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The CORANAVIRUS impact on HR matters

The Coronavirus is disrupting work relations. New rules have been urgently adopted in recent days to help employers deal with the consequences of government measures imposed to contain the epidemic. Let’s take stock of the HR situation to date.

HOW TO (RE)ORGANISE WORK?

The ministerial decree of 18 March 2020 stipulates:

  • For the majority of employers in the private sector, the obligation:
    • to organise telework for all jobs for which this is possible;
    • if this is not possible, to reorganise the working conditions in the usual workplace (and during transport time, if collective transport to the workplace is provided for, which is often the case in the construction sector) so that everyone can be sufficiently separated (at least 1,5m) from one another (respect for social distancing). How to achieve this? By adjusting fixed working hours, by introducing flexible working hours, by organising rotations, etc.;
    • if this is not possible, to close the workplace.
  • That the above rules do to apply for companies recognised as necessary for the protection of vital needs (this includes health institutions, the media, telecommunication infrastructure, waste collection and processing services, taxi services, fuel suppliers, production chains that cannot be stopped for technical reasons, businesses and companies involved in the food chain, etc.). These companies must nevertheless implement social distancing measures as much as possible. The list annexed to the ministerial decree is restrictive but ultimately includes many companies, which is currently giving rise to discussions between employer and union representatives in several sectors.

As warrantors of health and well-being at work, employers must ensure that risks are assessed and adequate protective measures are put in place, which means, at the very least, in addition to measures ensuring social distancing (desired or imposed):

  • Review the travel and business trip policy so as to eliminate/limit travel and business trips to what is strictly essential;
  • Provide for improved hygiene of the workplace (and work tools);
  • Enable workers to maintain meticulous hand hygiene by providing accessible disinfectants and communicate clearly about this subject;
  • Provide and communicate instructions in the event that a worker shows signs of illness, in particular infection by the Coronavirus, both with respect to the worker him or herself (isolate him or her, safeguard the manner of his or her return home, etc.) and with respect to other workers who have been in contact with him or her (disinfection of the premises, etc.).

A checklist is available on the website of the FPS Employment (https://employment.belgium.be/en)

HOW DOES TEMPORARY UNEMPLOYMENT WORK?

An employment contract that can temporarily no longer be performed due to an unforeseeable event beyond the control of the employer and the employee, is suspended for force majeure. In this case, the employer does not have to pay the salary. Compensation by the National Employment Office (“RVA” / ”ONEM”) (hereafter “NEO”) is possible and is in principle assessed on a case-by-case basis depending on the circumstances.

  • Temporary unemployment because of force majeure

The position of the NEO has progressively eased in recent days to the extent that, on the one hand, it has considerably broadened the scope of application of temporary unemployment because of force majeure and, on the other hand, it has greatly simplified the formalities to access it.

Broader scope of application

Thus, for the period from 13 March 2020 (and until 5 April but extendable until 30 June 2020), a flexible application of the concept of force majeure will be accepted. The NEO has indicated that all situations of temporary unemployment related to the Coronavirus will be considered as temporary unemployment for reasons of force majeure, even if, for example, it is still possible to work on certain days. The NEO explicitly refers to the following situations in particular:

  • Companies in the sectors in which a closure has been imposed by the ministerial decree of 18 March 2020 such as restaurants, bars etc.;
  • Companies that are (partially) closed because they do not have tasks that can be carried out through telework for (all) their workers and they cannot respect the social distancing measures in the performance of the work and in the transport they organise (for example, companies in the construction sector);
  • Companies that suffer production stoppages because they depend on suppliers who no longer deliver;
  • Workers who are quarantined because they have been exposed to contamination;

It seems, moreover, that the NEO considers that, exceptionally, even situations of reduced work following a general drop in activity (reduction in the number of orders, projects, etc.) may be considered as temporary unemployment for force majeure (and no longer as temporary unemployment for economic reasons), provided, of course, that this drop in activity is linked to the Coronavirus epidemic.

It is not required that the company is completely closed down. In practice, this means that some workers may be temporarily unemployed and others may not. Workers can also alternate between unemployment days and working days (however, an unemployment day must be an entire day).

The NEO specifies that an employer who had initially sent a communication of temporary unemployment for economic reasons can thus switch to the regime of temporary unemployment for force majeure (reason: “coronavirus”) without having to complete any further formalities.

Simpler formalities

Exceptionally (and temporarily until 5 April 2020, possibly extended until 30 June 2020), it is no longer necessary to submit a file to the regional unemployment office of the NEO. A simple declaration (Declaration for Social Risk [“ASR” / ”DRS”] scenario 5) via the social security portal site is sufficient.

(Immediate) financial compensation for the workers  

The worker receives, without probationary period, the amount of 65% (increased to 70% until 30 June 2020) of his gross monthly salary (the latter being capped at EUR 2,754.76 gross). In addition, a supplement of EUR 5.63 per day of unemployment is paid by the NEO.

The Minister of Employment has also just announced that workers newly declared to the NEO will immediately receive a lump-sum unemployment benefit of EUR 1,450 per month (for a full time) pending the examination of their files.

The NEO has indeed to examine a considerable number of files. The number of 400,000 files has already been mentioned, which is an unprecedented situation.

  • Temporary unemployment for economic reasons

This regime, which has been simplified as regards to employees by the Collective Labour Agreement (“CAO” / “CCT”) (hereafter “CLA”) n°47 concluded within the National Labour Council (“Nationale Arbeidsraad” / “Conseil National du Travail”) on 18 March 2020, implied requesting the FPS Employment for recognition as a company in difficulty, in particular, in the current context, on the basis of unforeseeable circumstances that lead to a substantial reduction in turnover, production or the number of orders over a short period of time.

This regime allows the use of a total suspension of performance (for a maximum of 16 weeks per year) or a partial suspension of performance (for a maximum of 26 weeks per year), or a combination of the two (within the same limits knowing that 2 weeks of partial suspension is equivalent to one week of total suspension).

However, the FPS Employment has explicitly indicated that during the period of flexible application of temporary unemployment for force majeure by the NEO, it will not take any action on applications for recognition as a company in difficulty, including those submitted since 13 March 2020.

Situations of reduced turnover, orders or production resulting from the Coronavirus epidemic will therefore preferably lead to a request for temporary unemployment for force majeure. It is advised to indicate ‘coronavirus’ in the declaration and not to refer to economic causes.

The regime of temporary unemployment for economic reasons remains applicable to situations where there is a drop in turnover, production and/or orders that are not linked to the Coronavirus epidemic.

EMPLOYERS SUPPORT MEASURES

  • Payroll tax: automatic deferral of 2 months (without fine or interest in arrears). The payment relating to the declaration for the 1st quarter of 2020 is therefore postponed until 15 June 2020. It is also possible to apply for a phased payment plan without a fine (to be introduced by 30 June 2020 at the latest).

We assist employers on a daily basis in understanding and implementing the new measures. The situation is constantly changing. We will keep you informed of future developments.

The CORANAVIRUS’ impact on corporate matters

HOW TO ORGANIZE THE ANNUAL GENERAL SHAREHOLDERS’ MEETING ?

The coming weeks are annual meeting season for calendar-year companies. In the current environment, what are the alternatives to in-person meetings provided by the new Belgian Code on Companies and Associations (“BCCA“)  ?

A first option to consider is to postpone the ordinary (annual) general shareholders’ meeting. In such case, the shareholders must be informed in due time, with a relevant explanation regarding the decision taken by the board of directors to not convene the meeting on the statutory date (breach of the Articles of association). For this breach of the Articles of association, the board could request specific discharge from the shareholders’ meeting.

Companies may also contemplate other options (as long as these options are not in contradiction with the provisions of their Articles of association and are applied pursuant to the BCCA requirements) :

  • vote by proxy (the goal being to limit the number of shareholders attending the meeting). The shareholders can grant a proxy to another shareholder or a third party to attend the meeting in person and vote on his/her behalf. This possibility does not need to be provided for in the Articles of association. Even if the Articles do not expressly mention remote voting, companies could request shareholders to vote by proxy ahead of the meeting.
  • remote vote prior to the shareholders’ meeting. The vote is expressed by letter (for the “SRL/ NV” and the SA / NV” ) or via the company’s website, by means of a form made available by the company (for the SA / NV”). The Articles of association must set out this possibility.
  • participation to the general meeting by way of electronic means of communication  made available by the company (video conferencing, web portal, …). The procedure and conditions for the use of the electronic means must be provided for in the Articles of association. In principle, the participation to the meeting by way of electronic means is solely possible for the shareholders (and not for the bureau, the directors and the statutory auditor)
  • shareholders’ resolutions can also be adopted via unanimous written resolutions. The Articles of association do not need to expressly foresee this possibility. However, this process can neither be applied for shareholders’ decisions that have to be recorded in an authentic deed nor by listed companies.

The companies’ choice will of course depend on their specific situation.

WHAT ARE THE SPECIFIC COMMENTS TO CONSIDER IN THE COMPANIES’ ANNUAL REPORT ?

Depending on the specific circumstances, the current situation could qualify as a material event or as a risk or uncertainty to be mentioned in the annual report.

WHAT ABOUT THE FILING OF THE FINANCIAL STATEMENTS ?

Late filing of the financial statements can lead to penalties. However, in case the late filing is due to an event of “force majeure”, a reimbursement of these penalties can be claimed. For such purpose, the company must evidence the “force majeure” and must claim the reimbursement within 18 months after the closing date of the annual accounts. Whether the coronavirus could be considered as “force majeure” event in this respect will largely depend on the evolution of the situation.

The Belgian government is considering solutions to allow some flexibility and facilitate the organisation of general meetings of shareholders under the current circumstances. We will update this insight when such measures are adopted.

The CORANAVIRUS’ impact on commercial contracts – Covid-19 as an event of force majeure?

The Coronavirus COVID-19 puts mankind to the test in many ways. In addition to countless medical, social and economic issues, several legal questions also arise. This article focuses on commercial law issues and more specifically on how commercial contracts can be affected by this epidemic. What if certain agreements can no longer be executed because of the Coronavirus? Can the Coronavirus be invoked as a case of force majeure (“overmacht”)?

As in most legal matters, the answer depends on the specific circumstances and a case-by-case analysis.

FORCE MAJEURE CLAUSE?

First and foremost, it is important to check whether the agreement contains a force majeure clause.

It is of course very unlikely that the parties would have established a contractual clause in relation to the outbreak of a Coranavirus, but it is possible, for example, that they have included a general clause on the outbreak of epidemics, health issues, government measures, etc.

Such clauses are very important, both because they can extend or limit the possibility of invoking force majeure, and because they can determine the consequences in the event a force majeure would occur.

BELGIAN COMMON LAW

In Belgian law, a force majeure situation allows a party to temporarily or permanently fail to perform its contractual obligation(s) without any risk of liability, because a change of circumstances makes it (absolutely or reasonably) impossible to perform the obligation(s).

This means that to invoke force majeure, the following three conditions must be met:
1) there must be an unforeseeable circumstance,
2) which is beyond the control of the party that is supposed to perform, and
3) which makes the fulfillment of the obligation(s) absolutely or reasonably impossible.

It is important to keep in mind that the burden of proof will lie on the party which fails to fulfill its contractual obligations.

Let’s assess whether the above conditions apply to the Coronavirus crisis:

1) CAN THE CORONAVIRUSCRISIS BE QUALIFIED AS AN UNFORESEABLE CIRCUMSTANCE?

An “unforeseen” circumstance amounts to a situation that could not reasonably be taken into account at the time the agreement was concluded.

At first sight, it seems safe to say that an average person (“bonus pater familias”) could not have foreseen the outbreak of an epidemic of such a magnitude, i.e. a virus which leads to the (semi)lockdown of several countries around the world.

However, in some cases it will be relevant to determine when it became clear that the Coronavirus would have such far-reaching consequences and when the agreement was concluded. If a contract is entered into when the force majeure situation already exists, the debtor cannot invoke it as a valid reason not to fulfill his contractual obligation.

2) IS THE CORONAVIRUS CRISIS BEYOND THE CONTROL OF THE PARTY SUPPOSED TO PERFORM?

The second condition of force majeure implies that the non-performance of an obligation is not caused by the fault of the person who is in breach.

In order for this condition to be met, it is essential to be certain that the coronavirus is the exact reason for the non-performance of the agreement.

For example, the non-execution can be due to the Coronavirus as such (i.e. illness) or due to the measures imposed by the government, the so called “Fait du Prince” (i.e. a governmental intervention, e.g. when the government closes restaurants and bars, leading to the cancellation of several supplier orders). However, in some cases also (personal) precautionary measures (e.g. closing your shop even before it was ordered by the government) could be a legitimate reason for non-performance.

In the latter case, there is of course a higher potential of dispute. It is therefore crucial to maintain a clear communication with the other contracting party at all times. Again, the question whether a judge will accept “precautionary measures” as a force majeure in the context of the Coranavirus will depend on the specific circumstances of the case.

3) DOES THE CORANAVIRUS CRISIS MAKE THE FULFILLMENT OF THE OBLIGATION(S) ABSOLUTELY OR REASONABLY IMPOSSIBLE?

According to part of the Belgian legal doctrine, the unforeseen event must have made the performance of the contract “completely” or “absolutely” impossible. In this view, only insurmountable physical, material or legal impediments are accepted as force majeure.

On the other hand, the majority of Belgian scholars defend a “relative” impossibility. Meaning that a human, reasonable or practical impossibility will be sufficient.

This third condition means that there are no fair, reasonable and practicable alternatives to execute the agreement. For instance, by delaying the performance of the contract, engaging a subcontractor, finding another delivery method, etc.

Regarding the Coronavirus, it is obviously difficult to determine when this “unforeseeable event” will end; hence a delay will not always be helpful. Also the fact that this epidemic affects so many people and companies will in most cases make it very challenging or even impossible to find subcontractors or substitutes to execute the agreement. Nevertheless, even in these extreme circumstances, the debtor must do everything possible to limit the potential negative repercussions of its non-performance.

CONCLUSION

It follows from the above that the Coronavirus should certainly not be considered as a “safe harbor” for not executing agreements or commitments. The question whether the Coronavirus epidemic will qualify as force majeure with respect to your specific agreement depends on many factors, and must therefore always be carefully analyzed on a case-by-case basis.