Over the last 18 months the Coronavirus pandemic has caused a multitude of new words and phrases, not otherwise used that frequently, to enter our daily vocabulary (think ‘quarantine’ and ‘furlough’!). The latest example seems to be ‘pingdemic’ – the somewhat ominous name given to the sharp rise in the number of individuals being ‘pinged’ by the NHS Covid-19 app, with an advisory notification to self-isolate as a result of possibly coming into close contact with someone who has tested positive for Coronavirus.  Between 8 – 15 July 2021 over 600,000 people were ‘pinged’ and advised to self-isolate in England and Wales alone.  That is by far the highest number of notifications since the app came into service.

The effect has been dramatic. Businesses are reporting a significant impact on operations arising from staff – who are apparently symptom-free - failing to report for work whilst they self-isolate:

• Iceland has closed supermarkets, despite having kept all of its stores open during the lockdown, as a result of 1,000 members of staff being ‘pinged’ and asked to self-isolate.
• Supermarkets across the country are anticipating shortages of certain foods, with the meat industry reporting as many as 10% of workers in isolation after being ‘pinged’. Supermarket bosses have been quick to reassure the public that food shortages are not widespread, with the Business Secretary saying, "I don't want people to get the impression that every shelf in every supermarket is bare - that is not the case but we are certainly concerned about instances of shortages, we are looking at the supply chains of critical industries and we are reviewing that situation”.
• BP is suffering from petrol and diesel shortages leading to some sites closing, in part due to staff being told to self-isolate. This is also compounded by the current shortage of HGV drivers, with the Royal Haulage Association estimating a shortfall of around 60,000 drivers, with an estimated 30,000 HGV driving tests not having taken place last year due to Covid.
• The Royal Mail has also been hit, with service being disrupted in several areas due to members of staff self-isolating following a notification from the app.

It’s clear that this issue is not confined to just one industry and is likely to get worse as a consequence of increased mixing following so-called Freedom Day on Monday (19 July).

Aside from the obvious concerns over health and safety of workers, the impact on supply chains and the capacity of businesses to function/perform has been dramatic. As we have seen from the issues currently facing the supermarket industry, shortages of workers can result in suppliers not being able to fulfil orders and provide stock.  In worse cases (Iceland and BP), businesses have closed entirely. Closing operations and leaving orders unfulfilled may give rise to disputes between contracting parties, at any stage of the supply chain, for delay or non-performance of obligations.  This is undoubtedly a matter of concern for many.

What are your options?

Those concerned by performance issues must start with a review of their contracts. Whether you are a supplier or customer in this scenario, there are several clauses in your contract that may be of assistance:

Force majeure:

Typically, contracts will contain a force majeure clause, such that a supplier may not be liable for non-performance or delay if this is due to a force majeure event (often defined as an event entirely out of the hands of either party). Whether a shortage of staff due to self-isolation falls within the definition of a force majeure event will depend on the wording of the clause. There may be strict obligations to notify in order to operate the clause, so advice should be sought promptly.

It is worth noting, from a UK perspective, that a ‘ping’ from the NHS app is not a mandatory order to self-isolate (compared with direct contact from the Government’s track and trace system) and is instead only guidance. That may be material:  if a worker follows the guidance and self-isolates, it will probably be difficult to characterise a resulting inability to perform arising from voluntary actions (as opposed to mandatory/legal requirements) as giving rise to a force majeure event. Again, this will depend entirely on how the particular provision is drafted, but we would expect the hurdle may be higher in many instances.

Covid-specific provisions

: It may be the case, if the contract has been drafted during the last 18 months, that it contains a specific provision for Covid-related non-performance. Again, the fact that a ‘ping’ from the NHS app is not a mandatory order to self-isolate may have an impact on whether such a clause is engaged and will depend on the wording of the clause.

Limitation of liability

: A supplier’s liability for delay or non-performance may be limited in the contract, for example to the cost to the customer of obtaining replacement goods. Whether you are a supplier or customer in this scenario, it is important that you are aware of the supplier’s liability under the contract in order to fully understand your position.

One should also consider whether the common law doctrine of frustration applies.  If it does, the contract is discharged entirely.  However, we think it will be extremely difficult to argue that frustration is applicable. First, the doctrine requires impossibility or illegality.  Referring back to the above points regarding the app only providing voluntary guidance, this means it is unlikely that the doctrine will assist. Secondly, the doctrine relies on the frustrating event being unforeseen at the point the contract was formed.  So new contracts formed since the pandemic started will run into difficulties, as will contracts that contain express language dealing with Covid issues, or the pandemic: the event is arguable foreseen, and the parties catered for it, even if the wording used is not engaged or of help as the case may be. 

In summary, while the contract might provide some assistance, this may be limited. If that is the case, early discussions with the counterparty to reach a consensual position may be a sensible first step.

For more information on points to consider in relation to contractual performance issues arising out of the pandemic, please refer to our guide here: Lewis Silkin - Contract Issues. The team is available to assist, and in appropriate cases, we can work with clients to reduce or avoid the costs of disputes through our LS Unlock initiative (for more information click here: Lewis Silkin - LS Unlock).

Is help on the horizon?

The Government announced on Monday (19 July) that they plan to allow certain employers in specified industries to apply for staff to be exempt from Coronavirus self-isolation rules if they have been fully vaccinated for at least two weeks, so that they are able to travel to work and perform their jobs. However, it appears that the Government will assess exemptions on a case-by-case basis, and it is expected that the number of exemptions granted will be limited. This is therefore unlikely to help in a supply chain scenario, where not all of the workers within the chain are granted an exemption. For the food industry at least, the Government provided a much needed life line on Thursday night (22 July), confirming that supermarket depot workers and food manufacturers will be exempt from quarantine rules, and will be able to do daily Covid testing instead of isolating if they are ‘pinged’. This will not, however, extend to supermarket workers.

Of course, it shouldn’t be forgotten that the NHS app is ultimately there to protect us, and the resulting ‘pings’ should be viewed with that in mind. The data suggests that downloads of the app are continuing to rise, but there doesn’t appear to be any way of knowing if the app has been deleted and a recent YouGov poll suggests that one in ten users have now deleted the app, with those between 18 and 24 most likely to have deleted it after installing it. While the disruption caused to people’s lives and businesses as a result of being ‘pinged’ is clear, we have to consider if the app will become less useful as more people start to delete it. A balance needs to be struck between protecting the public and allowing industries to continue to function and get back on their feet following a very disruptive period of uncertainty.