Is the coronavirus pandemic putting Texas businesses at a higher risk of lawsuits?

By Titus Wu

Like many Central Texas businesses, Austin martial arts studio Dark Clan Fight Lab took a big hit when the coronavirus pandemic hit. About 50% to 60% of the company’s monthly membership was lost within two to three weeks, owner Derrick Garza says.

So when it came time to reopen, Garza implemented procedures to ensure customers it was safe as possible, from requiring masks to checking temperatures.

But even with those procedures, the risk of someone contracting the virus still existed. So partly to protect his company from a COVID-19-related lawsuit, Garza also began requiring customers to sign a liability waiver, having them acknowledge that risk.

“I think everybody that owns a business right now can’t ignore that (a virus-related lawsuit) is a possibility,” Garza said.

Nearly two-thirds of small businesses nationwide with 20 or more employees and half of businesses with 5 to 19 employees are worried about such legal action, according to a recent poll by MetLife and the U.S. Chamber of Commerce.

As COVID-19 cases rise, the legal aspect is one of many in which businesses are navigating between staying afloat and keeping people safe. Some are pushing for a legal shield granting businesses immunity — but others are pushing back, worried that the current legal environment does not protect workers enough.

Lee Parsley, general counsel for Texans for Lawsuit Reform — a lobbying group that advocates for tort reform and limiting lawsuits — says businesses already face many challenges during the pandemic. The costs of defending themselves against lawsuits — especially frivolous ones — would be another financial blow, he said.

“What you really can’t add to a two-and-a-half month shutdown where you got no business at all and no money coming in … is you have a wave of lawsuits,” Parsley said.

Parsley said he expects to see more coronavirus-related legal action from employees as time goes and reopening happens.

Texas is the only state that doesn’t require employers to have workers’ compensation insurance. Companies with that insurance provide benefits to employees for on-the-job injuries in return for a level of immunity from negligence lawsuits.

Without workers’ compensation insurance, “you don’t enjoy the workers’ comp bar, you’re more likely to get lawsuits by your employees for on-the-job injuries,” Parsley said. “And so yes, Texas is slightly more likely to see employee-based litigation for COVID disease than might be the other 49 states.”

Rick Levy, president of Texas AFL-CIO, a state federation of labor unions, said he sees those concerns as distracting from the real issue: employees who fear their workplaces aren’t properly protected from the coronavirus.

“Virtually every sector of the economy that people who are still having to choose everyday between putting their lives, their family’s lives at risk and being able to continue to earn their paycheck,” Levy said.

Both Parsley and Levy said the nature of current rules and guidelines on COVID-19 are leading to confusion.

Government-issued guidelines will likely play a role in a court’s determination of how reasonable someone’s actions were, Parsley said. But there are so many different guidelines from different levels of government it’s hard to follow every single one of them, he said.

That was one obstacle Garza faced when reopening his martial arts studio — confusion at one point when Austin and other cities had required masks, then Gov. Greg Abbott banning enforcement of those rules before eventually allowing businesses to require them.

“When you have something like that and you’re trying to keep the business afloat, it’s hard to enforce,” said Garza. “Because there isn’t consistent protocol on what we should do, I think it makes it harder to convey to people that they should come in because it’s safe.”

Any missed guideline could potentially be used against a business in court, Parsley said.

The guidelines and rules are also difficult to enforce, Levy said.

Adam Orman, owner of L’Oca D’Oro restaurant in Austin, said the inconsistency in the guidelines and in their enforcement is a source of frustration for business owners.

“We saw what a lot of the guidelines were and there were so few that were binding, or really there weren’t any that were binding,” he said. “There were no consistent rules, and there was no enforcement. It’s hard to blame the owners and the guests when people are left to their own devices.”

To protect businesses, Parsley said, Texans for Lawsuit Reform supports a COVID-19 liability shield with a set of guidelines.

“In an environment where we need our businesses to come back and we need society to begin to operate again, we think that creating a safe harbor — if you comply in good faith to the applicable standards, then you don’t have liability, we think is a fair rule,” he said.

Some states have already set up a shield law. In Texas, the Legislature isn’t scheduled to meet again until next year, but Abbott sent a letter to Congress asking for one on the federal level.

If Congress doesn’t pass such a rule, Parsley said his group will push for one in Texas in 2021.

However, Ware Wendell, executive director of Texas Watch — a group that advocates for worker safety and business accountability — said a liability shield would protect business interests at the expense of workers. Proponents’ claims of a pending wave of frivolous COVID-related lawsuits is false, Wendell said.

“They’re spinning a crisis in their minds and trying to get politicians to fall for it, to push for things they’ve wanted for years, which is blanket immunity for irresponsible corporations,” he said.

Instead, Wendell said, the state should change its workers’ compensation system. Even for employees who’ve relinquished the right to sue for workers’ compensation benefits, the system is broken, said Wendell.

Parsley said COVID-19 may not qualify for workers’ compensation under Texas law, as it could be considered an “ordinary disease of life,” meaning a disease equally exposed to the public. Even if not, one would still need to prove it was work-related to qualify.

The AFL-CIO sued the federal Occupational Safety and Health Administration seeking it to enact emergency standards for COVID-19 instead of guidelines. Doing so would give the rules more teeth, Levy said.

“I think as a result (of a lack of clear standards from the government) and of the way our workers’ compensation laws work, that workers are not provided the security and protection in terms of job, health and safety that they deserve when they go to work every day,” Levy said.

Some have taken matters into their own hands, such as Orman and his organization Good Work Austin, a group of local business owners who initially came together to advocate for paid sick leave. The group has set up a more binding reopening agreement that businesses can sign onto, promising to enact certain COVID-19 policies.

Regardless of who bears the brunt of the virus, successfully suing a business for COVID-19 infection would be tough to do, legal experts say.

“Texas is a very, very, very, very business-friendly state. There’s a lot of protections already on the books, in the laws over the last 25 years,” said Jim Mitchell, president of the Texas Trial Lawyers Association.

A plaintiff would need to prove negligence, showing a reasonable person wouldn’t act similarly under the same circumstances and — much harder to prove — that the failure to act reasonably actually caused the injury.

That would also mean proving someone actually got the virus on business property. That’s why Mark Phillippe, owner of Hi Sign Brewing in Austin, said he is not particularly concerned about potential COVID-related lawsuits.

“Tell me about the 24 hours of the day and where you were all 24 hours of every day for the last three weeks. And until you can tell me the only places you were was your car and your house and Hi Sign Brewing and nobody else in your family is infected, then I think it’s case closed,” he said.

Companies with workers’ compensation insurance are protected from negligence lawsuits by employees. For a lawsuit to succeed, it would have to prove the higher standard of gross negligence, in which the business consciously ignores the risk and safety of others. That would be “an extremely high hurdle,” said Mitchell, adding that this exception “only applies if there’s a wrongful death.”

According to a national COVID-19 lawsuit tracker, there have been five lawsuits in Texas brought over injury from coronavirus, all regarding employees.

Levy said the current laws surrounding liability with its high burden of proof don’t help in keeping businesses accountable.

Wendell said the legal standards should be balanced toward worker and consumer safety.

“If you set that bar so high that unsafe conduct is encouraged and unsafe conduct is rewarded, then that endangers the public, that endangers workers and ultimately it hurts responsible businesses,” he said.

The main takeaway for business owners, legal experts say, is to closely follow all governmental guidelines and standards regarding the virus.

Having alternatives to normal services, such as work-from-home setups or offering takeout only, will help. Creating additional COVID-19 guidelines — such as a plan for when an outbreak does occur — is beneficial, but denying the virus exists won’t be.

Garza said he’s been taking all precautions not just to guard against a lawsuit but because “it’s the morally responsible thing” to do. However, he’s experienced pushback from some customers for rules like requiring a mask.

“I want to keep the community safe, but I also want people to keep coming to the business,” he said. “It seems like I have to choose between those two things.”

COVID-19 liability waivers haven’t been as commonly used, but they gained some attention when President Donald Trump used them for a campaign rally in Tulsa, Oklahoma. In Texas, they can be “very effective … if done properly,” said Mitchell, of the Texas Trial Lawyers Association.

If signed, waivers could block negligence lawsuits but not gross negligence, Parsley said. Waivers on employees likely won’t be effective unless they’re paid an independent amount of money to sign.

Dark Clan Fight Lab, the Austin training studio, always had a waiver for clients on physical injuries, but adding COVID-19 to the waiver made sense for him, Garza said.

“It’s not necessarily just releasing me from liability but also just an acknowledgment that you guys are aware that any time you go anywhere, there’s a risk,” he said. “It’s more just to have transparency … saying hey, even though we’re implementing these safety precautions, there’s still a risk this might happen.”