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Fighting Spirit: Keeping Production Lines in Times of Crisis

CEEIHM Issue 1.1.
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Przemyslaw Witas, General Counsel at CEDC International, is directly involved in keeping a production line running during the COVID-19 Crisis.

It’s mid-May 2020, somewhere in Poland. You are a lawyer. You work in a law firm, development company, or bank. You deal with transactions or give opinions on complex lease agreements or financial products. Just like every other day, you went to a store near the house for milk, cheese, sweets, washing powder. From time to time, you buy a bottle of wine for dinner or whiskey or vodka to meet friends. It is a warm spring evening, you have just had dinner and are watching a news channel where they discuss the details of another loosening of the restrictions introduced in March and April in connection with the COVID-19 pandemic. You mention for a moment the ending lockdown. It comes to your mind that the products you bought today in your store were available throughout that strange period. “Nothing was missing. Someone had to produce and deliver those,” you say. “How did they do it when everything was closed?” you ask. You remember that, however, not everything was closed. While working at home, you saw the vans delivering to stores, and people at the bus stop going to work. The factories produced and people worked in them. You are a lawyer, so after a while, you start to wonder what the lawyers, if any, did in the companies that kept operating during the lockdown. What did those lawyers do while you were working all closed up at home?

Well, I would like to tell you what the lockdown time was like for lawyers in a company that did not cease operations and produced those goods that you saw in the store throughout the lockdown.

I will first present to you, dear reader, my workplace. It is a company that produces its own brands of alcohol beverages in two factories located in Poland, and imports, on an exclusive basis, world-famous alcohol brands to Poland. The company is the number one player in Poland on the alcohol beverages market. We operate at a truly large-scale. The company has a very important Operations Department. It is a large department managing the entire production process, from purchasing raw materials and packaging through production to storage and delivery to customers. It is not just people at production lines and in the warehouses. The department has technologists developing new products, specialists managing tax warehouses, and supply, production, and inventory planners. The complexity of the Operations Department is huge, each of those elements is a separate, complex business process.

Lockdown

The first regulations directly related to the COVID-19 pandemic entered into force in Poland on March 8, 2020. On Tuesday, March 10, 2020, the government announced that it was closing all kindergartens, schools, and colleges. There had already been a Crisis Management Team operating in my company. I was – and am - a member of that team, along with our General Manager, the Head of the Operations, and people representing other functions. We meet every day, analyze the progress of lockdown restrictions, and agree on issues that are important to ensure the company’s ongoing operations.

Home Office

The law effective as of March 8, 2020, gave the company the opportunity to order the employees to work outside the office. This work mode is officially called “remote work” and popularly referred to as “home office.” When the closure of schools was announced, we decided that all the employees at the company’s headquarters in Warsaw (approximately 200 people), the employees of offices at the production plants, and the employees at our shared services center, serving the entire capital group, would start working remotely no later than Monday, March 16, 2020. Thanks to the cross-functional cooperation (HR/IT/Legal/Crisis Management Team) we quickly set the necessary details and an application was created to allow the electronic circulation of formalities enabling employees to legally switch to remote work mode.

Remote work is not only the experience of the office workers. Our entire Sales Team, including sales representatives directly visiting the points of sale, went into remote operation. Later, in May, the sales representatives would be the first to return to regular work. For now, however, they are starting to cope with the new reality by contacting customers by phone. After a few days, the whole market got used to the new mode of operation.

Remote work is a new experience for all employees. Our HR Department quickly provided us with the tools to tame the new situation, including webinars with a psychologist discussing the specifics of remote work. For me as the head of the department, it was inspiring. I established daily routines with my team, thanks to which, despite working from home, we had constant contact, ensuring the flow of information and the opportunity to consult on all matters. Technology also helped a lot. After a while of getting used to it, we worked just like in the office: separately, but together.

Working in Factories and Warehouses

The Polish government announced further restrictions on Friday, March 13. Our analysis of the new regulations, made immediately after their announcement, confirmed that no restrictions had been introduced for CEDC’s production operations in Poland, and domestic and international cargo transport was also allowed. Therefore, the employees of the Operations Department could continue working in the factories and warehouses without hindrance. In their case, remote work is impossible.

In the following weeks, the Polish Government kept announcing additional restrictions and rules on social distancing, applicable to any workplace. On the basis of the new regulations, our company developed new organizational rules, determining appropriate distances between work stations, and rules for moving around the production plants. We developed rules for measuring employee temperature in the factories and warehouses and new rules for accepting deliveries and pickups of products. The legal team participated throughout, advising on an ongoing basis with regard to the new regulations.

Lockdown Legal Environment

In Poland, the lockdown regulations were introduced by the government through ordinances of the Council of Ministers and individual ministers (including the Ministers of Health and Interior, among others). The government acted on the basis of the Law of 2008 on preventing and combating infections and infectious diseases. Consequently, the introduction of new regulations was much faster than the adoption of new laws would have been under a regular legislative path. Therefore, leaving aside the legal controversies associated with that approach, we had to react to a quickly changing legal environment. Usually, the government announced new lockdown rules at press conferences during the week, and the rules themselves were published on Friday evenings.

In Poland, the strictest lockdown rules were put in force in April 2020. Starting the beginning of May 2020, the restrictions were gradually lifted at two-week intervals.

Examples of restrictions introduced in Poland during lockdown:   

  • Closing borders for non-cargo traffic
  • Mandatory 14-day quarantine for persons arriving from abroad
  • Ban on operations of shopping malls (excluding grocery stores, pharmacies, and drugstores)
  • Ban on restaurants, entertainment (cinemas, theaters, concerts), and recreational activities
  • Restriction of all gatherings (in peak lockdown, a maximum of five people were allowed in church or at funerals)
  • Limiting the number of people in the stores (in peak lockdown: maximum three people per checkout) and the introduction of shopping hours for seniors
  • Obligation to keep a distance of two meters while walking
  • Prohibition of movement, except for performing professional activities or satisfying necessary life needs
  • Prohibition for persons under 18 years to move without adult supervision
  • Limiting the number of people on public transport
  • Obligation to cover faces in public places
  • Mandatory use of disinfectants or gloves and to maintain a distance (1.5 meters) in the workplace

Each time the government published new lockdown regulations, the legal team informed the Management Team and the Crisis Management Team accordingly. The practical consequences of those provisions were discussed immediately, regardless of the day of the week. Our culture of cross-functional cooperation as well as the individual burden of duty of people involved in the process worked well. Operations Department employees who continued their work in the facilities during the lockdown were the main recipient of all organizational initiatives based on the new regulations in the company.

There were no restrictions at any stage of the lockdown preventing our company from doing business. The delivery, factory, and warehouse workers had no restrictions on arrivals to work.

However, the economic environment in which our company had to operate changed radically, and economic indicators began to be revised from day to day. The company’s Management Team undertook business activities on an ongoing basis to limit the impact of the market situation on the company’s condition. That is a subject for another time.

Force Majeure and Disputes and ... Business as Usual

Since the beginning of the lockdown, the concept of “force majeure” has become an important issue for the legal team. The topic is known to every Polish civil law practitioner, except that by 2020 it was mainly theoretical knowledge. From mid-March 2020, everyone suddenly started using the concept of force majeure. For me, that meant an express return to the Civil Code, a handbook on contract law, and a review of case law.

Immediately after the introduction of the lockdown, we noticed an increased demand for legal analyses regarding the non-performance of contracts, including contracts for the supply of raw materials (I am not authorized to refer to details here, but let’s just say that they are important for our production). The arguments used by the suppliers were always the same: we have to make deliveries for other entities, we are not able to make deliveries for you, the situation is extraordinary, it is not our fault.

Our conclusion was one: the state of epidemic and lockdown are not in themselves force majeure. It all depends on the individual situation, the clauses in the contract, and the business environment in which you operate. If in a state of a pandemic, the government orders the closure of your business (whether or not the Polish government did so properly in these circumstances is a topic for a separate article) and you are not in a position to fulfill your contractual obligations, you probably can successfully cite force majeure. If, in the same state of a pandemic, the government allows you, your suppliers, and your customers to continue the business, then invoking force majeure will not be effective. If your contractor refers to force majeure, check the contract and the circumstances concerning its performance, because force majeure does not work automatically, and it must be interpreted in a specific context.

In the case of our contracts, after analysis, it turned out that relevant business circumstances did not prevent our suppliers from performing their deliveries. The fact that, overnight, suppliers received prices much better than the ones we had agreed to was determined to be the real reason for not delivering. The legal team was involved in every conflict situation, and our opinion was the starting point for business decisions. The efforts of the Operations Department employees have allowed many conflicts to be resolved. It turned out again that our cross-functional culture brings the results. We avoided cases in court and the non-completed deliveries have been moved to new dates. Our relations with conflicting suppliers are now returning to normal.

During the lockdown, the legal team kept analyzing subsequent versions of the anti-crisis regulations adopted by the Polish Parliament. Those provisions, known as the Anti-Crisis Shield, constitute a set of new regulations applicable to companies, employees, and beyond. The scope of the Anti-Crisis Shield extends from governmental financial support for the companies and employees affected by the pandemic, through the changes in labor law, changes in the court deadlines and changes in criminal law, to a number of changes in various detailed laws. To date, several successive versions of the Anti-Crisis Shield have entered into force. We followed subsequent versions of the Shield, catching the issues relevant to our company. Another tool announced by the Polish government was the Financial Shield: a program to finance corporations through a dedicated governmental fund and commercial banks cooperating with the fund. I also continued to advise on different elements to the Finance Shield. [See page 68]

In addition to extraordinary matters, the legal team handled the Operations Department as before. The ongoing projects were not interrupted. By way of example, in our company, expanding a warehouse space is a complicated process that requires a number of formalities due to permits for the sale of alcoholic beverages and various tax requirements. Our daily work for the Operations includes contracts with packaging, label, and media suppliers, contracts regarding transport and other logistics matters, and investment contracts. All those more or less routine matters were continued during the lockdown without interference. The fact that the lawyers were working from home was not an obstacle. The number of instructions generated by the Operations Department requires good organization and information flow. The key is the selection of a proper team. A team based on experienced legal counsel capable of handling the cases independently, supported by younger lawyers, is my model of managing the work for key departments, including Operations. Recognition for the work of the legal team that was expressed by our Head of the Operations, among others, confirms that the model works.

Back to Normal

As I have already mentioned, from the beginning of May, the restrictions introduced in Poland during the lockdown have been loosened in several stages. At the moment, the most visible manifestation of restrictions is the obligation to cover faces in public places. My team returned to the office in July, but took place under various restrictions. Our production and logistics facilities continue to operate without interruption, as they did throughout the lockdown period.

Conclusions For the Future

The operation of an in-house lawyer in a company that continues operating in an extraordinary social and legal environment was a unique experience. So too was it to work during that period for a company that had a large production capacity and put all the efforts to maintain its supply chains without interference. The lockdown proved to be the final test for the legal team in the organization – it was possible to see with all intensity whether the legal team is an added value for the organization and whether lawyers’ opinions can influence business decisions. It is not my role to assess whether the CEDC legal team met those obligations. We certainly did not sit with our arms folded; we worked as hard as before the lockdown, or even harder. Remote work, within the team and with other functions, requires greater concentration, and communication takes more time – as does preparing the documents and the handling of ongoing matters.

I focused here on the description of the legal support given during the lockdown to the Operations Department.

That is only a part of the legal services provided to the company. Our legal team served at the same time all other functions in the company: Marketing and Trade Marketing, the Sales Team, Finance, group-level matters, and supporting departments (HR, IT, and others).

Our work, for Operations and every other function, was carried out with the awareness that it takes place at a special moment, and that the work of a lawyer is part of a team effort to ensure the continuity of the company’s business. This was very motivating for us lawyers. We are aware that we have managed to keep things afloat in an unprecedented situation. We have a very positive and motivating feeling that the legal team is part of a very comprehensive organization.

Referring to the introduction of this article, I think that as a legal team, we were involved in the fact that our company could produce and bring to your store the products that were on the shelf at the time when you were shopping during the lockdown time, wondering what would happen next. Perhaps the fact that our products did not disappear from the store gave you a sense of normality at a very abnormal moment. That thought is very rewarding for us. In any case, you probably did not expect the legal team to have anything to do with it. And yet, a lawyer too can be a part of the production process.

I wish, for all of us, that despite the uniqueness of the situation and all the useful – I hope – experience gained through it, the lockdown will never happen again.

May we live in the most normal and ordinary times possible!

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