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Federal Protection for Businesses from Coronavirus Liability Starting to Take Shape

June 18, 2020

After an intense lobbying effort by the U.S. Chamber of Commerce, Senate Republicans are drafting legislation to provide broad coronavirus liability protection for businesses against claims by both customers and employees. The proposal, expected to be released in the coming weeks, would let businesses decide which federal, state or local health and safety guidelines to follow. The liability protection would be retroactive to 2019 and run through 2024. It would apply to all industries, including universities and hospitals.

This proposal aims to help business owners weighing the risks and benefits of reopening during the ongoing pandemic. Government officials are trying to balance health and economic concerns, as well as potential political repercussions, when choosing to relax or lift restrictions on business operations. This has left business owners hesitant. Many wonder if it’s truly safe to reopen and, importantly, what happens if reopening results in an employee or customer contracting the coronavirus.

We have discussed how some businesses may try to limit potential liability by requiring customers to assume the risk of exposure. The enforceability of these waivers remains unsettled and will vary by state. The waivers also do not address employer liability if an employee contracts the virus while executing his or her job duties. In many jurisdictions, a liability waiver in the employer-employee setting is unenforceable for public policy reasons, including the unequal bargaining power of the parties. The Senate proposal could offer protection for businesses in these cases.

Opponents of similar measures rumored in recent months fear that a broad shield opens the door to abuse by employers. They worry employers could subject their employees to unsafe working conditions without fear of retribution. Senate Republican leaders say enjoyment of the safe harbor would require a good faith effort by the employer to adhere to the chosen guidelines. Congressional Democratic leaders showed a willingness to consider such protections provided they are not overly broad and easily abused.

As with any legislation - especially an undrafted plan - the proposal remains subject to debate, amendment and compromise before a final version could be put to a vote. But Senate Republicans signaled that a liability shield of this nature will be a top priority when negotiating future coronavirus-related legislation with congressional Democrats.

Please contact Derek Larsen-Chaney or any other member of Phelps’ Business team if you have questions or need compliance advice and guidance. For more information related to COVID-19, see Phelps’ COVID-19: Client Resource Portal.