As the end of summer is nearing, and there is no clear date for businesses and activities to fully reopen across the United States and California, more and more attention has been given to what protections businesses have from COVID-19 related lawsuits. Many businesses find it a necessity to reopen during this time of uncertainty in order to simply avoid going out of business – they must do something to pay their rent, insurance, and other financial obligations. With the press of reopening, businesses are rightfully concerned that they will be named a defendant by an employee or a customer who contracts COVID-19 and claims that the virus was contracted while working at or visiting the business establishment. Here are five issues California businesses must understand regarding the legislative environment of COVID-19 liability, and the potential to have employees or customers waive liability related to contracting COVID-19.
1. Legal liability shield on the Federal level
As part of the ongoing negotiations for additional economic relief between Congress and the White House, Republicans have been arguing for a liability shield that would protect businesses from COVID-19 related lawsuits from employees as long as the employer uses “reasonable efforts” to comply with regulations and protect employees. However, as of August 2020, there has been no agreement between Republicans and Democrats on this issue, and it remains a contentious issue in the ongoing negotiations for further relief bills.
2. California legislation creating presumption that employee contracted COVID-19 at work
In direct opposition to proposals on the federal level to protect employers, California has implemented and is looking to continue presumptions that an employee contracted COVID-19 at work if they are infected. On May 6, 2020, Governor Newsom issued Executive Order N-62-20, creating a rebuttable presumption that an employee’s COVID-19-related illness arose out of the course of employment for workers’ compensation purposes if the employee tests positive or is diagnosed “within 14 days after a day that the employee performed labor or services at the employee’s place of employment at the employer’s direction.” The presumption does not apply if the employee worked from home. We previously wrote about this Executive Order here.
That presumption expired in July, but the California legislature is currently drafting legislation that would implement a similar presumption that was set forth in the Governor’s Executive Order.
3. Liability waivers
In response to lack of a federal liability shield and California’s potential extension of a presumption that an employee contracted COVID-19 at work, many employers are seeking some type of potential protection and have asked if a liability waiver by employees is a viable option. Private parties may enter into agreements to limit liability for either party’s negligence, and these agreements are generally enforceable. These liability release agreements can include provisions whereby a party covenants not to sue, acknowledges an assumption of risk, and provides for indemnification against the company should litigation ensue. While these liability waivers are enforceable in the commercial setting (such as customers coming into a restaurant or retail location), in the employment context their enforceability may be more limited.
For example, the California Labor Code section 2800 requires employers to indemnify employees for losses caused by the employers’ “want of due care,” and prohibits any waiver of this right.
4. Limits of liability waivers in California
California law places many limits on claims employees can prospectively release, and therefore employers considering such waivers of liability with employees should use caution and seek legal advice before doing so. For example, California law is clear that workers compensation claims cannot be released as a matter of law.
In addition, failure to comply with mandatory safety requirements and safety guidelines could also impact the enforceability of liability waivers. If a company does not follow the guidelines, it could be argued that the actions were grossly negligent actions, which cannot be subject to be released or waived. Also, California Civil Code section 1668 states that it is against public policy for a party to attempt to contract around their obligations to comply with the law.
Generally, California law does not favor waivers and will be strictly construed against the party drafting them.
5. Liability waivers for customers
As mentioned above, a contract waiving liability for injuries caused by ordinary negligence is enforceable under California law if it does not violate public policy. Outside of the employment context, liability waivers are likely to be more enforceable, but companies must remember that California law does not favor waivers and a court will scrutinize any contract that seeks to waive liability, and no case law has yet addressed whether some unique aspect of COVID-19 would remove it from the general category of risks for which liability can be waived. In addition, companies must review the public perception of having customers and clients entering into liability waivers. However, the longer the virus is present and absent any federal law granting businesses a liability shield, liability waivers may become more common.