As the COVID-19 pandemic forces companies across the economy to allocate scarce resources among myriad pressing issues, environmental, social and governance (ESG) programs can play a core role in reducing corporate risk and enhancing the private sector’s response to the crisis. The pandemic is amplifying recognized ESG issues, while presenting new challenges that require creative solutions from managers grappling with remote—and, in some cases, limited—workforces. In this alert, we focus on ESG activities that warrant immediate attention: supporting the workforce, managing operational safety and environmental obligations and initiatives, and implementing good governance practices.
To combat the spread of COVID-19, many companies are shifting to a remote workforce (either voluntarily, or based on government orders). Remote work raises a number of challenges for employers and employees alike. Companies moving to a work-from-home model should take care to do so in a legally compliant manner.
First, to the extent work-from-home is offered to only a subset of the workforce, employers should ensure that flexible workplace policies are administered in a consistent, nondiscriminatory manner; to the extent that any employees are treated differently, there must be legitimate, nondiscriminatory business reasons. Second, employers who wish to monitor employees’ communications (to monitor their productivity, for example) should consult their established policies and act consistently with those policies and applicable law. Third, employers must ensure that employees continue to be compensated appropriately for time working from home. While remote work may interrupt typical “clock-in” and “clock-out” procedures, employers remain legally obligated to record accurately (and pay) all time worked by nonexempt employees, including time spent on phone calls and emails. While strict timekeeping is not required for exempt employees, such employees generally must receive full salary for any week in which they perform work.
Employers also should be mindful of obligations to provide reasonable accommodations to employees with disabilities, even when they work-from-home. Such accommodations may include, for example, providing ergonomic computer equipment and accessories to employees who would otherwise be provided such accommodations in an office setting. For further information about legal issues employers should consider when going remote, please see our Work-From-Home Legal Issues Checklist and Frequently Asked Questions by Employers.
Employers remain obligated to provide their employees with a safe and healthy working environment during the COVID-19 pandemic. Federal and state occupational health and safety regulations require employers to record instances of work-related injuries and illnesses and to report to the U.S. Occupational Safety and Health Administration (OSHA), or applicable state agency, all work-related fatalities and in-patient hospitalizations, among other events. Although the common cold and seasonal flu are excepted from recordkeeping requirements, COVID-19 is not. Determining whether exposure to COVID-19 was work-related and reporting work-related illnesses within the required timeframe may prove increasingly difficult the more widespread COVID-19 becomes. For further information regarding OSHA obligations and COVID-19, please see Akin Gump’s prior coverage of this topic.
While companies grapple with unprecedented business challenges, many continue to devote resources to assist employees and communities in coping with the disruption caused by COVID-19. Ultimately, these ESG-active companies may reduce risks, improve employee satisfaction and differentiate their brand from competitors. Examples include:
Although facilities from New York to California are scaling back operations significantly or shutting down, it is important to maintain compliance with operational and monitoring requirements. These include reporting and recordkeeping obligations imposed by state and federal laws and operating permits and those assumed through voluntary frameworks.2 Managers should maintain a firm grasp of all applicable obligations (whether mandated or voluntary) and take steps to ensure all pertinent records for the duration of the COVID-19 disruption are accessible,. In particular, companies of all sizes should prepare by implementing the following practices:
The unprecedented, quickly evolving nature of the COVID-19 crisis is forcing companies to respond to new and ever-changing risks. Between facility shutdowns, supply chain disruptions, transitioning workforces and decreased demand for many goods and services, companies must be prepared to assess the materiality of ESG risks on a near-daily basis. This risk assessment will not only inform disclosures to investors, stakeholders and regulators, but also form the basis for assessments of an individual company’s response to the particular challenges posed by the crisis. As always, the key focus should be on material issues, that is, those issues that are reasonably likely to impact the financial condition or operating performance of a given company.7 To address these risks and reduce uncertainty, companies can rely on the traditional earmarks of an effective ESG program—such as target setting, road-map implementation, data collection and reporting—with a critical eye toward the unique and financially material issues this pandemic presents.
Furthermore, good governance during an extended crisis requires increased attention to and early engagement with regulators and other government authorities as they exercise emergency powers to respond to the pandemic. The rapid government response we have seen in recent weeks reiterates the need for immediate and consistent discourse with authorities to secure safeguards through relief legislation and executive initiatives. Companies should look to work together with industry and trade associations and to engage on an individual, targeted basis to communicate pressing regulatory needs. Many groups, such as the American Petroleum Institute, have already initiated outreach, but the opportunity remains for continued engagement on both coordinated and individual bases.8 In addition, and as discussed above, agencies have already begun to provide flexibility through relaxed compliance deadlines and the use of enforcement discretion. Companies should therefore monitor announcements made through agency websites (such as EPA’s and states’ coronavirus-specific webpages), press releases and social media feeds.
Because the United States does not have a federal equivalent to the European Union’s General Data Protection Regulation (GDPR), data security has become a key governance issue within the ESG framework for many American companies, particularly those with European operations. In short, well-governed companies are more likely to have a better understanding of the cyber risks they face, particularly when robust cyber risk management is not legally required.
As we have discussed in greater detail, on March 12, 2020, the United Kingdom’s data protection authority published guidance for data controllers on their data protection compliance obligations during the COVID-19 pandemic.
First and foremost, even in these exceptional times, the data controller and processor must ensure the protection of personal data. Still, proportionality remains the guidepost: “[I]f something feels excessive from the public’s point of view, then it probably is.” While even if not directly applicable, the guidance is instructive for bringing clarity to how companies can assist health authorities in slowing the outbreak’s spread and minimizing their own economic losses, while also protecting personal data:
1 As federal, state and local governments enact new measures to protect workers affected by COVID-19, some employers may be legally required to provide additional paid time off. See our prior coverage of this issue available here: https://www.akingump.com/en/experience/industries/national-security/covid-19-resource-center/house-passes-families-first-coronavirus-response-act-impacting-employee-leave.html. See also https://www.akingump.com/en/news-insights/employer-obligations-under-new-federal-and-new-york-sick-leave-laws-related-to-covid-19.html.
2 Companies reporting through voluntary frameworks such as CDP, the Global Reporting Initiative or the Sustainability Accounting Standards Board should continue to make efforts to monitor and collect reporting data during the pandemic, to the extent feasible.
3 See Memorandum from Susan Parker Bodine, U.S. Envtl. Protection Agency, to All Governmental and Private Sector Partners (Mar. 26, 2020), https://www.epa.gov/sites/production/files/2020-03/documents/oecamemooncovid19implications.pdf (informing the public of EPA’s decision to limit enforcement of some categories of noncompliance, while requiring—among other things—documentation of reasons for noncompliance).
4 Id. at 2.
5 Id. at 5.
6 For example, closings or layoffs may trigger employee notice requirements under applicable law. See our prior coverage of this topic.
7 See Sustainability Accounting Standards Board, “Why is Financial Materiality important?” (2018), https://www.sasb.org/standards-overview/materiality-map/ (defining financial materiality in the context of financially-related ESG decisions).
8 Letter from the American Petroleum Institute to President Donald J. Trump (Mar. 20, 2020), available at https://www.api.org/~/media/Files/News/Letters-Comments/2020/3202020-API-Letter-to-President-Trump.pdf.