See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/348446875

Impact of COVID-19 on Contractual Obligations in Individual Employment

Contracts Mostafa Masry

Article  in  Vierteljahresberichte / Forschungsinstitut der Friedrich-Ebert-Stiftung · January 2021

CITATIONS READS

0 47

1 author:

Mostapha al-Masry
Lebanese University
20 PUBLICATIONS   0 CITATIONS   

SEE PROFILE

All content following this page was uploaded by Mostapha al-Masry on 14 January 2021.

The user has requested enhancement of the downloaded file.

Impact of COVID-19 on Contractual Obligations in Individual Employment Contracts
Mostafa Masry

Introduction
Given the continuous global increase in the number of COVID-19 cases and the fact that this disease was
classified by the World Health Organization as a pandemic on 11/3/2020, most countries have adopted
drastic restrictive measures to contain the spread of the virus. These include lockdown measures, home
quarantine and travel restrictions.
At the local level, in an effort to mitigate the risk of an outbreak, the Lebanese government announced a
General Mobilization to face the spread of the novel coronavirus (COVID-19), which entailed strict
measures, such as the suspension of work in all kinds of private companies and institutions. This has
negatively impacted the finances of companies and institutions that were forced to suspend business
activities. As a result, many companies and institutions will certainly revise current individual employment
contracts, amid the general lockdown and the dire economic and social conditions. Given the current crisis,
commercial establishments find it in their best interest to discharge employees and workers, by granting
them unpaid leave or leave with a partial salary, if not dismiss them permanently from work, in order to
minimize their commercial losses.
Article 624 of the Code of Obligations and Contracts defines an employment contract as “a contract by
virtue of which one contracting party undertakes to work in the service of the second party and under their
management in return for a wage that the second party undertakes to pay to the first party.” This definition
clearly states that the wage earner provides work or services to the employer and works under the latter’s
management, in return for a wage paid in compensation for the work or services provided. Therefore, the
COVID-19 pandemic affects the personal activity of the wage earner, as the work to be carried out is the
primary object of the employment contract, which entails a mutual commitment by both parties to perform
their obligations: The wage earner commits to perform the agreed work, and the employer commits to pay
the wage earner their dues.
This article will explore the impact of COVID-19 on contractual obligations in individual employment
contracts and their legal repercussions on employees in private institutions and companies that are subject
to the provisions of the Lebanese Labour Law,1 as well as the repercussions on employees in light of the
conventions of the International Labour Organization (ILO).

1
Article 8 of the Lebanese Labour Law stipulates that “the provisions of the present Law shall apply to all employers,
wage earners and salary earners, with the exception of those who are excepted by a special text. The provisions of this
law shall also apply to all establishments, as well as their branches and subsidiaries, whether they are of a commercial
or industrial character, national or foreign, public or private, including educational establishments, charitable
associations and foreign companies operating a business, an agency or a branch in the country.” Therefore (according
to Article 7 of the Labour Law), the categories excluded from these provisions are domestic workers employed in
private houses, agricultural corporations that have no connection with trade or industry, public employees in
government administrations (they are subject to the Regulations on Public Servants), temporary journeymen working
for government administrations and municipalities and teachers at private schools.
The goal of this article is to determine the legal status of the employment contract amid the socio-economic
impacts of the COVID-19 pandemic on private institutions and companies in Lebanon. It also seeks to
explore how employers will deal with their employees after the pandemic is contained and after people go
back to work, in the midst of a near-total economic collapse and a social crisis affecting workers, who are
considered to be the weakest link in the employment contract.
This raises the following question: To what extent is it legal to dismiss an employee from their work in the
current crisis?

First: Implementing the Employment Contract amid the COVID-19 Pandemic as an Emergency Situation
The concept of “emergency situation” can be defined generally as a sudden change of circumstances which
could not be foreseen by either party at the time of signing the contract, and which makes it extremely
difficult, although not impossible, for the two parties to the employment contract to fulfil their contractual
obligations (i.e. a state of economic imbalance in the contract emerges), leading to serious losses. Based
on the circumstances, and after striking a balance between the interests of both parties to the employment
contract, the judge may reduce the burdensome obligation to a reasonable level. Therefore, four factors
must come into play in order to activate the emergency situation mechanism:2
1. The change of circumstances must be an exceptional event that arises during the implementation
of the obligation.
2. The change of circumstances must be unforeseen at the time of signing the contract.
3. Neither of the parties to the contract must have previously accepted to bear responsibility for the
change of circumstances.
4. These events must make the fulfilment of the obligation difficult, but not impossible.

As is widely known, the COVID-19 pandemic is a general exceptional circumstance that could not have been
foreseen at the time of signing the employment contract and could not have been avoided despite the
measures taken by the Lebanese government. However, the question remains: Have the impacts of this
pandemic made it difficult, but not impossible, to implement the individual employment contract?
Before answering this question, it must be noted that the Code of Obligations and Contracts does not
include an explicit text on emergency situations. Article 166 thereof stipulates the principle of freedom of
contract, as it allows individuals to manage their legal relationships as they see fit, provided that they do
not violate the laws in force.3 The Lebanese judiciary has confirmed its absolute and categorical rejection

2
For more details on these factors, see: Abdul Razzak Ahmad Al-Sanhouri, Al-Waseet Explanation of the New Civil
Law – Sources of Obligations, Volume I, ed. 3, Al-Halabi Legal Publications, Beirut, Lebanon, 2000, p. 717 onwards.
3
By contrast, there are many legal texts that do provide valid grounds for this theory. Article 5 of Law No. 50 of
23/5/1991 on the Suspension of Legal, Judicial and Contractual Deadlines stipulates that “the affected party shall be
given fair compensation for the damages they suffered due to the devaluation of the national currency,” despite the
fact that this legal rule is limited and its conditions are restricted solely to compensation, and despite the fact that it
cannot be expanded, as its purpose is to mitigate a risk. The same applies to other legal texts, such as Articles 221,
113 977, 115, 300 and 617 of the Code of Contracts and Obligations. Special laws have been issued to find clear
solutions to the difficulties of managing the contractual relationship due to wars and emergencies of various types.
of the concept of emergency situation in terms of the need to amend contracts when a change of
circumstances takes place, through a number of verdicts issued by Lebanese courts of law.4 However, some
scholars believe that contractual stability cannot be guaranteed by refusing to amend the contract despite
the fact that its obligations have become burdensome,5 as amending the contract would enhance
contractual stability by preventing the emergence of factors that would undermine or terminate the
contract. Amending the contract would also prevent acts of bad faith, as the concept of emergency
situation, in the case of individual employment contracts, is based on the principles of fairness, execution
in good will and the inadmissibility of the arbitrary exploitation of rights due to the current circumstances.
Meanwhile, some Arab legislations have integrated the concept of emergency situation in clear and explicit
legal texts, such as Syria and Egypt.6 France has also recently enshrined this concept in a clear and explicit
text in Article 11957 of Decree No. 131 of 10/3/2016.
In principle, it is not impossible for the wage earner to implement the employment contract, as some
institutions are still in operation, even if partially (regardless of the specialization of each individual
employee). The wage earner can go to the institution or company while abiding by certain arrangements
to ensure public interest and to protect themselves and others, both within and outside the institution or
company. They can also use alternative means to work remotely. Therefore, the wage earner’s personal
activity, which is the primary object of the employment contract, can still be carried out despite the general
exceptional circumstances. However, it becomes burdensome for the employer to implement the
employment contract, amid the complete absence or decrease in commercial activity. The degree to which
the employer is affected by the emergency situation is not fixed and is subject to change, as the employer’s
fulfilment of their commitments could lead to serious losses that differ from those incurred in normal
transactions, as the latter entail both profits and losses.8

For example, some texts allow parties to renege on the contract or terminate it in the event of an emergency situation
that was unforeseen at the time of signing the contract, and they postpone the payment of loans (Law issued on April
2, 1981 on accepting instalment payments by traders affected by the incident) and other obligations. These texts have
given the judiciary the right to amend certain types of contracts that have been severely affected by the crises,
including, in particular, rent agreements, in order to regulate the relationship between the owner and the tenant (Law
No. 160 of 23/7/1992 and its amending Law No. 2 of 28/2/2018).
4
Mount Lebanon Court of Appeal, First Civil Chamber, Decision No. 11 of 27/1/1987, Hatem Jurisprudence
Collection, part 190, p. 887; Court of Cassation, First Civil Chamber, Decision No. 42 of 13/7/1995, Baz Collection,
part 34, 1995, o. 194; Court of Cassation, Fourth Civil Chamber, Decision No. 34 of 30/11/1999, Justice Magazine,
issue 3/2, 2000, p. 189; Civil Court of Cassation, Decision No. 10 of 24/11/2000, Baz Collection, issue 39, 2000, p.
257.
5
Sami Mansour, Factors of Stability and Change in Civil Contracts, Dar Al-Fikr Al-Lubnani, Beirut, 1987, p. 112;
See also Edward Eid, The Impact of Currency Devaluation on Civil Obligations: The Concept of Emergency
Situation, Zein Legal Publications, 1990.
6
See Article 147.2 of the Egyptian Civil Code and Article 148.2 of the Syrian Civil Code. Other countries that adopt
the concept of emergency situation include Poland, Algeria, France, Jordan, Greece, Italy and others.
7
“Should a change of circumstances occur, which was unforeseen at the time of signing the contract and which makes
implementation highly costly for one of the parties who did not agree to bear responsibility for this change, this party
may submit a contract renegotiation request to the other contracting party, provided that they continue to fulfil their
obligations until the contract is renegotiated.”
8
Abdel Razzak Ahmad Al-Sanhouri, ibid., p. 723.
Therefore, under the abovementioned conditions, work is not suspended, and the contract remains in full
legal effect, but the two parties negotiate amicably or judicially to review the contract in order to amend
or terminate it. Any and all cases of dismissal from service shall be considered cases of arbitrary dismissal.9

Second: Impossibility of Implementing the Contract amid COVID-19 as a Force Majeure

A force majeure or sudden incident is an unexpected, unavoidable and insurmountable incident or situation
that is not caused by any of the parties to the employment contract – i.e. it is outside their control – and
that makes it impossible to fulfil the contractual obligations.10 Based on this definition, three factors must
all come into play in order to classify the incident as a force majeure. These are:
First: The incident must be unavoidable and insurmountable.
Second: The incident must be unforeseen.
Third: The incident must be outside the control of the parties to the employment contract or independent
of them.11
Given the fact that the COVID-19 pandemic is a general exceptional circumstance that was unforeseen at
the time of signing the employment contracts and could not have been avoided despite the measures taken
by the Lebanese government, it is necessary to ask the following question: Is it impossible for the two
parties to implement the employment contract amid the current crisis?
Before answering this question, it must be noted that Article 50 of the Lebanese Labour Law stipulates that
“the employer may terminate some or all current employment contracts at their institution if a force
majeure or economic or technical conditions so require…” The Termination of Employment Convention
also stipulates, as a fundamental principle, that the “employment of a worker shall not be terminated unless
there is a valid reason for such termination connected with the capacity or conduct of the worker or based
on the operational requirements of the undertaking, establishment or service.”12 The Convention also
stipulates that “Temporary absence from work because of [non-occupational] illness or injury shall not
constitute a valid reason for termination.”13 It is clear that the spread of COVID-19 and the subsequent
general mobilization measures in Lebanon will make it more likely that this event is considered a force
majeure (this was advocated by the Colmar Court of Appeal14 in France and the Chinese government).
However, there are some delicate contractual issues to be addressed in the Labour Law, in addition to some

9
Arbitrary dismissal is the dismissal by the employer of the employee from their work without prior warning and
without legitimate reasons justifying the dismissal. In this case, the employer is considered to have abused or misused
their right, causing damage to the wage earner (Article 50 of the Lebanese Labour Law).
10
Mohammad Hassan Qassem, Civil law: Contracts (Impacts and Penalties of Violating the Contract), Volume
II, ed. 1, Al-Halabi Legal Publications, Lebanon, 2018, p. 258.
11
For more details on the conditions of the force majeure, see: Mustafa Al-Awji, Criminal Law: Criminal
Responsibility, Part II, Al-Halabi Legal Publications, Beirut, Lebanon, 2016, p. 110 onwards.
12
Article 4 of Convention No. 158/1982 on the termination of employment at the initiative of the employer. Lebanon
has not ratified this Convention.
13
Article 6 of Convention No. 158/1982. See also paragraphs 136-142 of the 1995 General Survey on unjustified
dismissal.
14
CA Colmar, ch. 6 (etrangers), 12 mars 2020, n° 20/01098.
difficulties that will no doubt arise when applying the force majeure mechanism to individual employment
contracts.
In light of the above, and in order to ensure the continuity of work, the parties to the employment contract
must address two simple questions:

1. Is there any specific force majeure clause in the employment contract concluded between the wage
earner and the employer?
If the answer is “yes,” does this clause include the term “epidemic, pandemic or contagious disease”? It is
worth noting, in this regard, that individual employment contracts rarely include a force majeure clause.
Therefore, if the answer is “no,” the general provisions on force majeure shall apply. However, the reason
for suspending the employment contract in the Labour Law15 is no longer restricted to the traditional
concept of force majeure, as suspension in this case does not necessitate the emergence of the factors of
force majeure as per civil law. Most cases of employment contract suspension (with the exception of the
wage earner’s illness) cannot be considered a force majeure in the civil sense, given that they are expected,
semi-voluntary and can be avoided.16 In terms of the contract’s effects, they shall not all be terminated, as
in the case of civil law, which discharges both parties from the need to fulfil their obligations, as the
employment contract’s secondary obligations remain enforceable (such as the non-disclosure of
professional secrets and the obligation not to compete with the employer). Some legislations also stipulate
that the wage shall be paid in full or partially without the actual performance of work, which is in
contradiction with the general rules on the impacts of contract suspension.17

2. To what extend has the implementation of the individual employment contract become impossible
amid the COVID-19 pandemic?
First, impossibility means that there are circumstances preventing the contracting party from fulfilling the
legal obligation that they are being accused of violating. This is usually referred to as the “impossibility of
performance” in the field of contractual liability. The impossibility is assessed with regard to the contracting
party (according to the rules of civil law), who shall claim that it is impossible for them to fulfil their
obligations by comparing their situation to that of the normal person practicing due diligence. Therefore,
this claim is based on objective criteria.18 The impossibility to perform must also be genuine (absolute) and
not simply a difficulty in fulfilling the obligations, which threatens to cause serious losses for the employer.
Therefore, the fulfilment of contractual obligations may in some cases become impossible due to a force
majeure, and the impossibility to perform shall be considered either permanent or temporary, based on
its impact on the two parties to the employment contract. In the case of permanent (definitive)

15
The suspension of the employment contract entails the temporary non-fulfilment of its obligations, without any
impact on the contract itself or the relationship between the parties thereto, due to an emergency situation. Both parties
shall also continue to implement the contract once the reason for the suspension is resolved.
16
Abdul Salam Shoeib, Lectures on the Labour Law and the Social Security Law, 2002-2003, p. 128.
17
Issam Youssef Al-Qaysi, Lebanese Labour Law, Ashtar Publications, Beirut, Lebanon, 1983, p. 249.
18
Mohammad Hassan Qassem, ibid, p. 263.
impossibility, one of the parties to the employment contract is no longer capable of fulfilling their
obligations, leading to the automatic termination of the contract, without the need for special procedures
to give effect to this termination. In this case, the employer may resort to the abovementioned Article 50,
paragraph (F) on the termination of the employment contract. By contrast, if the impossibility to perform
due a force majeure is temporary, the contract shall not be automatically terminated. Rather, the contract
suspension mechanism shall apply, in addition to Articles 4 and 6 of the Termination of Employment
Convention. In this case, the obligations of both parties are deferred until the impossibility to perform is
resolved, in which case each party shall continue to fulfil their obligations.19 In light of the above, should
the ongoing COVID-19 pandemic be considered a temporary or permanent impossibility to perform?
There is a set of preconditions to consider the impossibility to perform temporary, including the need for
this impossibility to end before the implementation of the employment contract becomes impractical. This
means that it is not only necessary for the impossibility to perform to end at a future time to be considered
temporary, as it is also bound by the requirement that the delay in execution does not negate the purpose
and benefits of the employment contract. As the future cannot be predicted with certainty, the likelihood
that the impossibility to perform will end shall suffice to consider it temporary, so long as there is a glimmer
of hope or a possibility for it to end, which would achieve the purpose of stability in employment and
contractual stability. The duration of suspension also plays a role, as the temporary aspect of the
impossibility to perform must take into consideration the employment relationships to which the employer
and the wage earner have committed and the impact of the time factor on this relationship. In fact, duration
is a key distinction between two types of contracts, in terms of their expiry date – namely, indefinite or
time-bound contracts.20 By comparing the duration of suspension and the contract’s original duration, it is
possible to determine whether the impossibility to perform is temporary or permanent. If the contract
execution period plays a crucial role (in case the two parties agree to implement the work during a specific
period or to deliver on a specific date), the suspension shall be considered definitive, rather than
temporary, as in the case of time-bound contracts.
In light of the above, there are specific conditions that apply to the suspension period, as the latter must
not last for a period that is as long as or exceeds the agreed contract duration. In the event that there is no
text specifying the duration (whether contractual or legal), the latter shall be determined based on the
nature of the contractual relationship and the interest of each party in preserving the relationship, ensuring
the stability of employment and guaranteeing the proper functioning of the institution.
Conclusion
Based on the above, we have developed a set of practical recommendations that could help clarify the legal
status of the parties to the employment contract amid the current pandemic, in addition to some structural
recommendations that could help institutionalize the post-COVID-19 period:

19
Abdul Salam Shoeib, ibid., p. 132.
20
A time-bound contract is a contract in which the parties agree explicitly or implicitly to set a specific duration for
their contractual relationship upon signature (casual, seasonal or task-based). This type of contract a specific date of
commencement and expiry date, unless renewed. An indefinite contract is one in which the parties do not set a specific
expiry date. This type of contract is usually reserved for works of permanent nature.
 • Practical Recommendations:
- Ensuring the continuity of employment contracts during the general mobilization period, by
considering the COVID-19 pandemic a force majeure that entails a temporary, rather than
permanent, impossibility to perform the said contracts. Therefore, this impossibility shall suspend,
rather than terminate, the employment contracts, while taking into consideration the conditions
and duration for suspending each individual employment contract separately.
- Amending work regulations by accommodating for remote work through modern technological
tools, depending on the needs of each institution.

• Structural Recommendations:
- The need to include a force majeure clause within the provisions of the employment contract
concluded between the wage earner and the employer. This clause shall include the terms
“pandemic, epidemic or contagious disease” and shall entail the termination or suspension of the
contract in the event of a force majeure.
- The Termination of Employment Convention No. 158/1982 shall be amended, and a special clause
on the termination of employment during a pandemic shall be added to it, which puts forward a
specific mechanism for suspension and/or termination.

Disclaimer: The opinions expressed in this article are the author's own and
do not in any way represent the views of Friedrich-Ebert-Stiftung Lebanon

View publication stats