What social distancing means for business: Hospitality and retail

Harrison Drury’s commercial dispute resolution and regulatory teams consider how the government’s business closure regulations will affect the UK’s hospitality and retail sectors.

The government’s move to force closure of business outlets in order to protect the public during the coronavirus COVID-19 pandemic has greatly affected businesses including restaurants, bars, cafes, hotels, pubs and non-food shops.

The Health Protection (Coronavirus, Business Closure) (England) Regulations 2020 (SI 2020/327) have forced businesses that sell food and drink, intended to be consumed on premises, to close as of March 21, 2020 until further notice. Further restrictions on other ‘non-essential’ businesses then came into force on March 23, 2020.

Excluded from this closure are catering facilities in hospitals, care homes, schools and soup kitchens that provide food for the homeless. Also excluded are businesses that deliver or arrange collection of food or products.

It is now an offence to contravene these regulations ‘without reasonable excuse’, which is enforceable by local authorities, with police assistance, if appropriate. It is important that businesses affected by these regulations make note of these key legal considerations.

Compliance with the new regulations

If you are the owner of a business in the hospitality and retail sector, it is important that you immediately make the necessary changes to ensure your business complies with the regulations and the government’s advice on social distancing.

Local authorities have powers of prosecution under section 222 of the Local Government Act 1972 and related businesses will be monitored by environmental health and trading standard officers, together with police, if necessary.

Any business that breaches the restrictions will be issued with a prohibition notice. Local authorities may not have the power to arrest people that breach these regulations and cannot compel any business owner to attend an interview, but, in these unprecedented times, local authorities will likely work closely with police who can compel attendance at an interview under caution via police powers of arrest.

For small and medium sized owner-managed businesses, there is the risk that a business and its owner can be investigated and possibly then prosecuted.

Clearly, the prospect of criminal investigation and conviction is something business owners will be keen to avoid, particularly for company directors, bearing in mind their obligations under company law.

Legal costs incurred in defending – criminal prosecution, irrespective of the outcome, are not recoverable. In many cases these costs can be significant.

Businesses in these sectors that continue to operate must understand their position in terms of compliance with the regulations. Harrison Drury’s regulatory team can provide legal advice tailored to each business’s situation and can advise on any steps to minimise risk.

Reduced staffing

Due to the new regulations, many hospitality and retail businesses have taken the decision to either close or operate at reduced levels, resulting in all or some staff no longer being required.

Businesses keen to retain key employees so they can commence work again once restrictions have lifted can ‘furlough’ these people and join the Coronavirus Retention Scheme (CJRS). It is important to note, that all employees, including those on zero-hour contracts, may be eligible for the scheme.

Further information on the Coronavirus Job Retention Scheme (CJRS), can be found in our CRJS guidance blog post.

Dealing with supply chain issues

The coronavirus COVID-19 pandemic has and will continue to globally disrupt supply chains and cause difficulties in creating the new ones required by businesses. Some factories have been forced to halt production, whereas others are operating on a skeleton staff causing inevitable delays.

Arrangements are in place to provide cover for the thousands of agricultural workers that usually come from abroad to harvest British crops. Shipping and freight options are also currently limited, both within the country and from abroad.

Businesses in the hospitality and retail sector face difficulties in being unable to meet commitments to customers due to non-delivery by suppliers, both due to goods being  simply unavailable and also because imports from abroad, via air or ship, have been placed in quarantine.

In such circumstances, a close examination of the supply contracts entered into by the both parties will be crucial. Businesses need to quickly ascertain whether they may have a claim against the suppliers for damages due to non-delivery, delayed delivery or delivery to the wrong location.

Businesses should maintain clear, documented evidence of any losses suffered due to supply chain issues in order to support a damages claim, should litigation be required.

Managing cash flow

Cash flow will also be of concern to businesses within this sector. Due to coronavirus related stockpiling of goods and due to concerns over disruption of deliveries, some businesses feel they have little alternative but to pay for goods supplied to them sooner than would usually be anticipated.

In contrast, where businesses are selling to other businesses, as opposed to consumers, payments are often being delayed for invoices in respect of goods already supplied.

The risk, particularly to small and medium sized businesses, is that they will become starved of cash.

To mitigate this:

• Wherever possible, ensure payment dates are clear, with cash due on delivery.
• Adopt robust credit control procedures.
• Seek business interruption loans, where appropriate.

Taking prompt legal advice on these issues will give you and your business the best chance possible of coming through this current economic hardship.

We can also provide tailored advice to help you protect your interests during the coronavirus crisis and offer solutions to help you and your business minimise risk into the future. You can discuss your options with Harrison Drury’s commercial dispute resolution team or regulatory team on 01772 258321.