Bird flu planning - preparing your business
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EMPLOYMENT
26 JANUARY 2006
Bird flu planning -
preparing your business
The present risk of a bird flu pandemic (à la the 1918 Spanish or 1958 and 1968
Asian influenza epidemics) appears to be such as to warrant its inclusion in
businesses’ continuity planning. Two key concepts may be of interest in relation
to commercial contracts: “force majeure” clauses and frustration of contract. For
employers, the occupational safety and health legislation will be key in relation to
personnel risks, but this should be balanced with employers’ other employment
law obligations. Without wanting to be unduly alarmist, we outline how bird flu
may present such issues, and offer some practical tips for action now.
Generally, a force majeure event is an event beyond the
Would bird flu trigger a control of a party, that could not have been prevented or
“force majeure clause”? planned for (e.g. earthquake, flood, fire or Government
intervention). Contracts may specify a list of what is or is
If bird flu were to become a human flu, illness to key staff not classed as a force majeure event.
and State actions to combat the disease may prevent
contracting parties from performing their contracts. Typically, the specified event must render performance
Powers under the Health Act 1956 could see business or impossible, and not simply more difficult or unprofitable
other premises being closed, infected persons or places – although clauses using the words “hinder” or “render
being isolated and land or buildings or vehicles being uneconomic” are not unknown.
requisitioned by the State for the purposes of preventing
the outbreak or spread of the disease. Pandemic flu probably would qualify as an unforeseen
event, in the terms mentioned above.
Many contracts contain “force majeure clauses” that may
provide for such circumstances. However, an outbreak occurring over a period of weeks,
with ebbs and flows in infection and morbidity rates,
The expression “force majeure clause” envisages an would not necessarily bring a sudden and complete halt to
express term of a contract that operates to excuse or performance. Rather, it may merely hinder performance.
adjust the parties’ obligations, given a specified unforeseen In contrast, the exercise of statutory powers of quarantine
event. or requisition could restrain a business’ operations entirely.
| COUNSEL 26 JANUARY 2006 PAGE 1the parties from further performance
Could bird flu frustrate of it. A Court does not have the
Occupational safety
a contract? power to adjust the contract to fit the & health issues
new circumstances.
Alternatively, a contracting party Should the pandemic eventuate,
might rely on the legal doctrine of employers’ duties under the Health
frustration, to be absolved from Application to employment & Safety in Employment Act 1992
further performing their obligations agreements (the “Act”), to take all practicable
under the contract. precautions and to eliminate or
An employment agreement may be minimise hazards, will come into
Such a result may mean significant frustrated, if sufficiently affected by focus. At the same time, employees
interruption of business and losses for violent forces external to the parties. naturally will defend their other rights
the other party. insofar as they might be affected by
employers’ actions. Employers will
The fact that termination occurs
The basic test that a court will apply in need to be mindful of, and seek to
automatically means that there is no
determining whether or not a contract balance, their competing obligations.
dismissal, and that there can be no
has been frustrated is whether the event
claim of unjustified dismissal.
or circumstance has so radically changed
the nature of the contractual obligations
The Health & Safety in
that they would, if performed, amount to The courts have recognised a number
Employment Act 1992
something fundamentally different from of situations as potentially frustrating
what the parties envisaged when the an employment contract. The obvious The Act provides a framework under
contract was made. ones are death or imprisonment of which employers can determine
the employee. Notably, for present what actions to take. Employers’
In applying the basic test, the factors purposes, illness or incapacity has contractual obligations to maintain a
that a court will examine include: also been held to be a frustrating safe workplace will generally reflect
event. Conceivably, the quarantine the provisions of the Act.
• whether the contract is still or requisitioning of necessary persons
capable of being performed. The or property could also frustrate Under it, employers and employees
contract will not be frustrated employment. both have obligations — respectively,
if it can still be carried out in a
way not fundamentally different In the context of alleged frustration of • to take all practicable steps to
from that originally envisaged; ensure the safety of employees
employment through illness, the court
while at work, and
will look closely at the nature of the
• whether the common objective employment. In particular, whether
of the parties has been • to take all practicable steps to
the contract is of short or indefinite
defeated. The contract will ensure their own safety and that
duration, the length of employment
not be frustrated if all that of their fellow employees while
and the prospects of recovery will all
is prevented is the essential at work.
be relevant. The Court will also have
benefit to one party alone, nor
if performance becomes merely regard to any sick leave provisions.
Health threats (or perceived threats)
more expensive or onerous for are to be discussed with the employer
one party alone; Individual circumstances should be
or directed to the workplace health
considered. For example, a short
and safety representatives and/
• the duration and extent of period of illness could frustrate an
or committee, if there are such.
any uncertainty created by employment with little time left to Employers are to assist employees
the supervening event said to run, but not an indefinite employment. to participate in health and safety
be the cause of the contract’s Permanent incapacity could frustrate matters and have regard to any
frustration. an indefinite employment. Questions recommendations from any committee
of how far a reasonable employer or employee representative.
Frustration operates to “kill the could be expected to accommodate
contract” and automatically releases sick employees will be relevant. Under the 2002 amendments to the
PAGE 2 | COUNSEL 26 JANUARY 2006Be pro‑active now!
Companies might consider:
• checking where the key business exposures lie, should the pandemic eventuate;
• checking key contracts for force majeure clauses;
• considering what steps need to be put in place should a customer or supplier
call force majeure, or generally be unable to perform. For example, should new
contracts have an “out” for inability to take/supply if the business is impeded by
pandemic? What back‑up can be put in place?
• checking that the company has adequate insurance in place, to cover losses
due to force majeure or frustration of key contracts. The insurance industry
has recently been astute enough to point out that the risk of pandemic flu may
be excluded from business interruption insurance (ostensibly for reasons of
difficulty of assessment), but that limited cover might be negotiated.
Act, employees were granted the right met, consistently with employers’ law, be ‘suspended’. The employee
to refuse to perform dangerous work, obligations. could then pursue a personal
if they have reasonable grounds to grievance for unjustified disadvantage
believe there is a likelihood of serious Employers should turn to the health or disability discrimination. They
harm. Employees must continue to do and occupational safety and health could even claim unjustified
other work within their employment (OSH) authorities for guidance. constructive dismissal (a suspension
agreement, to the extent that is They should monitor the authorities’ can amount to a dismissive act).
reasonable. web sites (see below) for updated
information. It would be dangerous Employers might want to ask medical
The breadth of employers’ for employers to try to develop their questions of employees, even have
obligation is considerable. By responses and policies in isolation them undergo medical examinations,
“all practicable steps”, the Act from these sources. particularly if they are symptomatic or
explains, is meant every precaution
have just travelled from an affected
“reasonably practicable to take in
the circumstances”. Employers must
Employer responses area. While some employees might
submit, employment contracts
assess the feasibility of any proposed to bird flu generally do not require it, or require
precaution, having regard to — among
it only in limited circumstances.
other things — the magnitude of the However, employers’ obligation is not
harm, the known risk, the known tantamount to a ‘guarantee’ of a safe
Employees could argue that they
options and the availability and cost of workplace. It is, in particular, subject
qualify for protection under disability
the protective measures. to any limitations that as a matter of
discrimination laws. They arguably
law qualify the employer’s freedom to
In this context, employees who are act unilaterally. do, because illness is a protected trait.
concerned about contracting bird flu
might request protective equipment, For example, employers cannot as a There are, moreover, requirements
such as facemasks and gloves. They matter of law tell employees to stay that employers be able to justify
might request to work remotely away from work (ostensibly on sick such actions. Employers should
from home. They might even refuse leave). Nor can employers require bear in mind the statutory test for
altogether to perform work or certain employees to take annual holidays justification: whether the employer’s
work, such as travel to affected areas. (including under a closedown), on less actions, and how it acted, were
than 14 days’ notice. what a fair and reasonable employer
Responsible employers will treat would (or could) have done in all the
such requests or refusals seriously. If an employer turned an employee circumstances, at the time the action
Legitimate concerns should be away, then the employee could, in occurred.
| COUNSEL 26 JANUARY 2006 PAGE 3Again, be pro‑active now!
Employers might consider:
• establishing a process for monitoring the situation, with specific triggers for
communications such as limited human to human transmission;
• establishing strategies to educate staff on personal hygiene to stop the spread
of disease. This could extend to providing the means to maintain a sanitary
workplace;
• checking their sick and special leave policies, and reiterating the importance of
taking their entitlements if they are ill;
• reviewing their flexible work practices, such as in relation to working remotely;
• checking their OS&H strategies for hazard assessment, etc, to ensure they are
capable of dealing with influenza.
Justification is a fluid concept. The that the applicant was justifiably
statutory test basically envisages suspended for alleged failure properly
Monitoring bird flu
that actions be founded on some to implement OH&S procedures, where
substantial reason; and be fairly the applicant’s removal from the Links to pandemic and planning
implemented (both in terms of good information include:
work place was found to have been
faith and any contractual requirements convenient but unnecessary. The
– e.g. in respect of suspensions). It • http://www.moh.govt.nz/
applicant succeeded in his claim of
envisages that actions be rationally pandemicinfluenza : The Ministry
unjustified constructive dismissal.
connected to business objectives – be of Health’s website on pandemic
job-related. influenza, with new information,
The key point is that, in general,
fact sheets and links.
individual circumstances should
The concept of reasonable be considered. For example,
accommodation in disability • http://www.moh.govt.nz/nhep
an employee who presents with
discrimination law is similarly flexible. : The MOH’s National Health
symptoms of bird flu, which may
Emergency Plan.
mimic ordinary flu bugs, probably
As a general proposition, the risk of
could not as a matter of law be
outbreak or spread of bird flu could • http://www.med.govt.nz/
required to stay away from work
justify a given action affecting employees irdev/econ_dev/pandemic-
pending a medical clearance. But if
in their employment. Protecting planning/infrastructure/
the employee had just travelled from
employees’ health and safety against index.html : The Ministries of
an area where bird flu was rife, the Economic Development, Health
communicable disease, especially one
employer would be on much safer and Transport’s Information Kit,
carrying a severe risk of death, is plainly
a necessity for any business. ground. Travel through affected areas to aid continuity planning by
may not be enough by itself. infrastructure providers.
However, employers must be sure
– to a standard of commercial This anticipates at least a consultative • http://www.med.govt.nz/
reality – that they can substantiate exploration with the employee of the irdev/econ_dev/pandemic-
such concerns. The courts will not employer’s concerns. Then it is often planning/business-continuity/
countenance actions based on little useful for the employer to indicate in a planning-guide/index.html :
more than fear or unsubstantiated preliminary way the action it is minded MED’s Business Continuity
suspicion of infection.To underline to take, for the employee’s comment. Planning Guide, containing a
this point, in Miles v Richmond Ltd These are not inflexible requirements, range of information designed
(2004), the Employment Relations rather guard against the application of for general use in pandemic
Authority rejected an argument blanket policies. planning by businesses and
PAGE 4 | COUNSEL 26 JANUARY 2006The Health Act 1956 (the “Act”) confers potent powers on the State in the
interests of public health. These extend to powers of closure, quarantine and
requisition of property – affecting people’s mobility, civil rights, and ability to
conduct business.
other organisations in • prohibit normal freedoms of founded in the normal terms;
New Zealand. association, so that in any abnormal times,
it will be best placed to ride out
The Department of Labour (OSH) • enter and inspect any place. the shocks”
apparently is preparing workplace-
related information to help businesses They can also impinge normal private In other words, be prepared to take
prepare for a pandemic, in conjunction property rights, by: a hit. But there are fairly simple
with MED and the MOH. It’s website is measures that can be taken to
www.osh.dol.govt.nz. • taking possession of and minimise any impact, some of which
occupying any land or place we have highlighted here.
State’s powers when faced required for the accommodation
with an infectious disease
and treatment of patients, Footnotes
• requisitioning or demanding any 1. When World War I finally ended, France
Finally, it may be helpful generally vowed never again to let Germany, the
vehicle for use in connection so-called “beast that sleeps on the other
to be aware of the State’s powers to with the outbreak of disease. side of the Rhine,” violate its territory.
combat a bird flu outbreak. French politicians and generals conceived
the Maginot Line, a network of forts and
These powers – which authorise
The Health Act 1956 (the “Act”) blockhouses, as an obstacle to any future
dramatic interference with human invasion.
confers potent powers on the State
rights and civil liberties – are
in the interests of public health.
backed by criminal sanctions. But
These extend to powers of closure,
the maximum fines are surprisingly
quarantine and requisition of property
modest: $1,000, plus $500/day for
– affecting people’s mobility, civil
continuing offences.
rights, and ability to conduct business.
The Act confers limited rights of
Again, businesses should check that
compensation. These correspond to
they have adequate insurance in place,
Officers’ powers over private property.
to cover losses due to the exercise
But losses that result from powers
of statutory powers. This may also
of closure and quarantine are not
require negotiation of specific cover.
compensable.
Under the Act, authorised Medical
We understand that Cabinet is
Officers of Health can act to prevent
considering law-changes to grant
the outbreak or spread of notifiable
more extensive powers to combat a
infections diseases. ‘Highly
pandemic. Few details are available –
Pathogenic Avian Influenza’, including
although reports suggest any changes
sub-type H5N1 bird-flu, is a notifiable
could be directed to establishing a sort
infectious disease.
of Maginot Line1 to stop or hinder bird
flu at the border.
Their powers extend to powers of
closure and quarantine. So they can,
without consent: Conclusion
• order the closure of premises, We have some sympathy for
Australia’s Minister for Health Tony
• order the isolation, quarantine Abbott, when he said recently:
or disinfection of persons (or
classes of persons) or places, “In the end, I think that the
best thing that business can do
• order that people submit to is to get on with its job of being
medical examination, prosperous, successful and well-
| COUNSEL 26 JANUARY 2006 PAGE 5Doug Alderslade – PARTNER
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Our thanks go Pheroze Jagose – PARTNER
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counsel@chapmantripp.com.
to Stuart Dalzell
Every effort has been made to ensure
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E: pheroze.jagose@chapmantripp.com
accuracy in this newsletter. However,
the items are necessarily generalised
for preparing this
and readers are urged to seek specific
advice on particular matters and not
Stuart Dalzell – SENIOR SOLICITOR
rely solely on this text.
edition of Counsel.
T: +64 4 498 6348
E: stuart.dalzell@chapmantripp.com
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