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Coronavirus - Compliance risks for companies under the Infection Protection Law - Germany

  • Germany
  • Litigation and dispute management

31-03-2020

I. Introduction

The Covid-19 pandemic poses new challenges to society as a whole and to each individual. The rapid spread of the virus is currently prompting political decision-makers to react just as quickly by developing and adopting new measures.

The starting point for the public regulations is usually a law that has already been in force before, but is now becoming increasingly prominent in its practical application - the Infection Protection Act (Infektionsschutzgesetz, IfSG). On the basis of this law, authorities are authorised to issue measures that (significantly) restrict individual freedom. At the same time, the regulations established in the individual federal states differ considerably from one another. Hence, there is great uncertainty among individuals about the current legal situation.

This is particularly problematic, because intentional and sometimes also negligent violations of official orders are often subject to fines or even criminal penalties.

In this regard, the corona crisis poses a particular challenge to companies, as they are also exposed to legal uncertainties every day. In addition to uncertainties and fears about the economic consequences, business owners also have to deal with the question of what special legal obligations the ordered measures such as quarantines, curfews, contact restrictions and closures will have for the company, its management and its employees. The necessary balancing act between, on the one hand, trying to survive the crisis with the least possible economic damage and, on the other hand, fully complying with officially ordered measures can be extremely difficult in the individual case. In order to exclude additional risks for the company and the management with legal certainty, increased diligence should (also) be placed on the "new" catalogue of duties implemented on the basis of the IfSG.

II. Which regulations have to be (newly) observed in the Covid-19 crisis?

The basis of the current imperatives for action due to the Covid-19 pandemic is, as mentioned above, generally the IfSG, both for individuals and companies. In Sec. 73 IfSG alone, the law contains a catalogue of 24 types of administrative offenses. Particularly severe violations of the IfSG are even classified as criminal offences with the threat of prison sentences pursuant to Secs. 74 et seq. IfSG. Particularly noteworthy is the provision of Sec. 75 para. 1 no. 1, para. 3 IfSG, according to which intentional violations of, inter alia, an enforceable official order within the meaning of Sec. 28 para. 1 sent. 2 IfSG can be sanctioned as a criminal offence with up to two years imprisonment or a fine. This also includes certain violations of official regulations and general rulings which have been and are being issued by the individual federal states in the course of the corona crisis in summary proceedings and on the basis of which, among other things, a large number of companies have become subject to an operating ban. Especially in the food processing sector, there are already extensive prohibitions of employment in cases of infections with infectious diseases (cf. Sec. 42 IfSG), the disregard of which leads to separate impositions of fines.

III. Which liability risks exist for companies?

Criminal and administrative offences in principle can only be committed by individuals. Therefore, such proceedings are generally directed against individuals at first, but also entail risks for companies.

Pursuant to the applicable administrative offences law, a company can (also) be punished with a fine if an executive employee commits a criminal or administrative offence and if this offence constitutes a breach of duty relating to the company or if the company should in any case be enriched by this act.

The scenarios of possible company-related offences under the IfSG that can take place in the context of the Covid-19 pandemic are already manifold: An imminent scenario of sanctions is, for example, a violation of the orders relating to the closure of various businesses in the retail trade, which were recently quickly issued by the individual federal states as measures within the meaning of Sec. 28 para. 1 IfSG and which, in individual cases, in terms of their scope of regulation, certainly cause legal uncertainty for the respective addressee. If a company which the authority believes should have been kept closed opens its doors, it is threatened with substantial fines followed by criminal and administrative offences proceedings for the management.

Moreover, the current situation also entails risks of sanctions for companies which are less obvious: Since it is the company's duty within the framework of Sec. 30 of the Administrative Offences Act (Ordnungswidrigkeitengesetz, OWiG) to protect employees from dangers at the workplace, a violation of the respective laws in disregard of the legal regulations under the IfSG can also cause a fine being imposed on the company in individual cases. Only one of many conceivable case constellations is that a desperate head of a department causes or requests (possibly also by means of financial incentives) an employee who - possibly due to contact with an infected person - is required to remain in domestic quarantine pursuant to Sec. 30 IfSG to nevertheless appear at his workplace. Even this incitement to violate the IfSG may, under certain circumstances, cause a fine being imposed on the company pursuant to Sec. 30 OWiG.

In case of sanctions, the company may face considerable financial risks. Sec. 30 OWiG allows a fine of up to EUR 10 million if an intentional criminal offence is committed by an executive employee. In the event of an administrative offence by the employee, a company fine may be imposed up to the maximum amount of the fine that is threatened for the individual offence, which, pursuant to Sec. 73 IfSG, can be up to EUR 25,000 per offence. The amount of the actual company fine is at the discretion of the respective authority and/or the court. Since the current crisis-related exceptional situation requires the collective efforts of the entire society to comply with all of the measures taken, one can hardly seriously hope for lenient decisions by the authorities in case of self-serving offences.

Current administrative practice already shows that specific fines are to be expected. Numerous proceedings for the imposition of administrative fines have already been initiated in many federal states on the basis of alleged violations of the statutory orders under the IfSG. The federal state of North Rhine-Westphalia has recently drawn up a comprehensive catalogue of fines in a Corona Protection Regulation (Corona-Schutz-Verordnung, CoronaSchVO) and explicitly emphasised that companies may also be sanctioned with a fine under Sec. 30 OWiG which, in the respective case, is intended to exceed the economic advantage that the company gained from the violation.

In addition, companies are always exposed to the risk of an asset recovery (Vermögensabschöpfung) in case their employees commit any criminal or administrative offences. Assets which were obtained from a company-related unlawful act can be subject to state confiscation. The object and scope of the sizeable assets need to be determined in each individual case. However, if an officially ordered company closure during the Covid-19 crisis is not complied with, this may result in the loss of the entire company turnover in the relevant period.

IV. How can companies effectively protect themselves against these risks of sanctioning?

The continuous changes in the Covid-19 pandemic make it indispensable for the management of each and every company to deal with the official orders on a daily basis in order to avoid any statutory violations. Additionally, internal compliance requirements should, if possible, also reflect the current regulations under the IfSG in addition to the specific orders and ensure their compliance.

This applies all the more as it can hardly be ruled out with certainty that the individual federal states - depending on how the situation develops - will adopt further drastic protection measures in summary proceedings which will result in serious interventions in entrepreneurial activities and which will also entail considerable risks of sanctions in the event of individual violations. The measures with which the management's duties of action, supervision and organisation can be fulfilled with legal certainty despite the company's "crisis mode" depends on the object and the organisation of each individual company and must therefore be assessed based on the individual case.

If legal uncertainties are identified, it is recommended in any case to first establish legal clarity step by step as far as possible, despite the urgency of the matter, by contacting the competent authority and seeking legal advice, in order to manage the company in a compliant manner even during the Covid-19 crisis and to avoid further complications in a time which is economically challenging for many companies by accepting financially sensitive fines and the associated reputational damage.