As America reopens, prepare for a flood of coronavirus workplace lawsuits

Key Points
  • Legal experts say there is no existing playbook to combat lawsuits that could result from businesses reopening amid the coronavirus pandemic.
  • House Minority Leader Kevin McCarthy, R-Calif., said liability protections for doctors and businesses are the top priority for GOP leaders: “No bill will pass without it,” he said speaking Tuesday on CNBC.
  • Labor advocates worry that blanket immunity would create disincentives for even law-abiding employers to protect their workers — producing a race-to-the-bottom for workplace standards. 
  • Small business owners are the most worried about legal consequences and are stocking up on protective gear, like masks, gloves and sanitizer.
Tracy Singleton, owner of Birchwood Café in Minneapolis, Minnesota, remains cautious about reopening. "I don't feel safe having people walk into my environment yet," she says.
Tracy Singleton

Like many small business owners, Edgar Comellas, owner of Aces Wild Entertainment in Florida, has seen business grind to a halt since March. His company, which arranges casino games for corporate, fundraising and private events, has returned deposits and doesn't have any new bookings on the horizon.  

Times are hard, but Comellas isn't exactly rushing to get back out there. He's been stocking up on protective gear such as masks, gloves and hand sanitizer while contemplating eye goggles, plexiglass dividers and new arrangements, like three blackjack tables for the price of two so as to allow for more space between patrons. Florida, like many other states, is slowly reopening, but Comellas still worries about the lack of concrete guidelines and the risk of opening himself up to potential liability. 

"If you called and said you want a party at the end of June to kick off summer and then two weeks later we end up on the news as the new hot spot, with 100 people tested positive and five died, even though you and I and the event provider took precautions but some individual was sick. Do you want to risk that?" he said. 

Comellas is far from alone. As businesses prepare to reopen, business owners are left to make difficult decisions about how best to keep the business running while protecting customers and employees and fending off potential liability. 

"Businesses all over the country, but especially small businesses, are pretty worried about liability risks," said Harold Kim, president of the U.S. Chamber Institute for Legal Reform. "There is no playbook for this. Litigation is particularly damaging to Main Street because the level of potential damages can close down your doors," Kim said. 

Coronavirus litigation could set record 

Anecdotally, lawyers said they see more advertising from ambulance chasers, more lawsuit lending and increased funding from investors, including hedge funds, to provide capital to firms to pursue litigation. 

Burford Capital, a publicly traded litigation finance firm, said in March that it expects a "heightened level of engagement as firms and their clients head into a potential downturn and also come to grips with the economic damage inflicted by the coronavirus."

Kim said there are precedents, including consumer class-action litigation resulting from the Great Recession of 2008 and, in the 1990s, asbestos class actions. "But the level of litigation here in the wake of coronavirus could overshadow all of that," Kim said, likening the capital and infrastructure ramping up around litigation to drinking water out of a fire hose. 

Businesses "have to get some kind of qualified immunity or it will be open season on employers," said Andrew Sherman, partner at Seyfarth Shaw in Washington, D.C. 

Rep. McCarthy on new House relief package, rising China tensions and more
Rep. McCarthy on new House relief package, rising China tensions and more

Lawmakers and business owners are weighing the desire for a broader reopening of the economy, with concerns about safety and litigation. President Donald Trump has proposed shielding businesses from lawsuits, and Senate Majority Leader Mitch McConnell has said that the issue would be a priority.

House Minority Leader Kevin McCarthy, R-Calif., told CNBC's "Squawk Box" on Tuesday that the leaders would start with liability protections for doctors and businesses. "Liability protections would be the No. 1 thing I would look at," McCarthy said. "No bill will pass without it."

There is also some bipartisan debate on both the federal and state levels to limit liability.  

Most of the proposals focus on limiting liability from customers. There's already been a number of consumer class-action lawsuits against companies and organizations, such as Live Nation and Major League Baseball, involving refund disputes. There are also increasing disputes involving insurance coverage as restaurants and other businesses find that pandemics are generally excluded from business interruption insurance

Businesses should expect employee lawsuits 

For employers and employees, the risk is more complicated.

Workers' compensation laws, which limit the liability for employers, and tort law, which establishes liability for intentional or accidental wrongdoing, vary state to state. Even so, lawyers say they expect a wave of employment-related litigation as more businesses open up.

Over 1,000 coronavirus-related lawsuits had been filed as of last Wednesday, according to a case tracker by the Hunton Andrews Kurth law firm, but only 45 cases related to medical claims, reveals an analysis from the Insurance Journal. Cruise ship operators, meat-processing companies, senior-care facilities and Walmart are among those facing legal action related to medical issues.

Walmart has been sued by the family of a worker who died of coronavirus complications.

"We are heartbroken at the passing of two associates at our Evergreen Park store and we are mourning along with their families," a Walmart spokesman said. "While it may be impossible to determine where or how someone contracts the virus, we have taken steps across the country to protect our associates and customers," he added.

Those measures include additional cleaning measures, installing sneeze guards at registers, placing social distancing decals on the floors and limiting the number of customers in a store at a given time. Screening associates, conducting temperature checks, and requiring that associates wear masks or other face coverings at work is also part of Walmart's plan.

"We take this issue seriously and will respond as appropriate with the court," the spokesman said. 

Caution tape hangs at the entrance of a temporarily closed Walmart store, where a number of employees tested positive for the coronavirus disease and one employee died, in Quincy, Massachusetts, May 5, 2020.
Brian Snyder | Reuters

As of last week, at least six Amazon workers had died as a result of the coronavirus. The online giant has expressed "sadness" at the passing of employees in public statements, and Amazon said in its last earnings that it will spend $4 billion on the coronavirus, including safety measures. The company has cited many cleaning and disinfecting measures it already uses in warehouses around the clock, but it has been criticized for refusing to disclose data showing the full scope of employees who have fallen ill or passed away from the coronavirus.

Tensions have been growing between Amazon and warehouse workers nationwide about safety protections. Last week, 13 U.S. attorneys general asked Amazon CEO Jeff Bezos and Whole Foods CEO John Mackey to provide a state-by-state breakdown.

McDonald's employees in Chicago filed a lawsuit this week against the fast food giant alleging lack of safety measures to protect them in the workplace amid the pandemic.

Meat-processing plants have emerged as hot spots, with CDC testing showing cases at plants across the country and one plant in South Dakota having to close in April after hundreds of workers tested positive for Covid-19.

Recent lawsuits from workers also relate to jobs lost as a result of Covid-19 shutdowns. Former Hooters employees have banded together in a class-action suit alleging that the restaurant chain violated a federal employment law called the WARN Act, which requires advance notice before mass layoffs that do not involve a plant closing. 

We're being asked to open up. To go out there and be warriors. We're literally on the front lines but have no battle plans or proper ammunition or even working guns.
Edgar Comellas
owner of Aces Wild Entertainment

One of the most significant areas of concern, said Kim of the U.S. Chamber Institute of Legal Reform, is exposure claims against businesses, schools or places of worship that didn't take reasonable precautions to provide a safe workplace. The Chamber has proposed a safe harbor for companies and other entities that follow CDC guidelines as well as state and local guidelines. A barrage of industry groups, ranging from manufacturers, restaurants, casinos and hospitals, are pushing for liability protections. 

"People are making high-stakes decisions right now as to how to proceed, affecting a lot of people," said Barb Dawson, partner at Snell & Wilmer and chair of the American Bar Association's Section of Litigation. 

Labor advocates fear 'race to the bottom'

Labor advocates worry about the consequences of freeing businesses from liability. Testifying before the U.S. Senate last week, Rebecca Dixon, executive director of the National Employment Law Project, argued that granting any sort of immunity to businesses as part of reopening the U.S. economy requires taking into account the millions of unemployed workers who want to go back to work but who are terrified of the conditions that may await them.   

"In order to achieve that safety and confidence, workers and consumers must be able to hold employers accountable for unsafe workplaces and other violations of the law. Were Congress to grant employers the immunity that some have long sought, it would create disincentives for even law-abiding employers to protect their workers — producing a race-to-the-bottom for workplace standards — and would cause a health and safety disaster, with new hot spots across sectors and spread across communities," Dixon testified.

CNBC's latest WorkForce Survey for Q2 2020, released earlier this week, found that 53% of employees across the country want their workplaces to place a limit on size of workplace gatherings; 47% want testing for all employees; 41% want a requirement that all employees wear masks.

Lawmakers are getting a lot of pressure to lift shelter-in-place rules, and businesses are economically incentivized to open. But with no vaccine yet proven, and people going back to work, "it's a when, not if someone gets Covid-19 in the workplace," said Ben Rothstein, partner at Keker, Van Nest & Peters in San Francisco. 

CNBC|SurveyMonkey Q2 2020 Workforce Survey

For employers whose workers are less efficient from home or who can't work from home and are now in a jurisdiction where shelter-in-place rules are being lifted, Rothstein says the question is, "Do I force them to come back or give them an option? Am I exposing myself to wrongful termination if I fire the ones who don't?" He adds that for those who decide to have employees come in, businesses "need to figure out how to make it safe enough."

Lawyers anticipate class-action lawsuits from employees for hazard pay or other benefits, as well as lawsuits related to terminations and severance payments or wrongful termination suits. 

Tracy Singleton, the owner of Birchwood Café in Minneapolis has been closed for eight weeks, forced to cut 54 employees and switch to a curbside pickup, takeout and delivery model. While some restaurant owners are clamoring to open, she remains cautious. 

"I don't feel safe having people walk into my environment yet. Will customers be wearing masks? I kind of want somebody in charge to tell me what to do, but I also appreciate that our governor and board of advisors don't want to overregulate us either," Singleton said. 

"We're being asked to open up. To go out there and be warriors. We're literally on the front lines but have no battle plans or proper ammunition or even working guns," Comellas said. "[We need] some guidelines and direction so we can avoid litigation."