Legal Guide to Coronavirus (COVID-19)

Last updated: 29 January 2024

Legal Guide to Coronavirus (COVID-19) – This guide aims to answer some of the most frequently asked legal questions about the impact of the Coronavirus on Australians and Australian businesses. We’ve divided this legal guide into the following sections:

• Refunding customers and clients
• Cancellation or termination of contracts
• Employer obligations to employees and contractors
• Paying rent on commercial or residential property
• Government assistance plans

We’ll be updating this guide as more information becomes available and legal issues raised by COVID-19 come to light.

Legal issues covered in this guide

Click on any of the questions below to jump to that section of this legal guide.

If you still have a question after reading this guide, get in touch, as we’d love to keep adding your questions to this comprehensive guide.

Refunding Customers and Clients

What are the rules about giving customer refunds under COVID-19?

Under Australian Consumer Law, all businesses must honour their refund and cancellation policies. However, since these circumstances are unusual, the ACCC has issued the following guidance:

“If you are unable to provide goods or services during this time, you have the opportunity to work with your customers to find a mutually agreeable alternative arrangement. This could include providing a partial refund, a credit note or voucher, or rescheduling to supply the services at a later date where this is possible.”

The ACCC is saying it is in everybody’s interest for the Australian economy not to be flooded with demands for refunds and cancellation of contracts. So, please work with your customers to try and find a mutually beneficial way to provide your goods or services.

My clients are asking for refunds. Am I obliged to give a refund?

This may depend on the Terms you have written into your Client Agreement. There are two circumstances where your contract may be voided, and you may be obliged to give a refund:

1. Delivery of your services is date dependent (an ‘essential’ clause), and you cannot meet the deadline because of Australia’s Coronavirus lockdown rules or
2. Your contract includes a ‘Force Majeure’, ‘Pandemic’ or ‘Government Regulatory Prevention’ clause that addresses the COVID-19 circumstance.

Otherwise, you might not be required to provide a refund. In these cases, you should work with your client to agree on delayed dates for goods/service delivery and payment.

I can’t afford to give customers refunds. What are my options?

Under Australian Consumer Law, you should be able to refund the deposit if you have received a customer deposit and have not provided the goods or services. You should not have used that deposit for anything other than providing the goods or service to the client!

Be proactive. Contact your customers and offer them the first available alternative date to provide the goods or services. They may be happy to wait, as their businesses may have been forced to close, and they don’t currently need your goods or services or cannot make payment.

Cancellation or Termination of Contracts

Can my clients cancel or terminate our contract due to COVID-19?

It depends on your contract or agreement. Here are two examples where your contract could be terminated:

1. You have a clause that automatically gives one party the option to terminate the contract in the event the other party cannot deliver the goods or services.
2. You have a ‘Force Majeure’ clause, which states that the contract can be terminated in the event of a pandemic or government regulation that prevents the contract terms from being discharged or a similar clause.

I can’t complete my side of the contract because of COVID-19. Does that mean the contract is terminated or void?

It depends on your contract Terms and what you are providing. Here are some examples of what your contract may say:

Time of the Essence/Essential Dates: Your contract may state that delivery of the goods and services must be on a certain date for a certain reason, and the contract is void if not delivered.

‘Force Majeure’ clause: Your contract may have a ‘Force Majeure’ clause which states specifically that the contract is void or terminated with both parties released from their obligations due to “prevention of delivery due to government regulation or shutdown”, “work stoppage” or “pandemic” or other similar obstruction of delivery of the contract Terms.

Frustration: This is a legally recognised contract law doctrine where a contract is terminated in circumstances where an unforeseen event either makes contractual obligations impossible or radically changes the purpose of entering the contract. It is difficult to enforce, as the event must have severe consequences, depending on the specific circumstances, the nature of the contract and the ability to perform or deliver the services or goods.

In any event, you need to review your contract or consult a lawyer to understand your obligations and your ability to provide the goods/services within a reasonable timeframe.

Do Force Majeure clauses in a contract allow it to be cancelled or terminated?

Not always. Just because you have a ‘Force Majeure’ clause in your contract does not mean that you or your client has the right to terminate the contract in the case of a pandemic.

The clause must be specific to the circumstance and actually state termination due to a “pandemic” or “government regulation preventing the performance of the contract”, or something similar.

You should check with a lawyer if in doubt – otherwise, the party attempting to terminate the contract may be liable for damages incurred due to incorrect contract termination.

I don’t have a contract with my clients. Can they stop paying me due to COVID-19?

You are entitled to be paid if you have already provided the goods or services, and they have been received and accepted. Even if you don’t have a written contract, this is the case – a verbal contract is also recognised in law.

You may have to send your client a reminder invoice and even issue a Letter of Demand. Alternatively, you could offer them a payment plan to help with their cash flow. But this option is up to you and your ability to sustain slower payments.

I don’t have a contract with my clients, but I have worked for them for years. Is our verbal agreement terminated?

If you do not have a formal agreement but have been providing services and have been paid over a period of time, there is likely still a verbal (and legally recognised) contract in place. Such a verbal contract is only terminated when one party formally notifies the other of the cancellation or termination of services.

Suppose you are temporarily prevented from delivering your services due to the COVID-19 lockdown. In that case, you should contact your client and agree on a time to recommence services once the restrictions have been lifted.

Employer Obligations to Employees and Contractors

What are my obligations to my employees and contractors during COVID-19?

Your main obligation as an employer is to keep your employees safe. You may need to close down if you are not considered an ‘essential service’. Then, if possible, make arrangements for your employees to work from home.

For more information on your obligations as an employer, click here.

Can I stand down my employees during COVID-19?

Yes, but these employees must be eligible to receive the Government’s JobKeeper payment.

Not all businesses are eligible to stand down employees, and not all employees are eligible to be stood down. For example, if they can be employed in another capacity and have an employment agreement in place, you may not necessarily have the right to stand them down.

We recommend you seek legal assistance if you plan to stand down any employees.

Can I make my employees redundant during COVID-19?

In general, no. Whether you can make employees redundant depends on a number of factors, including:

• Are they casual workers, contractors or permanent employees
• Has Government regulation forced you to shut your business, or has the business suffered a downturn
• Have you received Jobseeker or any other government program benefits, etc.

Again, we recommend you seek legal assistance if you are considering laying off any employees.

Can I terminate my contractors during COVID-19?

In general, yes. If you no longer need the services of your contractors, you can reduce their hours or stop their services altogether. However, always refer to the Contractor Agreement you have with them and abide by the Terms of the agreement.

Can I ask my employees whether they have the Coronavirus?

Because of Privacy Law, you can only collect minimal personal information about your employees’ health. However, you are also obliged to protect the health of your employees. So you can collect what is ‘reasonable’ health information to do this. This includes asking your employees about their health only if you believe they are ill and are exhibiting Coronavirus symptoms.

If one of your employees is confirmed to have Coronavirus, then to protect all your other employees, it would be considered ‘reasonable’ to be more active in checking your employees’ health. For example, take the temperature of all employees entering your business using “no touch” temperature guns.

For more guidance on how to manage COVID-19 health questions with staff, click here.

One of my employees has the Coronavirus. Do I have to tell the rest of my staff?

Again, Privacy Law is the consideration here.

You have an obligation to inform your staff that a colleague or visitor has (or may have) contracted the Coronavirus. However, you should only disclose the personal information that is ‘reasonably necessary’ and on a ‘need to know’ basis to prevent any potential spread in the workplace. Otherwise, you are required to keep this information confidential.

Can I claim against my Business Interruption Insurance?

As of November 2020, insurers cannot deny business interruption claims resulting from COVID-19. The test case had to go to the NSW Court of Appeal, which ruled against the insurance companies and in favour of small businesses. This means that SMEs whose claims had been denied or held up waiting for the test case to be heard can now press their insurance companies for prompt finalisation of those claims.

Paying Rent on Commercial or Residential Property

Can I be evicted from my commercial premises if I can’t pay the lease?

No. Commercial property owners cannot evict commercial tenants who cannot pay their leases because of COVID-19. It is recommended that commercial property owners come to some arrangement with their tenants to defer payments, make partial payments, etc.

In addition, the Government is offering some relief and a stimulus package to eligible businesses. To be eligible, you must be a business that is “severely or significantly impacted” or has suffered “financial stress or hardship” by COVID-19.

For more information about Coronavirus and Commercial Leases, click here.

Can I be evicted from my home if I can’t pay the rent?

Not straight away. If you cannot pay your rent, you now have a longer period of 6 months grace before eviction. But that is the only concession.

At the end of 6 months, you will still owe whatever rent you have not paid and potentially additional interest. If you continue not to pay, there may be other consequences, such as being chased by debt collectors or court proceedings.

You should talk to your landlord and see if you can come to an arrangement that suits you both.

What could happen if I don’t pay my rent?

Your rent debt will keep accruing, along with additional interest charges.

Your Landlord will have the right to keep your Bond to cover the rent. If you owe more than the Bond amount, your Landlord can chase you using debt collectors or by filing court proceedings. This will impact your credit rating, and you may also have to pay filing or court fees.

What should I do if I can’t pay my rent because of COVID-19?

You need to look for alternatives as your rent due will continue to accrue. You could check into personal assistance programs that may be available in your State. For example, Queensland offers personal assistance to cover one month’s rent.

Government Assistance Plans

What is the JobKeeper program?

JobKeeper is a Government program to help businesses impacted by COVID-19 (and the Government’s related policies) to retain employees.

Payments of $1,500 will be paid fortnightly to employers for up to 6 months for each eligible employee on their books on 1 March 2020 and retained by the employer. JobKeeper workers receive either the $1,500 or their normal wage, whichever is the greater and irrespective of the number of hours worked.

The ATO will make payments to businesses via their bank, and employers are legally required to pass these payments on to eligible employees. Payments start on 1 May and are backdated to 30 March 2020.

You can apply for the JobKeeper program here.

What other Government assistance is available?

A long list of Government assistance is available around Australia for businesses and individuals/families. For a great list with links to the information and packages offered, click here.

We hope you found this Legal Guide to the Coronavirus helpful.

About the Author: Vanessa Emilio

Vanessa Emilio (BA Hons, LLB, ACIS, AGIA) is the Founder and CEO of Legal123.com.au and Practice Director of Legal123 Pty Ltd. Vanessa is a qualified Australian lawyer with 20+ years experience in corporate, banking and trust law. Click for full bio of Vanessa Emilio or follow on LinkedIn.

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