London Drugs cyberattack shows the need for companies to have insurance

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Large companies like London Drugs should have cyber-attack insurance to cover any costs, including wages owed to employees, when stores have to temporarily close, according to a legal expert.

“Realistically, what is reasonable for a company the size of London Drugs is to have insurance for these types of events,” said Lluc Cerda, managing partner and employment and labor law leader in Western Canada at Samfiru Tumarkin.

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He said qualifying for this type of insurance requires companies to beef up security measures to prevent cyber attacks from occurring in the first place.

His comments come after London Drugs said Monday it has reopened more than half of its 79 stores following a cyberattack that forced the chain to close for more than a week. In a statement, the company said it expected the remaining stores to open by the end of the day on Tuesday.

Responding to Postmedia inquiries, the company said that during store closures employees were offered the opportunity to continue working, focusing on merchandising, stocking shelves, cleaning or supporting efforts to reopen stores. He said for those who preferred not to enter closed stores, the option of using vacation pay instead of working a scheduled shift was offered.

“All employees received their paychecks as scheduled and will continue to receive them,” he said.

Cerda said having cyberattack insurance could help companies pay employees during a forced leave like this so they wouldn’t have to use vacation or bank overtime pay. However, there is no way an employee can force an employer to do this. Additionally, an employer cannot force an employee to agree to spend days or weeks without work.

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“Sometimes we see employers asking people to use accrued vacation and overtime so they can continue to be paid even if they are not working. Sometimes we see employees laid off during these crises as a result of a cyberattack,” she said.

He said having employees use their vacation or accrued overtime pay is a “middle ground” in that employees can continue to pay their own expenses, but then lose their vacation. The alternative is to lay off employees, but that may be a breach of an employment contract and the duty to provide work and compensation for it.

Companies that are affected by cyber attacks can face costs of tens of millions of dollars to address the consequences of a technical problem, as well as lost sales. They could also face penalties for having to delay accepting goods from suppliers or being unable to pay invoices, which would also involve breaches of contract that could be challenged in court.

In some cases, a cyberattack can result in the need for more employees or hours, such as when self-checkout kiosks fail, which is what happened at Empire Co. national grocery retail stores, including Safeway, Sobeys, IGA, FreshCo and Thrifty Foods. , among others, in the fall of 2022.

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While it pays to have insurance against cyberattacks, businesses must also protect themselves against many other unforeseen events.

“Today it is a cyber attack. Tomorrow there will be a railway strike. The next day, a pandemic. The actual event changes, but the unforeseen events, the details are unforeseen, but their happening is very predictable. That’s why it’s good to have a policy about what happens when a store is forced to close, because of a snow storm, whatever it may be,” Cerda said.

A strong policy would define the use of paid leave. You could also consider longer periods and include details about work-sharing or work-from-home arrangements, or the use of backup computing systems and locations.

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