LEGAL BRIEFINGS

NEWS & LEGAL BRIEFINGS

A legal briefing by definition typically states the legal reasons for a lawsuit based on statutes, regulations, case precedents, legal texts and reasoning applied to facts in the particular situation. Here, Workforce presents two cases related to the COVID-19 pandemic with a resulting impact of the case.

COVID-19 NO EXCUSE TO AVOID PAYING BACK WAGES

The Gym at Greenwich, LLC, The Gym at Porter Chester, Inc., and The Gym at Union Square, Inc. (collectively the “Gyms”) are commonly owned fitness facilities. On December 27, 2018, the Gyms were sued by 40 employees in New York federal court. The employees alleged that the defendants violated the federal Fair Labor Standards Act and the New York labor law by failing to pay wages on time.

The parties reached a settlement Sept. 9, 2019. The Gyms agreed to pay $300,000 25 months; however, if they defaulted, they would have to pay $1 million. On April 29, 2020, the plaintiffs filed a motion with the court asserting that although the Gyms had paid $76,086, they defaulted under the settlement agreement by not paying the rest of the owed amounts. The Gyms responded with sworn declarations from the owners complaining about their bleak financial conditions and asking the court to excuse their non-performance. The Gyms tried to use the contract law defense of “impossibility of performance,” arguing that since New York’s COVID-19 order closed their businesses, they lacked the funds to perform under the settlement agreement.

The court observed that the defense of impossibility only applies when performance under a contract (here, the settlement agreement) is objectively impossible. The court ruled that despite the unforeseen pandemic and executive order, the Gyms had at best shown financial hardship, which did not fit the “impossibility of performance” defense. The Gyms were liable for an additional $923,913. Lantino v. Clay LLC, No. 1:18-CV-12247 (SDA), 2020 WL 2239957, at *1 (S.D.N.Y. May 8, 2020). IMPACT: The COVID-19 pandemic has been challenging for employers, and unfortunately the challenges will likely continue. However, employers should not rely on these unforeseen circumstances as an excuse for failing to meet contractual obligations.

COURT DEFERS TO OSHA ON COVID-19 SAFETY ISSUES

Smithfield Foods is a meat-processing company, which was affected by several federal and state orders related to COVID-19. On April 4, the state of Missouri identified livestock-slaughter facilities as “critical infrastructure.” On April 22, the Occupational Safety and Health Administration sent a “rapid response investigation” letter to Smithfield regarding its COVID-19 work practices and infection at Smithfield’s Milan, Missouri, plant, and giving Smithfield seven days to respond. OSHA requested that Smithfield identify what policies and actions had been implemented in light of the COVID-19 pandemic.

The Rural Community Workers Alliance, which represents the workers at Smithfield’s Missouri plant, brought a lawsuit in the U.S. District Court for the Western District of Missouri accusing Smithfield of failing to adequately protect employees at the Missouri plant from contracting COVID-19. The RCWA raised state-law claims for public nuisance and breach of duty to provide a safe workplace.

The court dismissed the lawsuit. The court dismissed the case under the primary jurisdiction doctrine, which allows a district court to refer a matter to the appropriate administrative agency for ruling. Citing in part the Trump administration’s April 28 Executive Order requiring meat processing plants to continue operating during the pandemic, the court concluded that “OSHA (in coordination with the USDA per the Executive Order) is better positioned to” determine whether Smithfield’s plant was complying with federal guidance. Rural Community Workers Alliance, et al. v. Smithfield Foods, Inc. et al., No. 5:20-CV-06063-DGK 2020 WL 2145350 (W.D. Mo. May 5, 2020) IMPACT: While labor unions and advocacy groups will continue to raise concerns regarding worker safety in light of COVID-19, federal courts may be inclined to defer to OSHA on these matters. Ultimately, by reducing the risk of workers’ exposure to the virus, employers can also reduce their own exposure to liability.

Sukrat Baber and Allison Czerniak contributed to Legal Briefings and are attorneys at Taft Stettinius & Hollister LLP