When Companies Need to Report They Have Infected Workers: Q&A

(Bloomberg) -- Almost all U.S. companies are likely to include in their quarterly filings broad statements on risks the ongoing coronavirus pandemic poses to their businesses. Should they be disclosing more?

Smithfield Foods Inc., the world’s biggest pork processor, recently announced it was shutting down its Sioux Falls, South Dakota, plant, which accounts for nearly 5% of U.S. production, after state officials found more than 200 cases of Covid-19 among its staff.

But there’s no clear requirement that companies report they have sick workers. And they need to protect those workers’ privacy too.

Do companies need to tell investors about sick workers?

The Securities and Exchange Commission requires U.S. public companies to disclose information that is “material.” Smithfield, a subsidiary of a Chinese company, isn’t subject to those requirements, but, if it were, the closing of one of its major plants due to a coronavirus outbreak could qualify as a material event. On the other hand, a few sick employees in a large workforce might not, unless they are likely to cause a major disruption.

What if the CEO or other senior executives become infected?

Morgan Stanley Chief Executive Officer James Gorman earlier this month revealed that he had contracted the coronavirus a few weeks before but had since fully recovered.

An incapacitated CEO or other senior executive who becomes unable to exercise leadership responsibilities could be treated as a material event. Morgan Stanley has said it decided Gorman’s condition didn’t warrant disclosure because his symptoms were mild and he continued to work from home for the duration of his illness.

Who decides if companies made the right call?

The SEC can bring enforcement actions against companies if it feels they haven’t disclosed enough information on how the virus is affecting their operations. Richard Walker, a former SEC general counsel now in private practice at King & Spalding, says the agency has “signaled it won’t second-guess good-faith projections of how businesses are going to be affected” by the coronavirus.

Shareholders might also sue, claiming companies failed to disclose all they knew about the virus’ potential impact.

What about telling the public?

Businesses usually aren’t required to tell the public about infections in the workplace, but some may want to. “In some circumstances, some employers, like certain retailers, may decide for public health or public relations reasons that it is best to disclose a positive Covid-19 diagnosis to the public,” said David Lindsay, an employment lawyer with K&L Gates.

What about the privacy of sick workers?

Companies can warn employees if they may have been exposed to a co-worker with the virus, but should avoid disclosing the person’s identity in keeping with federal laws safeguarding the confidentiality of patient information.

©2020 Bloomberg L.P.