Tuesday, August 25, 2009

Swine flu staff shortages: your rights

Few contracts deal with pandemic-induced labour shortages, so it's worth knowing what rights you have for an extension of time should swine flu strike. By Richard Ward, head of construction, Eversheds

Swine flu has arrived. The latest Department of Health figures confirm that domestically there are around 100,000 reported cases of swine flu per week. Our own research at Eversheds reveals that 72% of employers have already suffered absenteeism due to the pandemic.

Employers must consider the health and welfare of their staff. The effects of flu symptoms on a machinery operative's performance could be every bit as serious as the effects of alcohol or drugs. Policies must be in place to prevent those employees who are genuinely ill from working, for their own welfare and that of their colleagues. Employers owe duties to both. General guidance to employers can be found at on the HSE website.


your rights


Medical experts have anticipated that with the normal winter increases in viral infection, the rates of staff absence could reach 15% of the workforce. This figure factors in the new extended self-certified sickness provisions, absence due to caring responsibilities and the concerns of the "worried well".

Eversheds' survey of more than 420 businesses and organisations across the UK showed widespread concern over the potential future implications of employee absenteeism, with 38% of businesses believing they will lose revenue and one in five (21%) indicating they expect to have to close or part close premises.

Natural tension

There is a natural tension between keeping those who are ill off site and mitigating the problems of short-term sickness, including the resulting cost of absenteeism. A sudden and unforeseeable labour shortage will inevitably have an impact on productivity and a company's ability to perform its contractual obligations.

Recuperating project and contract managers should be reaching for their force majeure clauses as the Tamiflu kicks in. There is no common law right of force majeure relief. It is derived from civil law, but most construction contracts (and indeed contracts generally) now provide some relief from obligations to parties for the occurrence of events outside their control. These events can be generally defined, or very specific, and typically excuse a party from liability under the contract where it is prevented from performing, for example by entitling a contractor to an extension of time.

It is unlikely that there will be drafting in many contracts (at least historically) that deals specifically with pandemic-induced labour shortages. However, such scenarios could give rise to an entitlement under many building/engineering contracts and development agreements.

For example, it would certainly be worth a contractor's while running the argument for an extension of time under MF/1 (Model Form of General Conditions of Contract), which provides that: "If by reason of circumstances beyond the reasonable control of the contractor arising after acceptance of the tender, the contractor shall have been delayed in the completion of the works, then the engineer shall grant the contractor such extension of the time for completion as may be reasonable."

In the considered hypothetical example, if a 15% reduction in workforce numbers occurred after acceptance of tender, there will be a good argument for an entitlement to an extension of time.

A common caveat to force majeure clauses is that the event that occurs must not have been foreseeable when the contract was entered into. Given the extent of official and media warnings, for contracts entered into recently and going forward, forseeability drafting is likely to defeat many such claims.

Whatever the level of flu-like symptoms that may spread during the winter months, it will be difficult to argue that there was no real warning and that the risks were unforeseen. The director-general of the World Health Organisation recently suggested that swine flu will be the biggest pandemic ever.

An example of a forseeability test is in the GC works approach, where the following drafting qualifies the relief available: "Any other circumstances (not arising because of any default or neglect by the contractor or by any employee, agent or subcontractor of his, and any other than weather conditions), which are outside the control of the contractor or any of his subcontractors, and which could not have been reasonably contemplated under the contract."

This clause requires not only the occurrence of circumstances outside the control of the contractor, but also that it be a circumstance which could not have been reasonably contemplated. That most contracting parties could now reasonably be contemplating the possibility of widespread cases of flu is compelling. This is an onerous position as even if contemplated at the time of contracting, there is nothing a contractor can do to mitigate the impacts of the pandemic.

Staff absences

While widespread re-drafting is probably not merited, there are types of contract where the prospect of staff absence should be carefully considered, for example emergency/critical services maintenance contracts or labour intensive contracts requiring specialised qualifications or staff pre-approval.

Could there be any positives? While increased illness levels will mostly be bad news for delivering projects, there could be some cases where the absence of people is of benefit. For example, one of the main productivity challenges on school or university projects is accommodating restricted access and working hours. The closure of such institutions could provide opportunities to accelerate delayed projects.

Businesses should check their sickness policies and take a close look at how the foreseeable occurrence of pandemic flu will be treated under their contracts, both with purchasers and suppliers.

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