Whether your business has remained fully open during Governor Cooper’s “stay-at-home” order, is providing reduced services and offerings, or has temporarily closed, the business community at large has expressed concerns about future legal claims by customers and employees related to COVID-19 illness.  This is a topic that has been discussed at the federal level and by several states, including North Carolina.  On May 2, 2020, the General Assembly ratified Senate Bill 704: the COVID-19 Recovery Act, and on May 4, 2020, Governor Cooper signed it into law. 

North Carolina’s COVID-19 Recovery Act contains a number of provisions in its 70 pages, including several provisions dealing with limitations on liability for health care workers, essential businesses, and emergency response entities.  This article will focus on the protections afforded by the Act for an “essential business”. 

Who is covered?

Section 4.14(a) of the Act specifically amends the Commerce and Business Chapter of the North Carolina General Statutes (Chapter 66) by adding an Article entitled “Limited Business Immunity”.  This new provision provides immunity from civil liability to an essential business for certain claims for COVID-19 related injuries and deaths.  Under this new provision, an “essential business” is defined to include businesses, non-profits, educational institutions and governmental entities that were identified in Executive Order No. 121, issued by Governor Cooper on March 27, 2020 (the “Stay-at-Home Order”) as well as any amendments and extensions.  It also includes any business that the North Carolina Department of Revenue (NCDOR) considers essential, and it appears this catchall is intended to cover businesses that were excluded from Executive Order No. 121 but that have been designated as “essential” upon a request to the NCDOR.

On May 5, 2020, Governor Cooper issued Executive Order 138: Easing Restrictions on Travel, Business Operations, and Mass Gatherings: Phase 1. That Order allows for re-opening and operation of additional retail businesses, with restrictions, that were previously considered non-essential. Although not entirely clear, it would seem to make sense that Executive Order 138 qualifies as an amendment of Executive Order 121, such that these additional businesses that are allowed to re-open during Phase 1 are included within the definition of an “essential business” and thus potentially covered by the limited business immunity provided for in the COVID-19 Recovery Act.  

What Protections Are Provided?

The Limited Business Immunity provides immunity to essential businesses from civil liability for certain claims.  In, particular, the limited immunity under this new law only applies to claims:

  • Made by a customer or employee;
  • For injuries or death;
  • Allegedly caused as a result of the person contracting COVID-19 while doing business with the essential business or while employed by the essential business; and
  • Arising from acts or omissions taking place between March 27, 2020, when the “stay-at-home” order was issued and the date Executive Order 116, in which Governor Cooper declared a State of Emergency, is rescinded or expires.

The limited immunity provided for in the COVID-19 Recovery Act applies to any claims filed on or after March 27, 2020.

Limitations on Immunity and Best Practices

While the limited immunity in the COVID-19 Recovery Act provides some protection to essential businesses that have been operating throughout the duration of the “stay-at-home” order and will provide some protection to essential businesses as our state works towards reopening the economy, it does not provide for complete immunity.  You should be mindful that no immunity is available to an essential business if the customer’s or employee’s injuries or death were caused by the gross negligence, reckless misconduct or intentional infliction of harm by the essential business.  The provisions of the Act sought to balance the need for protection for essential businesses from COVID-19 related claims with the need for those same businesses to follow guidelines set forth by our state government and its various agencies and to use reasonable care in their day-to-day operations given the pandemic.

Why do these limitations on immunity under the COVID-19 Act matter to you?  The most common type of claim for personal injuries in North Carolina is a claim for negligence – the breach of a duty of care owed to your customer. This new limited immunity provides a shield for essential businesses from civil liability for ordinary negligence.  However, a customer only has to claim that their injury arose from the gross negligence or reckless misconduct of the restaurant or other essential business in order to create a question of fact that will have to be litigated – i.e., whether or not there is any evidence that the business’ conduct went beyond ordinary negligence. This is why it is so important that operators in the retail, restaurant and lodging industries continue to not only comply with existing federal, state and/or local regulations that have nothing to do with COVID-19, but also to pay close attention to the requirements and recommendations issued by our state government and its various agencies for best practices now and as we proceed through the COVID-19 recovery period.  A timely example of this is Executive Order 138 and the requirements and recommendations for retail businesses, restaurants and bars as our state moves into Phase 1.  While violation of some provision of Executive Order 138 does not create a private right of action, it could be used by a claimant as some evidence of misconduct.

Retail Businesses

Executive Order 138 provides for specific limitations and safeguards to be used by a “retail business” during Phase 1 of the COVID-19 recovery period.  A “retail business” under the Order is defined as any business in which a customer enters a space to purchase goods and services.  Specific examples include “grocery stores, convenience stores, large-format retail stores, pharmacies, banks, ABC stores, hardware stores and vehicle dealerships.”  While the Executive Order generally allows for counties and local municipalities to enact more stringent measures, it specifically disallows this with regard to retail businesses. The Order, as with prior COVID-19 related Executive Orders, recognizes the need to create uniformity for retail businesses who operate across the state.

Executive Order 138 sets out required actions that retail businesses must comply with while operating during Phase 1 of our state’s COVID-19 recovery period as well as additional recommendations which are “strongly encouraged”.  At least some of these requirements and recommendations will be familiar to essential businesses, as being under prior Executive Orders, such as marking six feet of spacing in lines at point of sale or high traffic areas, frequently cleaning and disinfecting high-touch areas, designating times for seniors and high-risk persons to access retail services, and use of acrylic or plastic shields at cash registers in high volume retail businesses. A full list of requirements and recommendations for retail businesses during Phase 1 and a sample screening checklist questionnaire as well as sample signage to be posted at main entrances (both requirements under the Order) can be found here.


“Restaurants” are defined under Executive Order 138 as permitted food establishments as well as other establishments that both prepare and serve food such as restaurants, food halls, and food kiosks. Unfortunately, under Phase 1, restaurants remain restricted to delivery, drive-thru, curbside pick-up and take-out only, with on-premises dining still prohibited.  Under Executive Order 138, restaurants are encouraged to comply with recommendations to promote social distancing and reduce transmission such as using face coverings. Bars are not allowed to serve alcoholic beverages for on premises consumption and recent efforts to enact legislation to allow carry-out or delivery mixed drinks were not successful.

The North Carolina Restaurant & Lodging Association has developed the NC Promise program, which was designed to set out best practices and training for restaurant operators during the COVID-19 recovery. This program highlights all the things restaurant owners and operators already do on a day-to-day basis that provide sanitation and safeguards for the benefit of customers and employees – and then goes further in outlining suggested standards for use as North Carolina begins allowing reopening of restaurants and bars. Operators should stay tuned for Governor Cooper’s response to the proposed NC Promise program in conjunction with possible reopening of restaurants for patio and dine-in service during the COVID-19 recovery period.  In the meantime, restaurant and hospitality industry-specific resources can be found through the websites for the following industry organizations: North Carolina Restaurant & Lodging Association, North Carolina Retail Merchant Association, National Retail Federation, and National Restaurant Association.

Other Considerations

Of note, Executive Order 138 provides “recommendations to promote social distancing and reduce transmission” of COVID-19 by individuals who are leaving their homes to engage in any allowable activity – such as going to a retail business or picking up takeout from a restaurant.  The steps that are “strongly advised” in the Order include recommendations on social distancing by at least six feet; wearing a cloth face covering when in public settings or when unable to maintain an appropriate social distance; carry and use hand sanitizer; use proper hand washing etiquette and do so frequently; regularly clean surfaces that you come into contact with frequently such as cell phones and steering wheels; and staying home if sick. The Order also strongly encourages high-risk individuals to “stay home and travel only for absolutely essential purposes”.  As you receive and evaluate COVID-19 related claims, consider whether claimants are following these recommended strategies for their safety and the safety of others.

What About Worker’s Compensation Claims?

The limited immunity provided under the COVID-19 Recovery Act does not preclude an employee from seeking workers’ compensation benefits under Chapter 97 of the North Carolina General Statutes. There are two House Bills that were filed in the General Assembly on May 1, 2020, that propose to amend North Carolina’s workers’ compensation laws to include coronavirus infection or pandemic infection as an “Occupational Disease” under Chapter 97. Under the proposed legislation, a “covered person” who contracts a coronavirus or pandemic infection “shall be presumed” to have contracted it “due to exposure in the course of the covered person’s employment”.  House Bill 1056 limits a “covered person” to certain employees of state or local government, its agencies and certain health care workers, while House Bill 1057 includes employees of an essential business that are required to work during a pandemic, “including food service, retail, and other essential personnel”.  Clear and convincing evidence would be required to rebut this presumption.  This is certainly legislation to watch as we move forward.


A full copy of the COVID-19 Recovery Act can be found here, with the Limited Business Immunity provisions on page 42. If you have questions or need further information, reach out to the Retail, Restaurant & Hospitality Practice Group at Cranfill Sumner.