COVID-19: key issues to be considered for companies in Portugal

Portugal - 

Portugal Commentary

We are currently undergoing a public health crisis, caused by the new coronavirus («COVID-19»), the impact of which on the business sector could have significant legal consequences, from a contractual, dispute resolution, labor, regulatory and even criminal perspective. This broad range of potential incidents should warrant special attention and be handled from a multidisciplinary legal point of view.

Since December 31, 2019, date on which the Wuhan Municipal Health Commission (Hubei Province, China) reported an outbreak of 27 cases of pneumonia caused by a new type of virus which became known as «Covid-19» coronavirus, many countries have been affected by its rapid spread. Portugal is (was) no exception.

The absence of information on the source of the infection of this new virus, the non-existence of any treatment or vaccine and the uncertainty relating to its capacity to be transmitted among humans have caused a new health crisis, resulting in an unquestionable impact on the activity of companies and on the economy in general.

Faced with this unexpected situation, companies have to be aware that the various restrictions resulting from this crisis, apart from interfering with their usual business, might have significant legal consequences on various levels, from contractual to the resolving of lawsuits, potentially involving labor, regulatory and even criminal aspects. These consequences might affect companies’ obligations and/or rights, their relations with their employees and with third parties, and may even involve the liability of their directors or managers, among others.

In view of this, in order to minimize the respective effects, companies from diverse sectors (Hotel and Tourism, Automobile, Transport, Services and Public Administration, among other) must take informed decisions and adopt specific measures aimed at their type of activity, bearing in mind that these must be treated from a multidisciplinary legal perspective. Therefore, the effects that each of their actions or omissions might have within their corresponding business context must be assessed.

On a contractual level, as it is not possible to establish a general rule on procedures applicable to various sectors or industries, each case must be analyzed in accordance with the type of activity and, in particular, the specific relations in place, with both clients and suppliers.

Without carrying out an in-depth analysis of the contingent matters, companies should pay particular attention to the following:

  • It is important for any insurance policies in place to be analyzed, especially regarding the scope of the coverage taken out and the procedures and periods to be considered by the policy holder for the effects of the notification of any potential incidents. Any circumstances aggravating the risks covered and the duties arising from this must also be identified, along with the impact of the specific decisions that were taken within the company due to coronavirus and its effects.
  • Any contracts that have been executed, both with clients and suppliers, must be reviewed and, in particular, it it necessary to verify, where applicable, what was defined therein as a case of force majeure, the terms in which this was regulated or the breach of any obligations assumed, along with the risks for which each of the parties is liable. In addition, if there are clauses containing grounds for the early termination of the contracts applicable in these cases, an analysis thereof is recommended in the sense of evaluating whether they can be invoked and under what circumstances, whether any grounds other than those expressly agreed will be included (and whether their coverage allows them to be applied to this specific phenomenon), and the regime to be observed in each specific situation.

Still on this matter, companies should be aware that, even in a case of force majeure, they may be subject to a duty to mitigate the damage resulting from the suspension of (or delay in) the fulfillment of their obligations, exhausting all means within their power to avoid such an outcome. Within this context, the possibility should also be considered of reviewing the terms of a contract when the fulfillment thereof is disproportionally onerous, due to the aforementioned circumstances, at the limit through the signing of an addendum (whether temporary or not). This could be an alternative to be considered in those cases justifying it.

Furthermore, in order to analyze the concept of force majeure and its scope, it is essential to determine the law applicable to each contract, since this and its possible legal consequences might warrant a different treatment from jurisdiction to jurisdiction.

Within the scope of labor relations, companies might have to face different types of situations, such as:

  • The need to manage situations of absences or the suspension of employment contracts due to illness.
  • The circumstance of absences of employees as a result of obligatory quarantines imposed by the health authorities being considered to be situations of justified absence.
  • Reviewing the application of regulations in matters of the health and safety of employees. 
  • Considering resorting to mechanisms involving working remotely and a temporary change of workplace.  
  • The special fulfillment of data protection regulations as regards particularly sensitive information, such as employees’ medical and health data.

Aware that these multiple may potentially give rise to doubts and disputes triggering contractual or non-contractual claims, it is also relevant to identify not only the regime contractually in force in each case, but also the non-contractual liability companies might incur due to the strategy adopted in order to deal with the current context and the decisions taken within it.

In view of a potential lawsuit, it will be important to anticipate and avoid any contradictory actions that might result from decisions in other areas of the company, to decide on the best way of the anticipated production of evidence and to carefully consider the terms of the form of contractual termination to be implemented, in order to guarantee that they suitably and sufficiently secure the coverage of the company against any third-party claims.

From a strictly regulatory perspective, the following aspects will warrant particular attention:

  • Obligations of the companies in matters of health, mainly as regards the fulfillment of duties of information and the adoption of care and prevention measures determined by the competent authorities.
  • Analysis of any administrative agreements executed, in particular as regards the consequences of a potential breach and, if so, whether this may be included under a case of force majeure.

Potential liability civil of the Public Administration due to damage arising from any actions or omissions in the performance of administrative activity, related to this situation, that the individual is not legally obliged to bear.

Finally, it should be recalled that the duty of care imposed by law on the members of the administrative bodies of companies involves taking timely decisions aimed at containing the terrible effects of this health crisis. For this reason, and also from this perspective, it should be studied whether the actions to be performed (or avoided) within the context of this crisis might give rise to cases of civil or even criminal liability for these people. In these terms, the decisions to be taken must be informed and considered, taking into account their effects on the various areas of the company and follow a suitable formation process. It will also be important to gather specific evidence of these decision-making processes, of the options chosen and the corresponding rationale and, preferably, of the regular monitoring of the impact resulting from the corresponding implementation.