Legal impact of COVID-19 on the entertainment industry
COVID-19 is significantly impacting industries across Australia, and the nation’s arts and entertainment industry is no exception. In response to this crisis, public gatherings have been prohibited and theatres, cinemas, music festivals, shows and tours have been closed or cancelled indefinitely. Australian film productions are also being postponed.
So where does this leave the industry legally?
For stakeholders in the arts, film, music and media worlds, COVID-19 is fast presenting myriad legal issues to understand and address to navigate the pandemic.
These legal issues include:
- Contractual considerations;
- Consumer law considerations around event cancellations;
- Insurance law considerations; and
- Employment law considerations.
The entertainment industry is built on a series of contracts between venues, sponsors, promoters, distributors, vendors, investors, production companies, broadcasters, ticketing agencies, manufacturers and licensors (to name a few).
With the disruptive impact of a global pandemic resulting in the standing down of workforces, closure of borders, and enforced work from home arrangements, the risk of non-performance, poor performance, delay and non-payment is heightened. Some contracts address these issues expressly in their terms, in other cases, contractual principles like frustration will govern the parties’ respective rights.
Our recommendation: All parties involved in entertainment industry supply chains should be reviewing contracts for force majeure clauses, termination rights and assessing whether performance milestones can be revised or negotiated. In the film industry, for example, this might include revising production milestones and release dates to reduce the impact of compromised crew members or reduced audience numbers.
Stakeholders should also review insolvency provisions within relevant contracts and seek advice on whether the recently-introduced safe harbour provisions apply. For more information on Australia’s safe harbour laws please see our articles on this.
Consumer law considerations
Consumer law rights for cancelling live events may also change depending on the escalating nature of government-imposed crowd restrictions and social distancing policies. The ACCC has advised it expects ticket refunds or other remedies (such as credit note or voucher) for cancelled events. However, where live entertainment events are cancelled due to government restrictions, this may impact consumers’ rights to consumer guarantees under the Australian Consumer Law (ACL), which typically include guarantees to have services provided within a reasonable time and in the manner expected. The ACCC is imploring consumers to be patient with suppliers, but scrutiny on suppliers’ behaviour will be equally high.
Our recommendation: Stakeholders in live entertainment events should be reviewing ticket terms and conditions, their own policies and their obligations in relation to providing services under the ACL to understand their position regarding event cancellations and refunds.
Insurance law considerations
Despite this significant disturbance of COVID-19, it is highly unlikely that any Industrial Special Risk (ISR) policy, and in particular the business interruption section of the policy, will respond to the COVID-19 pandemic.
For the business interruption section of an ISR to respond, usually there first needs to be ‘damage’ to insured property. There are limited extensions of this requirement for damage and two of those are closure by regulatory authority and closure by infectious diseases.
The closure of business by a public authority can constitute ‘damage’ under certain ISR policy wordings. However, many ISR policies will go on to exclude damage caused by pandemics or communicable diseases from business interruption cover, regardless of the fact that the business has been ordered to close by a public authority.
If your business does have infectious diseases cover, there are usually significant restrictions of this cover including a significantly lower limit of indemnity.
As COVID-19 has been declared a pandemic by the World Health Organisation, the reality is that most ISR policies will not respond to business interruption sustained as a result of COVID-19.
As all insurance policies are not the same, it is important to consider that each policy will turn on its own wording, in particular the exclusions and individual endorsements need to be considered in detail.
Our recommendation: We have been monitoring the situation regarding the insurance response to the COVID-19 pandemic and there has not been a unified approach between all insurers. It is advisable that entertainment industry stakeholders review their policy before proceeding with any action that will result in a potential business interruption claim.
Employment law considerations
The entertainment and arts industry workforce is largely comprised of casual workers or contractors. With COVID-19 leading to the cancellation of productions and live events, the flow-on effects to entertainment industry staff will be significant. At law, casual employees and independent contractors who miss work aren’t entitled to paid sick leave or carer’s leave under the National Employment Standards in the Fair Work Act 2009. Employees can be stood down if they cannot be usefully employed for reasons beyond the employer’s control. However, these are difficult decisions that affect people’s very livelihood, and can involve careful consideration of factual circumstances to determine the true nature of an employment relationship. Despite the pandemic, the usual rules of procedural fairness in the employment relationship continue to apply. To avoid unfair dismissal claims or potential underpayments, stakeholders should exercise caution before suspending staff payments, giving stand-down orders or terminating employment arrangements.
Our recommendation: entertainment industry stakeholders should seek employment law advice before taking significant actions relating to staff during the COVID-19 outbreak, particularly staff stand down orders or dismissals.
COVID-19 is presenting a constantly changing economic and legal landscape. Our recommendations may change or be updated as the COVID-19 pandemic develops in Australia. Please contact our team if you would like to discuss any of the issues raised in this update.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.