Are Covid Immunity Laws Good for Franchising?
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Are Covid Immunity Laws Good for Franchising?

Are Covid Immunity Laws Good for Franchising?

This post solely reflects the views of the author, and not that of Fox Rothschild or any of its other attorneys.

While I am not opposed to immunity laws generally, I am not fan of immunity that is too broad. Given that stance, I have grave concerns about the liability protections and Covid immunities being offered to business in the context of the HEALS Act and other legislation at the federal and state level. Why? Because I am not sure they will help, and they sure could hurt. We as a franchise industry should want our customers to feel comfortable and confident when coming to shop, dine, or otherwise visit our establishments. And we should want our employees to feel completely safe – and to be safe – when they come to work.

The issues with the current Covid immunity proposals are, I believe, threefold. First, the HEALS Act establishes the standard of gross negligence to even get into the courtroom. (There are actually several more hurdles to legal access, but this is the biggest.) This is an extremely high standard for anyone wishing to challenge the grant of immunity. As one law professor I heard interviewed on the radio pointed out, gross negligence is the equivalent of a drunk driver driving the wrong way on very busy freeway. In other words, it is a standard nearly impossible to meet. Such a standard may sound great from a liability protection point of view. But I expect it will be counter-productive and discourage the public from coming back to restaurants and retail establishments.

Second, the HEALS Act doesn’t set any standard for the level of protection of consumers and employees that needs to be provided in exchange for the immunity protection. The House bill passed in May directs the creation of national standards and compliance with them in exchange for qualified immunity. The HEALS Act, in contrast, merely requires “reasonable efforts” toward compliance with voluntary standards. Moreover, it allows for the use of the lowest standard available in your jurisdiction, such as a lower state or local standard. Again, while such a standard sounds attractive on the surface and may be easier to comply with, it is unlikely to do much to encourage the public to return to dining out or shopping robustly again.

Third, based on data from Open Table and the credit card industry, reservations and spending at retail establishments, and particularly at restaurants, go up and down depending on the severity of the coronavirus in a region. Immunity exemptions, when the coronavirus is not under control, are highly unlikely to alter that behavior – and might actually cause fearful people to stay home.

Federal Reserve Chairman Jay Powell said recently that, “The path of the economy is going to depend, to a very high extent, upon the course of the coronavirus and on the measures we take to keep it in check.” Qualified immunity waivers, coupled with strict Covid regulation makes sense, is likely to assist in control of the virus, and as such, is likely to support an economic rebound. Unfettered immunity waivers have the risk of prolonging the crisis and preventing a robust economic recovery. I know which path I choose. How about you?


John R. Gotaskie, Jr. is a partner with Fox Rothschild representing individuals, partnerships, and companies in diverse legal matters including complex commercial litigation, bankruptcy litigation, and franchising issues. The original article appeared here. Contact him at JGotaskie@foxrothschild.com or 412-394-5528.

Published: August 7th, 2020

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