Coronavirus: FAQs for Retail Businesses

Last updated 16:15, 30 June 2020

COVID-19 (better known as Coronavirus) has been declared a pandemic by the World Health Organisation. The situation is developing on an almost hourly basis.

In view of these challenges, below are some of the most common questions we have been asked by clients in the retail sector, and our responses. This is information is subject to change and further information can also be found here. This Q&A is intended as general guidance only; a response to specific queries and comprehensive legal advice on any of the issues discussed in this note is available on request.

1. What disruption to my usual business practices should I expect?

It is difficult to predict the full extent of disruption to everyday business practices in this constantly changing situation. However, the following are current concerns for many of our clients in this sector:

• Staffing reductions: as a consequence of employee sickness, self-isolation and the utilisation by businesses of the government's furloughing scheme, businesses across all industries are likely to experience periods where they have fewer active employees.

• Store closures: with the exception of grocery and other essential goods, many retailers have been required to close for a significant period. Consequently, we are seeing retailers make changes to the way customers' shop in order to adapt to the new normal. In a promising move, the government has recently announced that, in addition all non-essential retail shops being permitted to re-open from 15 June 2020, many other business and venues will also be permitted to re-open from 4 July 2020.  These include, among others: hotels, hostels and bed and breakfast accommodation; bars, restaurants, cafés and pubs that are self-contained and that can be accessed from the outside; and hair salons and barbers, including mobile businesses. Further information regarding how you can prepare your business for re-opening can be found in section 9 below: What might the future look like?

• Consumer confidence: one of the key challenges facing retailers is a nervousness to spend on the part of UK households. On 1^st May, the FT reported that amounts held in bank accounts in March rose by the biggest amount on record. Until the government sets out its plan for relaxing lockdown and reopening the economy, we expect this to continue. Many of our clients have voiced concerns about a slow return to normal even once lockdown is softened.

• Reduced demand and cash flow: certain product classes are flying off the shelves, and indeed Unilever's chief executive had predicted that increases in demand for cleaning and personal hygiene products will become permanent. But in other areas, success will depend on a business' adaptability - holiday clothing may be out, but loungewear is most definitely in.

• Fluctuating commodity prices: the price of oil sunk in March, rising again towards the beginning of April, before dropping again recently due to falls in demand. Similar price volatility is occurring in goods throughout the market and this may result in a direct impact on your costs. If contracts include price variation clauses, the impact of these fluctuations may flow through supply chains even if businesses are not directly impacted.

• Disruption to the movement of goods: checks at borders and government-imposed quarantines are also likely to cause disruption. The UK Border Force are prioritising checks on medical equipment, which may lead to delays in processing for other goods, particularly if the border force is affected by reduced head count. As we know all too well, countries may impose or extend quarantines or lockdowns, thereby affecting the market's ability to produce and/or move goods on time.

2. What changes should I make to my business practices to ensure I comply with government guidelines and the law whilst maintaining productivity, where possible?

The below are a mix of government recommendations and examples of good practice that we have seen from clients in this sector. You may also wish to consider additional measures over and above the below to protect the integrity of your operations, and even your brand, at this time. What is appropriate will, of course, depend on the nature of your business.

Government guidance states that businesses should consider whether certain business activities need to continue for the business to operate and, if so, to take appropriate action to mitigate the likelihood of virus transmission.

• Health and safety: the Department for Business, Energy and Industrial Strategy has published the following detailed guidance to assist employers in keeping their workplaces operating safely and efficiently, a summary of which can be found here.

• Split work force: some businesses have split their work force across different locations to minimise virus transmission whilst maintaining productivity. This works well for manufacturing but is likely to be more difficult in a retail setting.

• Reduced product range: some businesses have significantly reduced the range of products and services they are offering. In addition to ensuring that customers are able to purchase more of the essential products they require, this practice is enabling businesses to adapt to cope with disruption to manufacturing and supply chain logistics, and to increase floor space for social distancing measures.

• Limits to online orders: in response to enforced store closures, the ability for businesses to continue trading online has become increasingly important. In order to maximise productivity whilst also adhering to the government's safety guidelines, some businesses have imposed strict limits on the size or volume of online orders that customers can place in any given period.  This ensures that businesses can maintain their online functions with reduced staffing levels, whilst also ensuring that the safety guidelines can be properly enforced for those employees who are required and/or able to work. For companies seeing a surge in demand, many are implementing online queuing systems to avoid site crashes.

3. How could I be affected as a tenant of commercial premises?

• Please note: in each and every case, due considerations needs to be given to the occupational documents. Each lease differs and, therefore, the applicability of the issues outlined below will vary accordingly.

• Freeths has prepared a Coronavirus FAQ article for landlords and tenants of commercial properties for you to read.

If I do not pay my rent, can the landlord take from the rent deposit and ask me to top it up?

First and foremost, it is important to check the terms of your rent deposit deed.  Please contact our real estate team if you require assistance with this.

In the majority of circumstances, however, it is likely that your landlord will be able to take funds from the rent deposit. They may also be entitled to request that you top-up the rent deposit fund. The terms of the rent deposit deed may also dictate whether the landlord is required to take from the rent deposit, or whether they can pursue other means of recovering the rent from you. However, in light of the government measures outlined above, landlords are currently limited in their ability to utilise these alternative means.

Can I be charged interest on late payment of rent?

It is important to check the terms of your lease, although it is likely that landlords will be able to charge interest.

4. How can I mange employees during this time? What rights do employees have?

It is important to consider your duties to your employees. Freeths has prepared a Coronavirus: FAQs for Employers article which covers this topic.

5. Can I require employees to take a Coronavirus test, or have their temperature tested?

You may ask employees to participate in Coronavirus or temperature testing. Although you cannot force an employee to take a test, if the employee's explanation for refusal is unreasonable, there may be grounds to take disciplinary action. This would be on the basis that they have failed to follow a reasonable management instruction.

It is important that employees have a chance to explain their reasons for declining testing. If they are unreasonable then the employee should receive a warning before appropriate action is taken. What is appropriate depends on the situation and we would recommend seeking legal advice in each case.

6. Dealing with supply chain disruption: are suppliers released from their obligations under my contract?

Please take a read of our FAQ article relating to Coronavirus disruption to commercial contracts and supply chains.

7. Will my insurance policy cover losses relating to Coronavirus disruption?

Freeths has prepared the following FAQ article that covers the key issues relating to business interruption insurance. Our Head of Financial Regulatory Services, Adam Edwards, is also available to advise on individual policy wording.

8. What government support am I eligible to receive?

Freeths has prepared FAQs relating to the following:

• Coronavirus Job Retention Scheme.
• Other forms of government-back business support.
• . What might the future look like?

Social distancing and other government guidance is likely to change the way retailers operate for the short to medium term, and many of you will be planning ways to adapt your business accordingly.

The government has recently announced that, in addition all non-essential retail shops being permitted to re-open from 15 June 2020, many other business and venues will also be permitted to re-open from 4 July 2020.  These include, among others: hotels, hostels and bed and breakfast accommodation; bars, restaurants, cafés and pubs that are self-contained and that can be accessed from the outside; and hair salons and barbers, including mobile businesses.  A full list of the businesses that will be permitted to re-open from 4 July 2020 can be found here.

As employers, retailers have a duty to reduce workplace risk to the lowest level that is reasonably practicable.  In the context of COVID-19, retailers should carry out an assessment of the risks posed in the retail environment by COVID-19 as soon as possible, working through the following steps in order:

• Ensuring both workers and customers who feel unwell stay at home and do not attend the premises;

• Increase the frequency of handwashing and surface cleaning;

• Make every reasonable effort to maximise home working and, where this is not possible, make every reasonably effort to comply with the social distancing guidelines issued by the government; (2 metres, or 1 metre with risk mitigation where 2 metres is not viable); and

• Where social distancing guidelines cannot be followed in full, consider whether the activity in question needs to continue and, if it does, undertake all actions possible to mitigate the risk of transmission between staff and customers. If staff are required to work face-to-face for a sustained period within more than a small group of fixed partners, it is particularly important to consider whether the activity should continue.

It is also important in any assessment to have particular regard to staff members that may be particularly vulnerable to COVID-19.

We recommend the Government's COVID-Secure guidance for shops and branches and, in particular, the further mitigating actions listed on page 8, as a useful means by which to identify the key steps that can be undertaken to ensure that the points outlined above can be met. Further information can be found in our Health and Safety update: how do companies now remain COVID-Secure? article.

For any questions on anything mentioned in this article please contact our Retail team. 

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If you would like to talk through the consequences for your business, please email us and one of our team will get in touch.