Why your contracts need to include the right to suspend
Australian States have at times ‘closed their borders’ to residents of other States when those residents are deemed to be at risk of spreading COVID-19. For most of 2020, Victorian residents were intermittently excluded from other States, while we attempted to get our second outbreak under control with a three-month hard lockdown. However, things became more complicated when the Delta variant of COVID-19 spread into Victoria’s northern neighbour, New South Wales, where it is still spreading.
Our client found themselves in a pickle. Its business is situated in Victoria. However, it had a subcontract to undertake works in a town in outback New South Wales where the works had been mostly completed. If it did not complete the works in a timely fashion, it would be liable for liquidated damages. The two employees best suited for completing the job were in Victoria. It wanted to know whether it could send its employees to New South Wales to do the job, and whether it would have to pay for hotel quarantining when its employees returned. The difficulty was that there was a complex web of regulations governing who could come into New South Wales and the terms upon which they could do it, and an equally baffling set of regulations governing who come into Victoria, and what their obligations were when they re-entered.
There was also the accompanying problem of whether it was safe from an occupational health and safety perspective to send the employees into an area where COVID-19 was present particularly when, at that time, Victoria did not have a COVID-19 outbreak of its own. Added to this, the Victorian regulations were changing on a day-to-day basis, so what might be allowed on Monday, may not be allowed on Tuesday. Could the employees end up stranded in New South Wales and unable to return to their homes? This type of situation is one that you might expect to encounter if you had employees working overseas, not just ‘up the road’!
This issue is one we think industrial companies in Australia need to be alive to. Used to moving back and forwards across State borders with impunity, many companies have a presence, employees and contractual obligations in multiple Australian States. Sadly Covid does not look like it is going to disappear anytime soon, and as infection rates vary dramatically from region to region, it is unlikely that there will be a standardisation of approaches and regulations. In the end, after much pulling apart of the relevant Directions and Acts, we managed to find a workable solution for our clients. But there is no getting away from the fact that this was a relatively timely and costly exercise for a not particularly large contract. It would be so much better to avoid the issue in the first instance.
Which is why we are now recommending that contracts should include a right of suspension so that if and when these kinds of government policies are put in place, you have the right to suspend work without fear of liquidated damages. We have also updated our free contract assessment tool to include this as a risk factor. If you have any questions about this issue or are having similar problems, please get in touch: firstname.lastname@example.org