Nov
Force Majeure: A General Legal Overview
As seen above a force majeure clause covers natural disasters and events falling under the scope of acts of god. However, it is pertinent to note that the term includes acts of persons as well, this is subject to the caveat that the event or its effect could not have been anticipated.
Difference Between Force Majeure & Frustration of Contract
The former is typically in the form of a contractual clause whereas the latter is a statutory provision. Therefore, while force majeure seeks to limit liability and define situations that can be mutually agreed to be outside the scope of an agreement, frustration of contract is a part of the law relating to discharge of liability due to ‘impossibility’ of performance.
Impact on Employment Law & Human Resources
It is evident that the primary concerns from a human resource perspective relate to how contracts must be drafted. If there is an explicitly defined force majeure clause then the same must clearly define events that are outside the scope of the same. Employers should refrain from trying to define events within the scope of force majeure as the same is excessively time-consuming and impossible to define exhaustively.
Another concern pertaining to employment contracts is with regards to the notice period stipulated thereunder and the duty on the party invoking the force majeure event to notify the other part of its incapability to perform its obligation. This relates to apportionment of liability under the clause as timely notice provides both parties to come to an amicable understanding/find an adequate solution.
Apportionment of liability in cases of force majeure events must be adequately outlined without any ambiguity or scope for misinterpretation. This goes beyond employment contracts with current employees and applies to prospective employees and recruitment activities as well. For example, if a prospective employee is given a conditional offer dependent on the outcome of an interview, and subsequently the candidate is unable to attend the same due to an unforeseen event or the company suffers heavy financial losses due to a force majeure event.
Can the employer rescind the offer? Or can the employer simply postpone the candidate’s induction? Would these constitute a violation of the contract? These are questions that HR leaders must address by making provisions that deal with the same in their internal process documents. Other aspects that require similar treatment are dealing with force majeure events under leave policy relating to emergency leave, payment during the same and termination of employment due to the same.
While the above aspects deal with the impact of force majeure events on contracts and policies relating to white-collar employment, there arise significant issues when the same is juxtaposed with blue-collar jobs. For example, if the same situation is analysed from the perspective of a factory, the requirements change drastically. This is because the nature of employment in such establishments requires physical attendance. Therefore, measures like introducing ‘work from home’ is rendered impossible creating the additional issue of restricted cash flow. Since industrial establishments cannot function during a force majeure event like the COVID-19 lockdowns, they have no funds to pay their employees. Thus, apportioning liability for wages and indemnification in case of such events is absolutely imperative for industrial establishments.
Conclusion
Whether the COVID-19 epidemic and ensuing lockdown are force majeure events comes down largely to the contracts between parties and the interpretation thereof. However, the challenges it continues to create must prompt HR leaders and business executives alike to re-evaluate their internal policies to deal with the effects of such events in the future. The lockdown crisis revealed grey areas in how the employement contracts were drafted and need to be readily addressed to ensure smooth functioning and protection from risks from potential force majeure events in the future.