Are COVID Immunity Laws Good For Franchising? (Part 2: The Counterpoint)

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My vote is YES! In fact, I think they are essential! I thus respectfully disagree with my partner and colleague John Gotaskie.

John appropriately focuses on three stakeholders in discussing immunity legislation: business operators, employees and consumers. In my opinion, COVID immunity laws are critical to franchisors, franchisees, franchise employees, and consumers.

COVID has pitched a small nuclear device into the franchise industry. Overnight everything changed. Franchisors and franchisees were faced with shut-down orders, obtaining needed inventory and supplies became problematic, some businesses retooled to offer contactless and/or delivery services, employees needed protective equipment, facilities needed to be adapted, and new distribution methods too often required additional investment. In short, doing business became more expensive and more complex, at the same time that revenues decreased. Now those same businesses face the challenge of reopening even as the COVID threat persists.

There is a regrettable absence of cohesive guidance on reopening safely. A franchisor trying to advise its franchisees, and a franchisee trying to protect its employees and guests, bear the risk of critical decisions that must be made in the regrettable absence of clear guidance. And what guidance there is changes frequently, sometimes for apparent political reasons and sometimes because medical professionals are learning more about the virus every day. While some businesses may take unfair advantage of the absence of clear rules, I believe the vast majority of businesses will strive in good faith to protect itself, its employees and its guests, even though at the cost of added expense. Opening safely benefits every business.

I agree that a “reasonable effort” standard of compliance with any standard, and excusing all but “gross negligence” go too far, but I strongly disagree that the answer is narrow immunity. Nixing broad immunity legislation, save the ephemeral (and impossible) ideal statute, helps no one. In addition to exposing franchisors and franchisees from the additional costs of reopening, the absence of expansive immunity legislation exposes the industry to the unknown and unknowable expense of litigation based on varying legal standards. Insurance costs can be expected to skyrocket, again at the expense of the business operator. When will the additional expense so overburden a business that it will not reopen . . . or will close? Losing businesses that employ millions of people, especially as the millions who lost their jobs because of the pandemic need to return to work, will not help the economy or consumers – who are themselves employees.

John argues that broad immunity legislation will discourage consumers who fear the virus from staying away from businesses. In truth, what will keep consumers at home is the degree the virus is controlled in the entire community. It’s just as Fed Chairman Powell explained: “The path of the economy is going to depend . . . on the measures we take to keep [the virus] in check.” That path demands attention to both medical and economic issues. It’s a difficult calculus, but if businesses are expected to reopen despite the ongoing pandemic (and that is another philosophical discussion), businesses must be protected from the lack of consistent federal guidance. Good faith efforts to comply with reasonable guidance should be rewarded with generous immunity.

The Senate HEALS Act includes a level of immunity that may be too broad. But the House’s HEROES Act and the Senate’s HEALS Act (assuming it emerges substantially in its present evolving form) will be the subject of Congressional negotiations. With the ameliorating effect of the House, a better immunity bill, one that sets a clearer standard for compliance, should emerge.

That’s the kind of business immunity that the franchise community needs!

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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