China's Coronavirus Pushes In-House Teams Into Crisis Management Mode

The spread of the Chinese coronavirus has general counsel scrambling to deal with a crisis that is changing daily and affects legal issues as well as the health and safety of employees.

The legal issues range from potential liability for an employee’s exposure and subsequent illness to complying with local Chinese laws governing the situation to assessing the impact of the crisis on contracts requiring the company to manufacture or purchase goods in China.

“The response will vary from company to company depending on the size and global reach,” former in-house counsel Teri Wood, who is now of counsel in the New York office of Jackson Lewis, told Corporate Counsel Thursday. “But one thing they all have in common: If they have people at all in their business, they are going to have to deal with this issue.”

Wood, who spent nearly 23 years at IBM, mostly as an associate general counsel, and another 15 years in-house at American Express, said this is a time for the crisis management team to go to work. “The in-house lawyers are going to come together with human resources, security, global mobility, communications, medical and other disciplines to sort out what is best for the organization at this moment in time because it is changing daily,” she said.

Wood said the team will have to consider the legal and regulatory implications not only in the U.S. and China but also in other countries being affected and where they may have employees.

“The team along with legal folks on the ground in those countries will determine what guidance needs to be offered to employees, what needs to be communicated,” she added. “One of things that is really interesting about this type of crisis is that the whole workforce gets kind of concerned and involved. Even if it’s not affecting them directly, they’re worried. People want to know that the company is doing something.”

Employment lawyer Martha Boyd, a shareholder in the Nashville office of Baker, Donelson, Bearman, Caldwell & Berkowitz, told Corporate Counsel her firm is getting calls from companies seeking guidance on what to say and do.

“Some companies have workers going to and from China and they want to know what to do,” Boyd said. The government says if a person is asymptomatic, then there is no reason to quarantine them, she said.

“Well, that might relieve the company’s liability, but it doesn’t relieve the fears of the CEO or of other employees … of this disease spreading through the workforce,” Boyd said.

The fear is understandable given the latest coronavirus news. The World Health Organization Thursday declared the epidemic an international public health emergency. The U.S. reported its first case of human-to-human transmission. The death toll has now reached 170 and the number of cases has grown to 7,711. More than a dozen countries, including the U.S., are quarantining people who have just returned from China or who have had contact with such people.

Several major U.S. companies with offices or stores in China have closed operations, especially in Hubei province where the virus started. Others are restricting their employees’ flights to and from China.

Delta Air Lines Inc., United Airlines Inc. and American Airlines suspended all flights from the U.S. to China on Friday.

A Google representative declined comment but confirmed reports that the company is temporarily shutting down all of its China offices due to the virus outbreak, including all offices in mainland China, Hong Kong and Taiwan. It is urging U.S. workers to return home, and to work from home for 14 days after departing China.

Google’s China offices focus on sales and engineering for its advertising business. To help support relief efforts, Google.org issued a $250,000 direct grant to the Red Cross Society of the Republic of China and launched an internal campaign that has raised over $500,000.

Other companies that have reported restricting travel due to the virus are Facebook Inc., Apple Inc., Microsoft Corp., Ikea, and LG Electronics Inc. United Airlines Inc. and American Airlines Inc. reportedly are limiting their flights to and from the country.

McDonald’s Corp. has closed all its restaurants in Hubei province and others at tourist and transportation hubs outside the province, according to Barry Sum, director of McDonald’s corporate relations in Asia.

In addition, Sum said all open restaurants are instituting preventative measures, such as taking all employees’ temperature when they arrive at work, distributing masks, and urging more frequent hand washing and disinfection. It has also established an epidemic prevention and control task force.

“We maintain close and regular contact with our team in China to be updated on the situation there,” Sum said. “Above all, the safety of our employees and our customers remains the focus and the priority of our work, and our teams are working closely with local officials to support the prevention and containment efforts underway.”

Starbucks Corp. reportedly closed 2,000 China outlets. A Starbucks representative declined to comment, referring Corporate Counsel to a Jan. 28 statement from president and CEO Kevin Johnson as part of an earnings call: “As we begin our fiscal second quarter, I want to acknowledge the dynamic situation our partners in China are navigating as health officials respond to the coronavirus. As events unfold, we will be transparent with all stakeholders in communicating how we are responding to these extraordinary circumstances and the implications for our near-term business results.”

Several international law firms with offices across Greater China and Hong Kong reportedly have adopted special measures, including paying for employees to take taxis rather than mass transit to the office and monitoring staff travel to high-risk areas.

Boyd, of Baker Donelson, said it’s important that companies operating in China comply with China’s laws, whether they are orders to shut down operations or requirements to pay employees who stay home. Boyd co-authored a law firm blog on what companies need to know about the coronavirus that includes more about China’s laws.

“China is being very proactive and forcing people to remain in place [in Hubei province],” she said. “I think they are handling this well.”

She also advised, “If you’ve got workers there and they want to leave, and the Chinese government says they can leave, then the responsible thing to do is to let them leave. It doesn’t mean that they immediately can walk back into work, but I wouldn’t tell them they can’t come home.”

Some employees may try to take advantage of a situation and not come to work, Boyd said. Employers should deal with such instances on a case-by-case basis, she advised.

“Employers are struggling with this crisis,” she added. “They want to do the right thing and protect their people.”