Covid-19 Challenges Highlight Importance of Business Relationships

October 28, 2020

The coronavirus pandemic has upended company operations, requiring organizations to rapidly adjust or fall further behind, said a panel of legal experts at Bloomberg Law’s virtual In-House Forum, “Leading Corporate Legal Departments in Times of Crisis.”

Flexibility and effective crisis management requires maintaining a Rolodex of strategic contacts in advance to minimize disruption.

“You can’t make a friend when you need a friend – having relationships that preexist the crisis is essential,” said Harvey Anderson, general counsel at HP.

[For more news, insights, and guidance related to the coronavirus pandemic, visit Essential Covid-19 Resources for Attorneys.]

The importance of relationships was the focal point of discussion during the forum’s first day. Legal experts from industry and government assessed how the pandemic has affected supply chains, as well as deepened worker and corporate ethical considerations. In navigating these issues, “true” relationships eclipse the limitations of contracts when supplies run low, experts said.

“Sometimes it doesn’t matter what the contracts say, you can’t get blood from a stone,” said Sonja Rajki, deputy general counsel of The MetroHealth System, a northeast Ohio public health care system, in a panel discussion moderated by Bloomberg Law’s transactions team lead, Diane Holt.

When supply networks are jeopardized, Rajki added, companies must “get creative.”

Creativity may require thinking “outside of any contract,” said Christina Zabat-Fran, global vice president, general counsel, and corporate secretary for St. John Knits.

“We’ve been in a retail apocalypse for some time, and Covid certainly escalated things,” said Zabat-Fran, speaking of the entire industry. For the clothing company, minimizing the disruption required close collaboration “with our partners throughout the entire chain – manufacturing, distribution, retail, wholesale – to figure out something [else] that would work,” Zabat-Fran said.

The pandemic has also forced companies to look beyond traditional supply chains. HP strengthened relationships with subcontractors to ensure the supply chain remained operational. “Tier-two and -three suppliers are equally important,” Anderson said.

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New approaches to product manufacturing have also developed. “We made protective surgical mask[s] on our baby care lines, using diaper materials,” said Joe Stegbauer, senior vice president and general counsel of The Procter & Gamble Company.

As Procter & Gamble pivoted to manufacturing PPE, the company leveraged its government relationships to identify expedited regulatory pathways for equipment to reach consumers.

Similarly, MetroHealth System relied on strong government relations to stay apprised of health care regulations, as well as to secure Covid-19 testing supplies and understand the reimbursement policies for the health care system’s skyrocketing number of telemedicine appointments, Rajki said.

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For businesses without a government lead, lawyers “are perfectly suited to take on that role,” Stegbauer said, adding that counsel should consider the role a “value-add to the overall legal value proposition.”

Strong government relationships can also help manufacturers obtain the “essential services” designation to remain operational during lockdowns. To keep employees working, for example, St. John Knits produced masks, which were then donated to hospitals.

“Masks were the winning product,” Zabat-Fran said, crediting the Irvine, Calif.-based company’s close partnership with Gov. Gavin Newsom and Rep. Katie Porter with helping it navigate state regulations.

Millions of U.S.-based workers, however, have been less fortunate during the pandemic. As part of the forum lineup, Maryland Attorney General Brian Frosh weighed in on unemployment.

Finding work is even more difficult without a driver’s license, Frosh noted. “This [pandemic] overwhelmingly affects people who are poor, and who are Black and brown,” said Frosh, whose office sponsored legislation to prevent Marylanders from losing their licenses due to inability to pay fines.

The state law, which went into effect Oct. 1, “will have a salutary impact” on approximately 300,000 Marylanders who have lost their licenses because of an outstanding fine, said Frosh, in a keynote interview with Bloomberg Law reporter Ayanna Alexander.

[Help your company navigate the ongoing impacts of Covid-19. Our special report offers practical guidance, analysis, and sample policies.]

Separately, in partnership with the Maryland Access to Justice Commission, the AG’s office formed a Covid-19 task force to help Marylanders affected by the pandemic. The task force has asked Gov. Larry Hogan to devote CARES Act funds to rent assistance and to extend an eviction moratorium through the end of the year. Thus far, however, these recommendations have yet to be implemented.

With more worker layoffs nationwide, employment lawsuits have also increased. Participating in the day’s forum, Janet Dhillon, chair of the Equal Employment Opportunity Commission (EEOC), spoke with Bloomberg Law reporter Paige Smith about the launch of pilot programs to increase voluntary resolutions – a development in federal anti-discrimination law that legal counsel will want to track.

Dhillon also discussed pay data collection. Because the agency effort unfolded last year upon court order, questions linger about the method of data collection and subsequent data quality, Dhillon said. The EEOC is now soliciting public input on the best way to collect “meaningful” data, Dhillon added.

Looking ahead, companies will continue to face supply chain issues, complicated not only by the possibility of a future pandemic but also national security and sustainability concerns, panelists said. More immediately, companies and their legal counsel can prepare for the challenges by doubling down.

“This time has brought focus,” Anderson said. “It’s made it really, really clear what’s important and what’s not. If I can find a silver lining, that’s it.”

[Learn more about business operations during a pandemic through our on-demand webinar “Reopening During Coronavirus: What Employers Need to Know.”]