The Victorian Government has recently announced significant restrictions for businesses operating in metropolitan Melbourne and regional Victoria, with workplaces closed from 11:59pm on Wednesday, 5 August, unless specifically permitted.
As these closures are predicted to last for six weeks and the time to implement the new restrictions is tight, we take a look at how these new restrictions are expected to impact Victorian businesses and the ongoing supply chain effects down the line.
Stage 4 restrictions
While the treatment of workplaces under the new restrictions differs from industry to industry, the Victorian Government has announced three different categories of restrictions that apply to businesses.
1. Businesses to remain open
Businesses that are permitted to remain open include:
2. Business is open with a significantly reduced capacity for on-site work
These businesses include:
All businesses that are able to remain open must enact a COVID-Safe Plan focused on safety, prevention and response in the event that a case of COVID-19 is linked to that workplace. If you require a COVID-Safe Plan, WorkSafe Australia has a helpful resource kit that you can find here.
3. Business is closed for the duration of stage 4 restrictions
All other workplaces are required to close from 11:59pm on Wednesday, 5 August. The Victorian Government has published a comprehensive list of which businesses are permitted to continue operating here.
Importantly, sole traders can continue to operate if they do not have contact with the public, or with people other than those living in their primary household.
How will this impact business?
We except there will be a significant ripple effect from these closures and business reductions, particularly for regional, national and global supply chains where products that are manufactured in Melbourne cannot be exported. Melbourne has the largest container port in Australia and manufacturing in Australia accounts for nearly 13 per cent of Gross State Product, meaning the closure and/or reduction in workplace capacity in the manufacturing and distribution sector will have huge economic ramifications.
It is anticipated that the restrictions will impact well over 20 per cent of Australia’s economic activity and many businesses may struggle to re-open after the restrictions and closures. In addition, the new restrictions are predicted to lead to another 250,000 workers being stood down.
The supply chain network impacted by these Stage 4 restrictions is incredibly complex and interconnected. For example, at first blush, metal fabricators would be required to close under these new restrictions, however if a metal fabricator supports food production and other health-related activities, it may be considered an ancillary business for a permitted worksite and therefore be permitted to operate.
Inevitably, any gaps in the supply chain created by these changes will be filled by interstate companies, meaning that the hit to the national economy may not be as significant, while the Victorian economy has been plunged into deep-freeze.
The restriction framework is complex, and when it comes to implementation, many Victorian businesses will look for assistance and guidance to navigate this regulatory labyrinth.
What should importers and exporters do?
As an immediate precaution, importers and exporters should keep up to date of any changes in domestic and international trade developments. For businesses whose supply chains extend beyond Australia, these businesses should reconsider their exposure to the following risk areas.
Many businesses may be concerned about their inability to meet deadlines or fulfil contractual obligations due to these changes. However, due to these peculiar circumstances and depending on the contract, the contract may be frustrated or a force majeure clause may apply to prevent liability for non-performance of contractual obligations.
However, assessing counterparty risk will differ between domestic and international transactions as different countries may have varying concepts of force majeure and frustration. For example, in many civil law jurisdictions (typically found in continental Europe, South America, China, Japan and parts of Africa) a force majeure clause may be implied in the contract, unlike common law jurisdictions (including Australia, New Zealand, Canada and the UK).
More information on contractual issues arising due to COVID-19 restrictions can be found here.
Modern slavery and human rights infringements
The impacts of COVID-19 have had considerable knock-on effects through global supply chains and can increase the vulnerability of workers. Factory shutdowns, order cancellations, abrupt changes to supply chain structures and workforce reductions can disproportionately impact vulnerable workers and increase their exposure to modern slavery and other forms of exploitation.
Businesses relying on a supply chain network (particularly those with global operations) should consider the risk of modern slavery and build this into their response to the pandemic. This may include providing information about modern slavery to the board or executives as part of a COVID-19 update, seeking to maintain supplier relationships and honour current contracts as much as possible, and understanding that short turnaround times and deadlines can increase the likelihood of modern slavery risks.
Illegal activity and corruption
Instances of bribery, fraud and corruption can spike in times of global disruption as businesses need to bolster their supply chains and engage with new suppliers to overcome logistical issues. In addition, typical organisational objectives such as transparency, business integrity and whistleblowing may become less of a priority in a time of economic uncertainty. Despite the turbulent economic landscape, regulators and law enforcement agencies in Australia have publicly asserted their expectation that firms continue to comply with anti-bribery, corruption and fraud laws throughout the pandemic. Businesses should therefore conduct proper screening checks of any new third parties, ensure existing policies of anti-bribery and anti-corruption remain in place and remain steadfast in their approach to compliance with these laws.
A timely review of key contracts and company policies could substantially benefit your business in determining a pathway to adapt to these changes and deal with the issues that arise due to COVID-19.
Author: Madison Tonkes
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.