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Invoking force majeure during hard economic times

| Mar 22, 2021 | Employment Law |

When the Metropolitan Opera invoked the force majeure clause to furlough a majority of its 3,000 employees in April of 2020, one of the largest arts organizations on the planet shuttered its doors for the foreseeable future under the harsh realities of the limitations imposed by a global crisis. Most of these employees are members of Union Local 802 and include musicians, chorus members, stagehands, carpenters and craftsmen in many other trades.

The entertainment industry has been particularly hard hit by lockdowns and strict limitations on large gatherings of the past year. Peter Gelb, the Met’s general manager, invoked the force majeure clause in union contracts after New York’s Governor Andrew Cuomo banned gatherings of more than 500 people in March of 2020.

Citing the impossibility of maintaining the $300 million annual operating budget, two thirds of which covers labor costs, during the lockdown, Gelb cancelled the Met’s financial obligations to union members and visiting artists, also giving up his salary for the duration of the disruption. The Met has continued to pay for the health care premiums of its employees.

Reexamining the force majeure clause in employment contracts

The force majeure, or “Act of God”, clause in business and employment contracts, is defined in Black’s Law Dictionary as “an event or effect that can be neither anticipated nor controlled”. As unanticipated economic or natural disaster events are prompting more employers to include the clause in their employment contracts, the main question becomes under what circumstances an economic downturn triggered by such events justifies invoking such a clause.

Concerning employment contracts, employers should consider:

  • if the employment contract is imposing timely notification of the employer’s inability to fulfill its contractual obligations due to a force majeure event
  • whether the force majeure event excuses the employer’s nonperformance completely, or only during the pendency of the disruption
  • whether the employer still has a duty to mitigate the effect that the force majeure event is having on its ability to perform under the contract, and if the contract states what mitigation efforts the employer must take

Although the common law doctrines of impossibility, impracticability and frustration of purpose can provide some protection, future employment contracts that incorporate the force majeure clause may need to include clarification of vague or ambiguous terms that do not specify the nature of the events triggering the clause.

In a challenging economy, employers are facing significant challenges in order to remain viable. Their needs can be effectively met with capable New York City legal representation.