The Coronavirus (COVID-19) has wreaked havoc not only on people’s health, but also on the North Carolina state economy and businesses. Families are self-quarantining. Neighbors are suddenly “social distancing” despite that term having been unknown just a few weeks ago. Even grocery stores are selling out of basic items. What does this mean for small business owners in North Carolina? This post gives an overview of considerations for business owners during the Coronavirus pandemic.
To begin with, there are no right answers to the question of what small businesses should do in the midst of the Coronavirus outbreak. There are certainly no easy answers. Though cities like Charlotte and Raleigh have some of the best business climates in the country, many employees are now ordered to work remotely – if they can work at all. Businesses in the food and beverage industries are shut down because of the Coronavirus, while the owners (and their employees) keep their fingers crossed that they will be able to return to work soon.
Business owners have contracts that they either need to collect on, or perform under. Some business owners have leases that they now can’t pay. Other entrepreneurs own the leased property but aren’t receiving rent because their tenants can’t make ends meet. A huge number of small businesses have been pushed to the brink of desperation within what seems like the blink of an eye.
Some of the major governmental actions that have been taken as of the writing of this post are:
The North Carolina courts are shut down for approximately 30 days, except for emergency matters. This means that most evictions are on hold. This also means that there will be a glut of evictions after the Coronavirus crisis ends.
North Carolina public schools are closed for weeks, with some predicting even longer.
Bars and restaurants have been ordered closed by Governor Cooper, except for takeout and delivery.
There are rumors that some counties will issue “shelter in place” orders, prohibiting people from leaving their homes except for emergencies.
Fortunately, some restrictions on unemployment benefits have been lifted to remove the one-week waiting period, along with other restrictions.
This list is bound to be obsolete as soon as it’s posted due to how quickly the legal, political, and medical landscape is changing.
So what should small business owners do in the midst of this uncertainty? The answer, as with so many things, depends on the business owner’s particular situation.
For instance, if the issue involves performance (e.g., payment) under a contract, the contract’s terms may be determinative. Some contracts have what is called a “force majeure” clause. This is a contractual provision that permits the parties to breach their obligations when unforeseen circumstances prevent them from doing so. In a recent case involving a force majeure clause, our office analyzed an agreement with a large corporation that expressly permitted non-payment if the World Health Organization issued guidance about a pandemic. As many know, the WHO did in fact declare the Coronavirus to be a pandemic situation recently. This permitted the lawful breach under the agreement.
Some contracts may not be so specific. In that case, the language of the contract may need to be parsed to see what the strongest arguments are on each side, and which is likely to win on balance. This is something that our office regularly does in any contractual dispute. Applying it to the Coronavirus outbreak is just the application of our legal abilities. A smart business owner can then make the executive decision about how to proceed once properly informed about the risks.
Other questions may be judgment calls. In another matter we recently reviewed, a business owner had enforceable contracts with numerous customers. The contracts were enforceable regardless of the Coronavirus outbreak, but the customers were unable to pay because of their own loss of income. Our client had the option to file lawsuits to collect, which would have been perfectly legal. However, the smart business decision was to permit those contracts to go unpaid for a month, but on the condition that the customers agreed to renew their agreements afterwards. With hope, the Coronavirus will only be a memory in a month or so, and everyone will need to get back to business as usual.
As you can see, the decisions that small business owners have to make with regard to the Coronavirus outbreak are not just legal decisions, they’re also practical decisions – and yes, sometimes they’re moral decisions, too. One courageous business owner in Charlotte who owns a brewery is reportedly is paying their employees while they are furloughed. Many, including our office, would say that is the right thing to do, though not all business owners are fortunate enough to be able to afford to do something like this.
Because of the Coronavirus outbreak, our office has decided to waive any fees for initial consultations for small business owners in North Carolina affected by this crisis. We will conduct these consults via phone or videoconference. If you or your business in the Charlotte, North Carolina metro area are affected by this situation, please to reach out to us at 980-999-3557 or email, and we will do what we can to provide some advice to help you protect your small business.