The COVID-19 pandemic has given rise to a number of risks for Canadian corporate management. The nature of such risks varies by industry, but there are some common themes.
Management’s immediate response to the pandemic may be challenged. The COVID-19 threat materialized through February and early March, and on March 11, 2020, the World Health Organization officially declared COVID-19 a pandemic. However, many businesses continued to operate in the ordinary course – perhaps with some level of preventative measures in place – for much of the next two weeks, until most of Canada’s economy was shut down by various levels of government.
The most obvious threat to management is the risk that the company’s operations contributed to a COVID-19 related illness or death. In such a case, decisions as to how and whether to operate will be heavily scrutinized, in both the courts of law and public opinion. Questions about what management knew, what it did and what it should have done will be asked.
Another area of concern for management is human resources. Management may face liability to employees arising from defensive steps such as mass layoffs or compensation reductions. In addition, management faces the threat of permanently losing key employees.
Finally, management’s response to COVID-19 may be attacked by contractual partners. For example, if management ceased production and delivery of an input critical to a customer, then the company may be liable for disrupting the customer’s operations.
It is not yet possible to determine how courts will treat issues related to COVID-19. However, the pandemic has not created new legal risks to management; rather, it has heightened and highlighted existing ones. As such, management’s decision making during the pandemic will likely be measured against traditional standards of conduct, and the key question will be whether those decisions were reasonable in the circumstances.
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