and the like. It can also be easier to implement security controls on company-owned technology such as laptops and smartphones, meaning that your business is less likely to fall victim to hacking, malware, or the perils of a data breach and the potentially crippling fines that can follow.

If you find that your resources are stretched, consider weighing up the costs of training existing staff for new or expanded roles instead of recruiting new people or taking on contractors. This opens up new opportunities and the possibility of a very welcome pay increase for your existing employees while avoiding the higher expense and complications of taking on new people.

Not all businesses are suited to home working, whether partially or fully. If your staff still need to come into work, keeping the workplace clean and safe is of paramount importance. The normal health and safety rules continue to apply, but when it comes to keeping things clean and hygienic, now is the time to go above and beyond. Equipment and surfaces should be cleaned more often than normal, with “high-touch” objects and areas receiving particular attention. Where supplies permit, provide cleaning materials for your staff to use, such as alcohol wipes for keyboards, mice, telephones, and other objects that are regularly handled. Ensure a plentiful supply of soap and hand sanitiser and ensure that your staff are reminded to use them frequently. Most important of all – if any of your staff are ill, however minor it may be, and whether or not they think it may be the coronavirus, ensure they stay at home and self-isolate in line with government and NHS guidelines.

If revenue declines to the point at which your options are limited financially, there are a range of options open. What is very important is that you communicate with your staff. Do not keep them in the dark. Consult with them and, where appropriate, involve them in planning. If possible, take advantage of the Coronavirus Job Retention Scheme and place your employees on furlough leave. Simply-Docs has a range of templates and guidance designed to assist with this. Further choices include reduced pay, reduced hours, and, if all else fails, redundancy. When considering any such plans, it is vitally important to take professional advice.

Reduce Your Outgoings

If possible, look to re-negotiate contracts. Many of those businesses you are contracting with will be in similarly difficult positions and it may well be preferable to agree to reduced payments, orders, and so forth rather than to risk losing them completely. We offer a range of templates designed to assist in amending contracts in our Business document folder.

When it comes to property, particularly if you are not using your premises (or not using it to its normal capacity), consider negotiating with your landlord and look into the possibility of options such as discounted rent, rent deferment, rent-free periods, and/or a reduction on service charges. Find out more about managing property during the pandemic in our April 2020 property newsletter.

Whatever accommodations are agreed, and however renegotiations proceed, do not let the sense of urgency tempt you into informal agreements. Whenever possible, ensure that everything is documented and legally formalised.

Looking for New Financing Solutions

As revenue falls, debt becomes harder to pay. It is important to remember, however, that those to whom you owe money should hopefully want to receive it than risk missing out. Communication is, once again, key. Discuss your situation with banks and other lenders and look to renegotiate agreements or even take out new finance to help bridge the gap until normal trading begins to resume. The government’s Coronavirus Business Interruption Loan Scheme is of particular relevance under this heading.

If you are a company, be particularly careful about giving personal guarantees. Always remember that a company is a legal entity of its own. Shareholders are protected and have limited liability. By giving a personal guarantee, the so-called “corporate veil” is pierced and the guarantor’s personal assets (including, potentially, their home) will be at risk. Once again, the importance of taking professional advice cannot be overstated.

VAT

Paying VAT can be a tremendous source of pressure and, if your revenue is on the decline, it will be even more so. Look to set up a quarterly payment plan for VAT and talk to HMRC about other assistance or concessions that may be available.

The government has also announced a VAT payment deferral scheme under which payments due between 20 March 2020 and 30 June 2020 will not need to be made until 31 March 2021. Returns must, however, be filed on time. Also ensure that any direct debits are cancelled.

Take Care of Your Duties to the Company

If your business is a company, it is important to remember that directors must still comply with their statutory duties as set out in the Companies Act 2006:

  • Act within their powers
  • Promote the success of the company
  • Exercise independent judgement
  • Exercise reasonable care, skill, and diligence
  • Avoid conflicts of interest
  • Not accept benefits from third parties
  • Declare any interest in a proposed transaction or arrangement

The second of these is particularly important, and directors must act in a way that they consider (in good faith) to be most likely to benefit the company’s shareholders as a whole.

It is also, however, important to keep in mind solvency and wrongful trading. If your company’s solvency is in doubt, a director’s first duty is to creditors, not shareholders. That being said, companies in trouble have been given more breathing room with the recent announcement of changes with respect to wrongful trading.

Under normal circumstances, directors may incur personal liability if they allow a company to continue trading beyond the point at which they should have decided it wasn’t reasonably possible to save it. New measures, however, allow directors to continue trading even if there are reasonable grounds to think that the company may become insolvent, without incurring personal liability. This applies to actions taken after 1 March 2020. There will also be a temporary moratorium to prevent creditors seeking to wind up companies seeking rescue or restructuring, but at the time of writing, this is yet to be introduced.

Ensure that the normal procedures for running your business are adhered to, at least as much as the situation permits. If a decision needs to be made that requires shareholder or board approval, conduct things online using tools such as Zoom or Microsoft Teams (the same applies to meeting with your staff). Ensure that your articles of association permit this, however, and keep to the established processes. Do not succumb to the temptation to let things slide into informality. In particular, if you hold a virtual shareholders’ meeting, ensure that you adhere to the Companies Act 2006 and all required formalities.

Fail to Plan; Plan to Fail

Planning is always important in business, but all the more so now as there is less margin for error. A good starting point is to prepare a cashflow forecast to cover the next two to three months. This should be followed by planning and forecasting for the next couple of years as, even once lockdown restrictions begin to lift, it is likely to take the economy quite some time to stabilise and rebuild.

Organisation is vital. Ensure that your books and management accounts are up-to-date and review everything regularly. All meetings, at whatever level and however formal, should be documented, in accordance with legal requirements where applicable.

Concerns, whether they are of the gravest or most easily dismissed, should all be taken seriously and considered at the appropriate levels within your business, leaving nothing to chance. Changing circumstances could easily turn paranoia into reality on the one hand, and render a significant worry unwarranted on the other. Bury nothing!

Diversify and Grow

Yes – grow! As counterintuitive as it may first appear, such seismic changes to the economic landscape also present opportunities for those businesses ready and willing to adapt. One opportunity is to expand online, particularly if your business has remained predominantly (or entirely) brick-and-mortar in the past. This will not, of course, work for all, but in some cases a move online could not only keep your business afloat during the COVID-19 pandemic, but also benefit it immensely afterward.

It may also be a good time to explore diversification. Perhaps there are new avenues that you have been keen to explore or some that are a natural next step that could be easily accommodated within your existing business model and by your existing staff.

Now is not the time for complacency. Businesses that have built up goodwill and nurtured customer relationships over many years may not, until now, have considered advertising and marketing particularly important. If finances permit, however, now may be an ideal time to consider casting a wider net. Online advertising, particularly on social media, can be an extremely productive investment if done correctly. Similarly, for those businesses already established online, consider your current SEO strategy. Is your website performing at its best? Could you make some changes to it that might move you up a peg or two in the search engine rankings? The internet is key to doing business under normal circumstances and even more so with the vast majority of the population quarantined in their homes.

You CAN Make It!

We keep being assured that there is light at the end of the tunnel. Meanwhile, numerous commentators caution us that we can’t see that light yet. It is certain that the toll that COVID-19 will take on the world will be huge, both in terms of the human cost and economically. Nevertheless, it is vital to persevere, and not surrender to the assumption that your business will fail just because it is facing difficulties.

To wrap up, some key points:

  • Stay up-to-date with the news (but don’t overdo it) and look out for announcements from the government that relate to your business affairs.
  • Document everything, whether required to by statute or not.
  • Avoid informal agreements at all costs.
  • When negotiating or re-negotiating contracts, be sure to cover the important points. Be specific about numbers, dates, review periods, termination, and other key provisions such as force majeure.
  • Communicate with your board, your shareholders, your staff, your suppliers, your customers, your bank, HMRC, and anyone else with whom your business deals. A problem is much harder to solve if those affected by it don’t know about it!
  • Be realistic and act accordingly. Don’t hide from your problems. Be proactive, be honest, be transparent, and be positive!

Being positive may sound awfully trite; but it is vitally important to remain as positive as you can. Looking after yourself as well as your business should be a key priority. Exhaustion and stress will not help keep your business going and could well end up costing you dearly if a lack of focus, physical, or mental illness stop you from performing at your best. Take time for exercise and for rest. Look after your mental health during these difficult times and ask yourself whether doing something really will make a difference. Will sweating over work until 11pm actually result in anything, or would your mind and work fare better with a fresh start in the morning if you took the evening to relax with your family or catch up with a friend over the phone or online?

Plan for the worst, hope for the best, and take steps now to keep your business going. In the words of President Barack Obama in his 2009 inaugural address: “With hope and virtue, let us brave once more the icy currents, and endure what storms may come.”

Working from Home with Children

Home Working with Children

Introduction

Working from home is the new normal for thousands of people in many sectors and industries. The laptop on the dining table is the new workstation on the desk; Zoom is the new conference room; and the kids are the new colleagues.

For some, this will be a delightful change, and indeed there are many who thrive on the flexibility and comfort of working from home, enjoying the company of their families as they continue about their labours. For others, however, adapting is hard. Striking a balance between childcare, education, and remaining productive for your employer can be a seemingly insurmountable challenge.

If there is one word that stands out as a solution from all sides, it is flexibility. By embracing flexibility during these challenging times, employers, employees, and their families will all benefit and striking that elusive balance will be that much easier. In this post, we look at some top tips for achieving the holy grail that is the work-life balance.

Setting Realistic Goals

Being realistic is right up there with being flexible. Particularly if you have young children, expecting a full working day that is as productive as a day in the office is likely to be unrealistic. It is, therefore, important to accept that your working day will be disrupted and that long periods of concentration may not be possible.

With this in mind, it is important to prioritise and to plan. Planning applies not only to your work, but to everyone’s. A normal working routine provides structure which can rapidly dissipate without the fixed timetables of school and work attendance. Creating a schedule for the family can be very helpful in recreating that structure.

  • Ensure that everyone gets up at the same times they did before the lockdown began.
  • Get showered and dressed for the day. It will put you in a more productive frame of mind than staying in your pyjamas.
  • Have meals at normal times, together as a family, and free of screens if possible!
  • Devise a timetable that incorporates everyone’s work – grownups and children alike.
  • Plan work carefully. Prioritise and keep track of what you’re doing.
  • Try to maintain boundaries between working and non-working hours.

Everyone is different. Some people thrive in circumstances that stymie others and vice versa. Maintaining self-discipline is important but try to avoid letting that slide into unhelpful comparisons and self-criticism. A colleague may have children too, but perhaps those children are older than yours or perhaps their family’s lifestyle has made them more self-sufficient. Chastising yourself for seemingly not performing as well as that colleague is rarely productive and remember – as the saying goes – the grass is always greener on the other side of the fence!

Work with Your Children

This heading encompasses multiple meanings. Creating a positive environment with as little friction as possible will help everyone to get more done. Importantly, you will need to adapt to the age of your children.

For those with very young pre-schoolers, nap times and early bedtimes may help when planning work time. Instead of trying to work when the kids decide that it’s playtime, consider shifting your working hours to coincide with naps or after bedtime, if the nature of your business or your employer allows it.

When it comes to primary school-age children, find ways to accommodate their desire for attention and set aside time in your schedule to fully engage. Attempts at multitasking rarely succeed in reality. Your productive endeavours and your children will benefit as a result.

Teenagers crave a sense of agency. They are transitioning from childhood to adulthood in more ways than one. So, when it comes to creating a positive home working environment, work with your teens. Negotiate rather than dictate and, depending on the nature of your work and the schoolwork that they have been assigned, perhaps even look for ways to involve them in your own work. This can help you at a practical level and provides many benefits for your offspring too by giving them useful work experience as well as a sense of responsibility.

Whatever age your children are, remember flexibility. While you may be used to – and even enjoy – a relatively rigid routine and work regimen, your children quite likely don’t share your enthusiasm and while it remains important to do your job, ask yourself this question: “Do I work better when I’m in a good mood, or while fuming after a row with the kids?” We hope we know the answer!

Look After Your Health

This is another ingredient to successful home working that applies to your whole family. When you aren’t leaving the house as part of your normal routine, it can be easy to slide into not getting any exercise. Government guidelines on leaving the house during the pandemic allow for outdoor exercise once a day, alone or with people you live with. This includes activities such as walking, running, or cycling. There are also many exercises you can do indoors, with or without exercise equipment.

Maintaining (or even improving) your physical health is important; mental health is, if anything, even more important. This is particularly so under such stressful conditions. Poor mental health can rob you of focus and motivation, ultimately reducing both the quality and quantity of your work. This in turn increases stress and damages your mental wellbeing yet further. Poor mental health can also have a knock-on effect within a family, particularly with everyone stuck at home, unable to take a break. Vicious cycles can develop rapidly. It is, therefore, important to be mindful and to deal proactively and positively with worries, stress, and other mental health issues rather than burying them.

Taking some of the other steps outlined in this piece can help with mental health. By being organised, your mind is free to think more clearly and calmly about things – work and otherwise. By managing your expectations, you are more likely to feel satisfied with your work rather than frustrated and worried by it. By fostering a positive relationship with your children and balancing their wants and needs with your work, you will be cultivating a happier and healthier home.

It is important to stay in the know. Indeed, your job may require you to follow current events in detail. An overload of news and information about the pandemic, however, can be harmful. If you can, limit your consumption of news. Consider picking two or three times per day when you read the latest news or watch a bulletin on TV or online and keep it at that. Also, take great care with your sources; keep to those that you know are trustworthy and reliable. Overconsumption of news will not make you any better-informed, but it may lead to excessive worry, stress, and ultimately more serious health issues. Similar rules should be applied to social media. You may even wish to curate your content more carefully using lists or groups. Twitter, for example, allows you to mute words, phrases, and hashtags.

Communication also plays a key role in maintaining mental health, both within the home and without. Talk to your family and encourage them to talk to you. Human contact is severely limited for many at present, and those with family at home should make the most of it. If you are worried about the virus, about your job, or about anything else, talk to your family and encourage them to do the same. Communicating with your friends is similarly important. You may not be able to socialise in person, but with methods ranging from a simple text message, to a video chat, to a session of Fortnite, there are myriad options available to keep your social life alive and well, and if you need to vent a little about your family with whom you’ve been cooped up for weeks, a phone call with a friend will help relieve pressure tremendously!

Communication is Key

We have looked at the benefits of communicating with your friends and family, and the same applies to your workplace at all levels. Having a chat around the water cooler with colleagues is on hold, but the same workplace relationships can and should be maintained through the other means available, for example, by email or via a workplace online chat tool such as Microsoft Teams.

Communication is also essential in keeping work organised. Even if your own work is largely independent from that of your colleagues, it is important to keep in touch and maintain at least the same knowledge of each other’s work that you would have under normal circumstances. Particularly now, you may have colleagues who need a hand maintaining their own work-life balance, or you may need a hand from them in maintaining yours.

Many workplaces are keeping regular meetings going using online tools such as Teams and Zoom. For those whose work requires communication with customers, other organisations, or similar, the use of company-provided phone systems or internet-based equivalents can be particularly useful. In any case, steps should be taken, wherever possible, to avoid “uninvited guests”. The appearance of children in the background of TV news interviews often goes viral online, but in the day-to-day business context, it is likely to become tiresome and unwelcome rather quickly. Finding a quiet place to work, preferably in a room with a lockable door, is ideal. If this is not possible, noise-cancelling headphones or a headset with a noise-cancelling microphone can at the very least help to filter out some unwanted background racket.

Communication is also important on a practical level within your family. You know how important your work is, and your partner or spouse likely understands it too. Your children, on the other hand, may not. Take the time to explain the responsibilities and pressures of your job and why that means you can’t spend all your time with them, even though you’re at home.

Much of the above also requires regular communication between employers and employees. Some people are fortunate enough to be in a position to arrange their work and their working hours however they would like but, in many businesses, this is not the default option or even possible under normal circumstances. These are not, however, normal circumstances and it is important to remember that many other people within your business are quite likely dealing with the same balancing act as you. Management are likely to prefer that staff work flexibly and productively rather than struggle to work strict nine to five hours while being unable to stay focused at their desk for more than five minutes at a time before having to help with maths homework or clean up a home art lesson gone wrong.

How Employers can Help

Once again, flexibility is key. Flexibility within employment comes in many forms and need not relate only to working hours. Depending upon the nature of the business, flexible hours may not be desirable or even possible. What, then, are the options for employers and their home working staff?

Flexible Working

If the nature of the business permits it, this is likely to be everyone’s favourite option. It maintains the availability of more staff, albeit at varying times, and is better in this regard than the various leave options considered below. Staff could, for example, split their workdays with their partner or spouse, with half a day spent on the children and the other half spent on the job. This could also be combined with working earlier or later in the day, resulting in a normal number of hours worked, with compressed hours, or with weekend working on days when one partner or spouse has more time to spend looking after the children.

For those who work part time, hours could perhaps be spread more thinly. The same number of hours are worked, but over a greater number of days, resulting in more time to spend looking after the kids. For those who do not normally work part time, it may be worth exploring the possibility of moving from full to part-time during the lockdown.

Taking Annual, Parental, or Compassionate Leave

Flexible working is desirable but may not be an ideal fit in all industries. Using annual leave may help to relieve some pressure or at least may buy some time to set up longer-term childcare arrangements. Similarly, leave entitlement could be used in combination with that of a partner or spouse, alternating time off in order to stretch it out somewhat. Given the length of time the lockdown restrictions may last, however, this is unlikely to be a long-term solution.

Parental leave is a second possibility, with every parent of a child (or adopted child) entitled to up to 18 weeks per child up to the age of 18. Unlike annual leave, however, parental leave is unpaid. Moreover, employees are subject to eligibility requirements and need to have been employed by their employer for more than a year.

Time off for dependants is a third option. This is also known as “compassionate leave”. If you have someone who “depends on you”, you are entitled to take compassionate leave for a reasonable period to deal with an emergency involving them. Compassionate leave is usually unpaid, although some employers opt to pay staff taking it. Again, however, taking compassionate leave – or any of the above kinds of leave – for the duration of the lockdown is unlikely to be a viable option for many. Wherever it can be accommodated, therefore, flexible working should be the preferred goal for those with children (or other dependants) to look after.

It All Comes Down to Flexibility

Working from home can be a pleasure or a toil; working at home with children, all the more so (in either direction). For employers and employees alike, in many cases it is a less than desirable combination and will inevitably impact productivity. At the start of this post, we said that flexibility was the watchword, and so it is. Employers will ultimately benefit from being flexible with their employees, enabling their employees to be flexible in turn.

Flexibility is only effective, however, when supported by some sort of structure. Planning and organisation are vital ingredients, as is the maintenance of good health, and effective communication.

Managing expectations is also something that all must do. Employers must manage their expectations of their employees and employees must manage their expectations of themselves. “Business as usual” is, for many, a concept that is unquestionably on hold for the time being, but by accepting and adapting to the unprecedented situation in which we all find ourselves, doing “the best you can” may just bring about better results than you might hope for.

New Property Regulations on Default Payments in Wales

Terraced Houses

The Welsh Government has laid regulations on the default payments which can be charged to tenants occupying premises under an assured shorthold tenancy in the private rented sector in Wales.

The Renting Homes (Fees etc.) (Prescribed Limits of Default Payments) (Wales) Regulations 2020 (‘the Act’) come into force on 28 April 2020.

Within the Renting Homes (Fees etc.) (Wales) Act 2019, Welsh Ministers had the power to make regulations specifying the limits for certain types of payment that can be charged in the event of a default by the tenant.

Under the Act, landlords or letting agents in Wales can charge tenants:

  • Interest at a rate of 3% above the Bank of England base rate for the late payment of rent which is more than 7 days overdue; and
  • The actual cost of replacing a lost key and/or changing, adding or removing a lock to gain access to the property, as evidenced by an invoice or receipt.

These default fees are similar to those permitted under the Tenant Fees Act 2019, which affects England only; however, in England there is a longer grace period of 14 days for late payment of rent before interest can be charged. In respect of the replacement of a lost key, the landlord or letting agent in England can charge the reasonable costs as opposed to the actual cost of replacing a key.

Here at Simply-Docs we will update our templates to reflect these legislative changes.

Minimum Energy Efficiency Standards – Changes from 1 April

Energy Efficient Housing

The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (‘the 2015 Regulations’) established the new Minimum Energy Efficiency Standards (MEES) in the residential private rented sector. Since 1 April 2018 it has been unlawful for a landlord in England or Wales to enter into a new letting (or extend or renew an existing letting) of a residential property with an F or G energy efficiency rating unless an exemption has been registered.

The 2015 Regulations were amended in 2019 by The Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2019 which imposed a requirement on landlords to contribute to the cost of improving their sub-standard property (F or G rating) up to the value of £3,500 (inclusive of VAT) unless an exemption could be sought.

Extending MEES From April 2020

From 1 April 2020, all existing tenancies are now caught by the Act, and it will be unlawful for landlords to rent out homes that are required to have an energy efficiency rating of F or G unless an exemption has been registered.

Landlords who let F or G-rated properties without having registered a valid exemption will be liable to financial penalties of up to £4,000 as well as “publication penalties”. A publication penalty means that the local authority will publish details of the landlord’s breach on a publicly accessible part of the National PRS Exemptions Register.

By now, landlords should have taken steps to ensure that their properties are up to standard or, alternatively, have claimed an exemption. Detailed information can be found on the gov.uk website, here.

Coronavirus, Commercial Contracts, and Force Majeure

As cases of the novel coronavirus, or COVID-19, continue to increase, having now reached pandemic status, as defined by the World Health Organization, many businesses are feeling the impact. This is perhaps most keenly felt where employees are concerned, either with staff taking sick leave, or with the need to increase home-working. As the impact worsens, however, it is likely to start impacting more supply chains and other areas in which contracts play a key role.

The basic principle that applies to commercial contracts that are subject to English law is that the parties remain bound to perform their obligations under them although it might have become more difficult or expensive to do so. However, many commercial contracts include provisions which expressly provide a right to terminate or some other right or remedy in particular circumstances described by the contract. The most common provisions of this type found in commercial contracts governed by English law are force majeure clauses, which excuse performance in the circumstances stated in the clause.

An important question that businesses should be considering now is whether COVID-19 amounts to a force majeure event under the terms of any force majeure clause that is included in any current contract that they have with another party, and if so, how does it apply to the circumstances?

What is Force Majeure?

The term “force majeure” originates in French, meaning “superior force”. A force majeure clause in a contract is designed to relieve the parties from their contractual obligations when events beyond their control (or reasonable control) prevent or hinder their performance of those obligations.

Rather than bringing the contract to an end, the party affected by the force majeure event will often be excused from performance by a force majeure clause in the contract for the resulting delay or non-performance, and the time within which performance is required will be extended. It is also quite common for force majeure clauses to allow one or both parties to terminate the contract – but do not state that the contract automatically ends – if the force majeure event and its effects on performance continue for a certain period of time.

Contracts under English law must include specific provisions covering force majeure if the parties want to be able to rely on such exemptions from a contractual obligation. English law does not apply any doctrine of force majeure or imply any force majeure term or effect in any contract; whether a force majeure consequence arises in relation to a contract will depend on the precise circumstances and wording of the force majeure clause, if any.

Since the courts will generally prefer to enforce the performance of a contract, the party seeking to rely on a force majeure clause will usually not be able to do so unless it shows that the clause applies. Unless the contract expressly says otherwise, it will have to show that performance is legally or physically impossible, not just that it is commercially impractical or uneconomic to perform.

Is the Coronavirus a Force Majeure Event?

Whether or not the impact of COVID-19 amounts to a force majeure event will ultimately come down to the wording of the relevant clauses in the contract. Some force majeure clauses are more specific than others. If a list of possible events is included in the clause, the question will be whether or not the virus falls within one of those events. Until recently, for example, a general reference to “pandemics” would not have been helpful; however, as the World Health Organisation has now classified COVID-19 as a pandemic, such a reference in a force majeure clause would be more likely to be useful. Alternatively, the clause might include other, more general events such as “act of god”, and/or a catch-all provision such as, “any other event which is beyond the reasonable control of the effected party whether of a similar or dissimilar nature to any of the foregoing events”, but such provisions are not a guarantee of success. In any event, it will be for the party claiming that a force majeure clause covers COVID-19 and the particular circumstances relating to the contract to demonstrate that the clause does cover it.

Also of key importance will be the parties’ knowledge at the time the contract was formed. Some force majeure clauses refer to “unforeseeable events”. In such cases, the parties’ prior knowledge of outbreaks of COVID-19 in the relevant areas will be an important consideration. If the parties knew of the outbreak of the virus when the contract was formed and did not make an express reference to it in the force majeure clause, the courts may not subsequently allow a party to the contract to rely on it as a force majeure event under any non-COVID-19 wording in the clause.

Even where it is possible to rely on a force majeure clause with respect to COVID-19, such clauses should be handled with care and do not necessarily represent an “easy way out”. There may, for example, be an obligation to mitigate the impact of the force majeure event (express or implied); the scope of the clause may be limited; and there may be time limits.

Depending upon the wording of a force majeure clause, then, it may indeed be the case that the coronavirus amounts to a force majeure event. Nevertheless, force majeure clauses are not designed to be, and are not, easy get-out clauses. They cannot be used to avoid liability for contractual breaches that would have occurred in any case or which were not caused by force majeure, and many will include limitations to ensure that contracts cannot be prematurely terminated simply because performance has become tricky.

Frustration

Where there is no force majeure or other helpful clause in a contract, or where there is such a clause but it does not cover COVID-19 and the particular circumstances, the English law doctrine of “frustration” might apply in certain very exceptional circumstances. Under this doctrine, if an unforeseen event renders a contract impossible to perform or transforms the obligations under it into something radically different, the contract is, in law, deemed to terminate. This occurs automatically, not by virtue of any termination by either party. Frustration only occurs if, on a strict view of a situation, there is such impossibility or transformation of obligations: if the performance of contractual obligations simply becomes more difficult or expensive, that is very unlikely to be sufficient for the doctrine of frustration to apply. If frustration does apply, it may be difficult to ascertain what financial adjustments between the parties are required to be made under contract law.

Complexity of Issues Requires Proper Legal Advice

Interpreting the scope and effect of any force majeure clause or reaching a view as to whether frustration applies in any situation may be a complicated, difficult, and uncertain legal matter. Similarly, reaching a view as to the financial effect on the parties of the application of a force majeure clause or frustration will also be a complex, difficult, and uncertain issue.

As well as considering suspension or the ending of a contract, it will be necessary to consider whether there is a liability to refund payments already made under the contract or to pay for value received or money expended before the suspension or termination. Therefore, in all cases you should seek appropriate professional independent legal advice as to where you stand in relation to COVID-19 and its effects on the performance of any commercial contract.

Budget 2020 – Extraordinary Measures and the Coronavirus

Downing Street & Whitehall

In the Budget address on 11 March, Rishi Sunak, Chancellor of the Exchequer, announced £7 billion of extraordinary measures to support the economy through the coronavirus (COVID-19) crisis.

What Measures Have Been Announced?

The following key measures were announced:

  • The cost of statutory sick pay (SSP) for coronavirus-related absence of up to 14 days will be refunded by the government. This applies to businesses with fewer than 250 employees.
  • SSP will be available “to all those advised to self-isolate even if they haven’t yet presented with symptoms”. This will apply from day one of sickness.
  • Employees will be able to obtain a sick note (fit note) from the NHS non-emergency service (111), which they can use as evidence for absence from work. This initiative is intended to take pressure off local GPs.

Will There be Support for Self-Employed and Gig Economy Workers?

The self-employed and those working in the gig economy are not eligible for SSP and so the government has made it quicker and easier to access benefits.

Additional financial support is being made available under a new temporary Coronavirus Business Interruption Loan Scheme with banks offering loans of up to £1.2m to support SMEs.

A special HMRC helpline has also been set up to assist businesses and self-employed individuals in financial difficulties with and outstanding tax liabilities. Those concerned about their ability to pay tax due to the coronavirus can contact HMRC’s helpline on 0800 0159 559.

Extension of The Homes (Fitness for Human Habitation) Act 2018

Leaking Ceiling

The Homes (Fitness for Human Habitation) Act 2018 (‘the Act’) came into force on 20 March 2019. This Act created a duty on social housing landlords, private residential landlords, and letting agents acting on their behalf (by implying a covenant in new tenancy agreements made on or after the 20 March 2019 for a term of less than seven years) to ensure that a property is ‘fit for human habitation’ both at the beginning of the tenancy and throughout.

For more detail on the Act, take a look at our previous post here.

From 20 March 2020 the Act will apply to all existing tenancies with terms of less than seven years.  This means that existing periodic tenancies will be subject to an implied covenant that the dwelling will be fit for human habitation on 20 March 2020 and will then remain fit for human habitation during the rest of the term.

Landlords may have to make improvements and not just carry out repairs to put and keep the property in a fit state for human habitation. The obligation to ensure that a property is ‘fit for human habitation’ extends to the dwelling and all parts of the building (including any common or shared areas) in which the landlord has an estate or interest.

In determining whether a property is fit for human habitation, the Act amends the Landlord and Tenant Act 1985 by incorporating the hazards set out in the Housing Health and Safety Rating System (HHSRS) to the existing nine hazards listed in the 1985 Act. The courts must decide if the property is so far defective in one or more of these matters that it is not reasonably suitable for occupation.

If a landlord does not comply with these obligations, the tenant can sue the landlord directly for breach of its tenancy agreement. Several exceptions may apply if the property is substandard due to the actions of the tenant, or for a reason outside of the landlord’s control, or if reasonable attempts by the landlord to obtain consent from a third party for works were made but consent was not obtained.

Whilst this Act extends to England and Wales, its practical changes only affect properties in England as similar obligations affecting landlords in Wales are dealt with under the Renting Homes (Wales) Act 2016.

Here at Simply-Docs our property templates were updated to reflect these legislative changes when the Act came into force for all new tenancies made on or after the 20 March 2019. Our property templates can therefore be used for all existing tenancies of less than seven years from the 20 March 2020. We have also published a Guidance Note on the Act which can be found here.

Preparing Your Business for the Coronavirus

Nurse with Blood Sample

The current strain of coronavirus, known as 2019-nCoV, is part of the same family of viruses that includes the common cold and SARS (Severe Acute Respiratory Syndrome). There are now three confirmed cases of the coronavirus in the UK and the outbreak has spread across China and to at least 18 countries globally.

If the new strain of coronavirus follows the same pattern as the SARS outbreak in 2003, it may be that the impact on the UK is quite limited. Coronavirus is not, however, an issue that employers can just ignore. At present, the risk level is assessed as being low to moderate, but the situation is evolving all the time.

What can I do to keep my workplace and employees safe?

Providing a safe and healthy workplace for employees is a legal requirement and employers should consider the following:

  • In general terms, the government advice is for people who may be infected by the coronavirus to take simple, common-sense steps to avoid close contact with other people as much as possible, much as they would with other flu viruses.
  • If any employees are required to travel to China, employers should be sure to follow up-to-date government advice (see advice from the Foreign and Commonwealth Office). Consideration should be given to cancelling visits to affected areas and assessing whether any meetings could be done via electronic means such as Skype or other online video meetings instead.
  • Business continuity plans should be reviewed.
  • Where employees have recently returned from China, consider allowing them to work from home until it is certain that they are not infected.
  • Good hygiene standards should be enforced across businesses with clear hand-washing instructions displayed in kitchens and bathrooms.
  • In the event that coronavirus spreads rapidly in the UK, employers will have to review sickness absence policies and add instructions to follow if employees believe they may have been exposed to the virus.

Advice on infection prevention and control for healthcare providers, including care homes, can be found here on the GOV.UK website.

Updated on 6 February 2020 with new number of confirmed cases in the UK.

Ethical Veganism is a Protected Characteristic

Employment in Focus

Earlier this month, an employment tribunal ruled that ethical veganism is a non-religious philosophical belief that should be protected under the Equality Act 2010. For a belief to be protected under the Act, it must meet several tests including being worthy of respect in a democratic society, being compatible with human dignity, and not conflicting with the rights of others.

The case concerned a charity worker, Jordi Casamitjana, who claimed he was unfairly dismissed because of his philosophical belief in ethical veganism. An ethical vegan is defined as someone who not only follows a vegan diet but also opposes the use of animals for other purposes. Casamitjana is taking his former employer, the League Against Cruel Sports, to an employment tribunal following his dismissal.

Having established that veganism is a philosophical belief, the case will now be taken to a second, full hearing to establish the reasons for Casamitjana’s dismissal. Casamitjana says he was dismissed by the League Against Cruel Sports after raising concerns that its pension fund was being invested in companies involved in animal testing, whereas the charity maintains he was sacked for gross misconduct.

As this is a first instance decision and may yet be appealed, it is not enough to have a binding effect on other tribunals and each subsequent case will depend on its own facts. However, in light of this ruling, employers may wish to review how they support ethical vegans in their business and consider if any changes are required.

New Draft Regulations on Mandatory Electrical Safety Checks

Electrical Checks

Further to our blog post in October last year (which can be found here), the Government has now published The Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020, which impose duties on private landlords of residential properties in England in respect of electrical safety standards.

These regulations require approval from both houses of parliament before they are made into law.

Most tenancies are caught by the regulations, although a number of tenancies including long leases, tenancies granting a right of occupation for a term of seven or years or more, social or resident landlords, holiday lettings, care homes, and licences for lodgers (where the occupier is sharing accommodation with the landlord) are excluded. The draft regulations require private landlords in England to:

  • Ensure that the electrical safety standards (the standards for electrical installations in the 18th edition of the Institution of Engineering and Technology wiring regulations (BS7671:2018)) are met when the premises are let under a tenancy;
  • Ensure that a qualified person inspects and tests every electrical installation in the premises at intervals of no more than 5 years and produces a report to the landlord (some reports only last a year and so landlords will need to check the length of the report before commissioning a report);
  • Carry out the first inspection and test before a tenancy commences on or after 1 July 2020 and before 1 April 2021 for existing tenancies (entered into before the date this legislation comes into force);
  • For existing tenancies, supply a copy of the report to each tenant within 28 days, and if requested by the local housing authority, within 7 days of request;
  • Supply a copy of the most recent report to a new tenant before occupation, or any prospective tenant within 28 days of a request from the prospective tenant;
  • Keep a copy of the report and give it to the person carrying out the next inspection; and
  • Carry out further investigative or remedial work within 28 days of the report or within the period specified in the report and supply written confirmation of completion of such further investigative or remedial work to the tenant and local housing authority within 28 days of this work being carried out.

If landlords fail to carry out further investigative or remedial work (where the work is not urgent) the local housing authority will serve a ‘remedial notice’ on the landlord. The landlord then has 28 days to make the improvements or will be given 21 days to object.

If the landlord doesn’t make the necessary improvements or the remedial work is urgent, the local housing authority can access the property with the tenants’ permission to do the work. If the tenants refuse access, the landlord will not be in breach of this requirement. Landlords have the right to appeal against the decision of the local housing authority to take that remedial action.

Landlords who fail to comply with the regulations are liable to face fines of up to £30,000.

The regulations also seek to amend the electrical safety regulations which currently affect Houses in Multiple Occupation (‘HMOs’) in England to propose new mandatory conditions for licenses to ensure that every electrical installation is in proper working order and safe for continued use.

It has been indicated that the Welsh Government is currently working on producing its own regulations setting out the standards expected of rental properties under The Renting Homes (Wales) Act 2016 and that regulations will require that a property is only fit if a landlord has:

  • Installed working carbon monoxide and smoke alarms; and
  • Undertaken an electrical safety test at least every five years.

In light of the draft regulations for England, the standards will be similar.

Here at Simply-Docs we will keep the progress of the draft regulations under review and will produce any necessary updates and/or content in due course.

Top