Legal Reform in the Time of COVID-19

Photo by Bonnie Kittle on Unsplash

As of May 8, some 18 states remain substantially locked down to inhibit the spread of COVID-19. Twenty-eight states have already partially opened, and the remaining four are opening back up soon.

For the first time in months, people are getting haircuts and tattoos, eating in restaurants and going bowling. For many, this is an enormous relief; for others, a cause of great concern.

The economic devastation of the lock-down is without precedent in our lifetimes. Some 20.5 million jobs were lost during the month of April alone, and the unemployment rate stands at 14.7 percent, the worst since the Great Depression. Businesses, small and large, are failing. So the desire to get people back to work is understandable. On the other hand, also on May 8th in the US, 29,162 new cases of COVID-19 were confirmed and 1,687 people died of the disease. We have clearly not yet contained the spread of the virus.

While state governments were able to enforce shelter-at-home orders and close non-essential businesses, their power does not extend to the opposite – they cannot command businesses to open, workers to return, or consumers to shop.

There are some levers available to government. In Ohio, the Department of Job and Family Services has published a form that employers can use to report anonymously any employees who quit or refuse to return to work as a result of fears over exposure to COVID-19. As a result, an employee, even one who may fall into one of the categories most at risk from the virus, may be left with a choice to return to work, and potentially chance exposure, or lose their unemployment benefits.

While the expressed purpose of making available this process to file a report is to deter unemployment fraud, it is worth noting that the state did not post a form for employees to report employers who have created unsafe working environments. The goal seems fairly clear – incentivize workers to get back to work (while reducing unemployment claims), and get the economy going again.

Such levers, however, are at best incentives, and cannot ensure the return of economic activity. There was ample evidence of a slowdown even before lockdown orders were issued. Having lived with the consequences of COVID-19 now for several months, consumers may not want to go to stores, barber shops or restaurants; employees may not want to return to work; and employers may not wish to open and risk exposing themselves, their customers or their employees.

While it may not be entirely possible to change attitudes, some have argued that it is possible to change the law in ways that may at least incentivize employers to reopen.

Many of those who represent business interests have noted that the new working environment poses new challenges for employers. Under current law, it may be illegal to inquire about an employee’s health condition, take their temperature when they arrive for work, or require testing. It would also be illegal to disclose to other employees the name of someone who has tested positive, which makes contact tracing and follow-up testing more difficult. And there is the risk that, should an employee or customer become infected, they may sue the business for damages.

Both the US Chamber of Commerce and the National Association of Manufacturers have issued reports proposing new legislation that would protect businesses from liability. Some in Congress, particularly on the Republican side, have expressed sympathy.

Senator Mitch McConnell has tied any additional federal aid to the adoption of legislation that protects businesses from potential legal claims. On Fox News Radio, he said, “The trial lawyers are sharpening their pencils to come after health care providers and businesses, arguing that somehow the decision they made with regard to reopening adversely affected the health of someone else.”

“So before we start sending additional money down to states and localities, I want to make sure that we protect the people we’ve already sent assistance to, who are going to be set up for an avalanche of lawsuits if we don’t act,” he also said.

Probably unsurprisingly, Democratic lawmakers and union leaders have called these proposals dead on arrival. They view them as efforts by business to shield themselves from liability for their own negligence or failure to properly protect their employees or customers.

To me, some of the proposals from business organizations seem quite reasonable. Permitting employers to ask whether an employee has been exposed to COVID-19, to take employees’ temperatures and, under certain circumstances, require employees to take a COVID-19 test seem appropriate. In certain cases where the possibility of exposure is relatively high, it may even be proper to let an employer refuse employment to individuals in one of the high-risk categories.

On the other hand, the US Chamber of Commerce would like to see the law changed so that employers have no obligation to give employees training on the proper use of personal protective equipment, or even to provide any such equipment at all. They want any claims relating to COVID-19 to be removed from the jurisdiction of state courts, so they can only be heard in federal courts. They seek “safe harbors” such that if certain actions are taken by an employer, they are completely insulated from any liability for creating an exposure to COVID-19. And they want all securities law litigation over matters relating to COVID-19 to be temporarily stayed, and once they can proceed, to cap damages that can be assessed, regardless of the recklessness of the actions leading to the case.

It has long been a tenet of business that litigation is an unfair burden that impairs the ability of companies to create value. Trial lawyers are a malevolent force, and frivolous litigation a peril to prosperity.

But we should recall the reason we have courts and litigation. In truth, they are an essential part of a free society. Where individuals and companies can freely act, sometimes they take actions that impinge on the rights of others. There must be a way to allocate the damages caused by actors in a free society.

An employer decides to reopen for business. An employee or a customer of the employer becomes infected with the SARS-CoV-2 virus. What happens?

Under current law, the customer would have to prove that they were exposed to the virus at the employer’s place of business, while the employee would have to show they were exposed as a result of their employment. With a virus that has an incubation period of three to 14 days, such facts may be very hard to prove.  Even if such proof were found, the employer will still only be liable if they were found to have been at least negligent in trying to protect against transmission of the virus. Again, that may be hard to do. But if both causation and negligence or worse can be shown, then typically, the law would say that the employer should be liable for the damages – it was their action or failure to act that caused it.

This is the typical allocation of risk.

Why isn’t that allocation acceptable to business groups? In part, they are concerned that given how widespread COVID-19 is, there will be massive waves of lawsuits against employers that choose to reopen, many constituting class actions. Even well-capitalized businesses that are in fact without fault may have to settle, to avoid the expense of fighting so many lawsuits. So long as that risk remains, many businesses may choose to stay closed at a time when many politicians want them to open.

To mitigate this risk and get businesses to open their doors, business groups want to substantially limit the circumstances under which an employer would bear the costs should employees or customers become sick. Of course, this doesn’t prevent the costs of people becoming sick, it just means that businesses won’t bear them. So if not businesses, then who does? The risk is shifted to the individual employee or customer. If they have health insurance, the costs are then borne by their health insurance company; if not, by the government via Medicaid or Medicare; or they just don’t receive health care at all, and perhaps die from the disease.

Like other issues relating to COVID-19, how you feel about this will likely reflect how you feel about the balance between enforcing restrictions to slow the spread of the virus versus reopening businesses to get the economy going again. If you prioritize the economy, then shifting the risk of liability away from business makes sense, though maybe only because of the extenuating circumstances required to avoid further economic catastrophe.

The problem is, this approach creates a general societal good – potentially, a stronger economy – but imposes the costs of creating that good on the (comparatively) limited number of people who are exposed to the virus. If the benefit is shared by the country as a whole, the right answer would be to bear the cost nationally as well – that is, make all treatments of COVID-19 arising from employment payable by the government.

I can already hear the objections. Is this some sort of socialism? No, since there is no nationalization of an industry; but it certainly would be a new, and likely massive, social welfare program. Why should your taxpayer dollars go to pay someone else’s healthcare costs? Well, because their exposure was part of a national program to get the economy going again, the benefits of which ran to the whole nation.

If you believe that there is a societal benefit to reopening the economy and so support limiting the potential damages that businesses may incur from doing so, then, if you are fair, you should also be willing to have society as a whole bear the costs that arise from that change.

This, of course, will not happen. The US Chamber of Commerce and the National Association of Manufacturers are powerful lobbying organizations with millions of dollars behind them. Who lobbies on behalf of the employees?