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Law360 (May 19, 2020, 4:13 PM EDT) --
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| Isaac Mamaysky |
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| Mark Papadopoulos |
Since many employers will open their doors at a time when COVID-19 is more manageable than it is today but still a risk to both employees and those they serve, businesses are crafting return-to-work plans comprised of numerous risk mitigation strategies. Return-to-work plans will differ, but their underlying goal is nearly identical across industries: protect employees and customers from infection and protect businesses from liability.
Businesses must ensure compliance with new state regulations and industrywide best practices, identify employer-specific safety measures, and implement guidance from government agencies, including the CDC, the Occupational Safety and Health Administration, and the U.S. Equal Employment Opportunity Commission.
All of this planning means that employees and customers will return to somewhat different business settings than the ones which closed a number of weeks ago. Employees should expect health screenings and temperature checks before work, physical safety barriers (like the plastic shields many of us have already seen in supermarkets), limits on the number of attendees at meetings, prohibitions on handshakes, various social distancing measures, and mandatory hygiene policies, including regular hand-washing and mask-wearing.
In addition to setting up appropriate safety programs for workers and customers, businesses have been asking us two questions: (1) Will there be COVID-19 liability legislation; and (2) can we use COVID-19 liability waivers in this new normal? While we wait for answers to the first question, this article addresses the question of waiver agreements between businesses and their customers and employees.
What are waivers?
The term waiver has a twofold meaning. While it is sometimes used to refer to a specific contractual clause which attempts to disclaim liability for various eventualities, the more useful approach is a larger waiver agreement consisting of a series of contractual provisions, each with its own legal impact, which come together to mitigate certain risks of liability. To be sure, this agreement includes the actual waiver clause, but it also includes a number of additional protective provisions which limit liability through other legal mechanisms.
For this reason, in their authoritative work on this subject, "Waivers and Releases of Liability," Doyice and Mary Cotten suggest that the more appropriate name for a properly drafted waiver agreement is what they refer to as an "assumption of risk, waiver of liability and indemnification agreement."[1]
As their proposed name suggests, the primary provisions of a complete waiver agreement are the assumption of risk, waiver of liability and indemnification clauses. Another important provision is the agreement to comply with essential policies.
The secondary provisions include the covenant not to sue, severability, choice-of-law and integration clauses. A complete waiver agreement also includes a proper acknowledgment section preceding the signature.
What are the intended effects of the primary and secondary waiver clauses?
Primary Provisions
The strongest waiver provision is the assumption of risk clause, which explains the inherent risks which cannot be mitigated by the business's care. For example, some of the inherent risks of attending or working at a summer camp might include slipping on a trampoline, falling off a horse, tick bites or sudden changes in weather. The assumption-of-risk clause is intended to disclose these risks and prevent a business from being sued for events that were not caused by the business's negligence.
A slightly weaker provision is the actual waiver clause, which is intended to prevent liability from injuries stemming from a business' ordinary negligence; even if a business did act negligently, the waiver clause is intended to limit liability. While courts sometimes accept waivers of ordinary negligence, they generally disallow waivers for gross negligence, recklessness or intentional conduct.
By the indemnification clause, which is also called the hold harmless clause, the indemnifying party agrees to reimburse the indemnified party for: (1) any loss to others caused by the indemnifying party; and (2) any loss incurred by the indemnifying party. Courts typically uphold these between sophisticated businesses but are reluctant to enforce them when an individual indemnifies a business.
The final primary provision is the agreement to comply with essential policies. This helps establish a contributory negligence defense if a party is injured because of that party's own failure to comply with an essential rule.
Secondary Provisions
The supporting provisions also play an important role in the waiver agreement. States have different approaches to waiver enforceability, and the choice-of-law clause allows the business to select a relevant state with the most favorable law.
The severability provision ensures that, if one clause of the contract is unenforceable, it will not make the whole contract unenforceable. The related integration clause prevents the parties from claiming reliance on any communications or promises that were made before the contract was signed.
Finally, the covenant not to sue has a slightly different effect than the waiver itself. While the waiver eliminates the cause of action, the covenant not to sue recognizes that a cause of action might exist but commits the party to not suing regardless of that fact.
Is there a new role to play for waivers in the employment context?
Probably not. While a number of employers have inquired about return-to-work waivers, courts have traditionally disfavored waiver agreements between employers and employees due to the unequal bargaining power of the parties. Exculpatory agreements in the employment context are generally thought to violate state public policy.
Waivers have an additionally limited role in the employment context, moreover, because of the existence of workers' compensation statutes in all 50 states. Workers' compensation statutes generally provide medical expenses, lost wages and rehabilitation costs to employees who are injured in the course and scope of their employment. These statutes were enacted to provide broad coverage of almost all work-related injuries save for the intentional acts of the employer.
If a workplace injury occurs, whether caused by the employer's negligence or the inherent dangers of the workplace, the employee's claim generally comes within the workers' compensation statute and the employee may not sue the employer directly for damages. This is sometimes referred to as the workers' compensation bar. Employers thus have less need for waiver agreements with their employees than they might with customers, invitees or others.
While waivers have been historically limited in the workplace relationship, one employment context where courts have upheld waivers is where employees are engaged in inherently dangerous activities. Courts have upheld waivers between employers and employees covering such activities as skydiving, horseback riding, wall climbing and physical fitness exams. For a variety of reasons, the workers' compensation bar did not apply in these cases.
Appropriately drafted waiver agreements for employees engaged in inherently dangerous activities can therefore provide some benefits to the parties. It is unclear, however, what new role, if any, waivers will have in the employment relationship as employees return to work more broadly in a COVID-19 environment.
While most workplaces are more dangerous than they were three months ago, it is not clear that these dangers are inherent in the workplace activity. Given the unequal bargaining power between employers and employees, it is unlikely courts would enforce run-of-the-mill COVID-19 waivers.
Is there a new role to play for waivers more generally in business moving forward?
Maybe. As various states reopen, many businesses are exploring how waivers might apply in industries that have not traditionally used them. When thinking through this question, it may be instructive to consider the businesses that have relied on waivers for decades, such as fitness centers, golf courses, community pools, summer camps, YMCAs, ski resorts and many others.
Every gym member has had the experience of signing a waiver agreement before being allowed past the front desk. As customer-facing businesses look to stay afloat while limiting lawsuits related to COVID-19 this experience may expand into other settings.
For example, membership-based big-box retailers already use a card-for-entry model, much like a typical gym. Might other retailers follow suit? Could various service providers modify existing client contracts to add communicable disease waivers? As we move into a post-quarantine world, customers may begin seeing waivers in settings where they have not appeared before.
Any business thinking of doing so, however, should carefully consider the alternatives and whether this is really a necessary step for the business. Waiver agreements are by no means a panacea and must be carefully drafted for the appropriate settings to have any legal effect. Even when drafted properly, a lengthy liability waiver might not be the best way to begin a relationship with customers, who have many competing businesses vying for their attention.
Businesses should bear in mind that risk mitigation begins with a safe environment for employees and customers, compliance with relevant regulations, adoption of industry best practices, highly trained employees, and customers who know and follow all relevant policies. Once this foundation is in place, a carefully considered waiver agreement might be a piece of the larger puzzle.
Isaac Mamaysky and Mark Papadopoulos are partners at Potomac Law Group PLLC.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] The authors of this article owe a debt of gratitude to the Cottens for the tremendous resource they have created, which significantly informs this article's approach to waivers.
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