The “new normal,” might have been the number one term of the past year. Part of the “new normal” is issuing refunds for canceled or postponed events. Even almost two years into the pandemic, events are still being canceled or postponed.
In May 2020, as the “new normal” was still developing, Attorney General Josh Shapiro urged businesses to honor their promised refund policies for trips that were canceled because of COVID-19 closures. Shapiro is referring to refund policies they already have in place for “unplanned or emergency circumstances.” Shapiro urged businesses to treat the COVID-19 emergencies similarly. Entertainment, travel, and event companies usually have a consumer refund policy for unplanned and emergency circumstances. A year later, in 2021, Shapiro was still urging companies to give fair refunds to consumers.
Businesses cannot legally retain a penalty if an event is canceled because of COVID-19. Generally, businesses may only retain a reasonable fee for their time and expense, not the full cost of the event or travel depending on what the contract language provides. In fact, businesses that do not honor their written cancelation policies could be violating state consumer protection laws.
More broadly, businesses are subject to state consumer protection laws prohibiting unfair and deceptive business practices. These laws can be enforced by consumers, individually or through class actions, and by State Attorneys General. The Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL) allows for restitution and penalties of up to $1,000 for each violation and $3,000 for each violation involving a consumer age 60 or older in a public enforcement action. Consumers bringing a successful civil action may assert treble damages and attorneys’ fees under the UTPCPL.
The new normal of events being canceled and postponed is frustrating to consumers and businesses alike. Businesses were caught off guard by the unprecedented nature and scope of the crisis. The quick and large nature of COVID-19 has quickly led to lawsuits over refunds and refund policies.
COVID-19 has left many Pennsylvania businesses unable to perform under existing contracts. In the legal world, COVID-related cancelations have highlighted the importance of the force majeure clause in contracts.
In Pennsylvania, the courts held that to enforce a force majeure clause as an excuse for non-performance, the event alleged as an excuse must have been beyond the party’s control and not due to any fault or negligence by the nonperforming party. However, there is little case law addressing the force majeure clause. Further, there is little to no case law pertaining to applying the force majeure clause in a pandemic. Pennsylvania courts will interpret such clauses narrowly, meaning events not provided for in the written agreement will not ordinarily excuse performance.
With additional cancelations and postponements almost certain to follow in the months ahead, the issue and logistics of consumer refunds will continue to present serious challenges.
However, not all events are canceling, some are just postponing. What does that mean for the consumer? What if the new date doesn’t work for them?
First, it is best to hold on to the tickets until the new date is confirmed. If a consumer cannot attend the rescheduled date, then they may be eligible to claim a refund on the ticket’s face-value price. But, unlike a canceled event, it is unlikely that the additional fees will be refunded.
Although, it is important to keep in mind that where a ticket was bought will alter the consumer’s protection. For example, there are fewer protections if you purchased tickets from a secondary source. In this case, the consumer may have to sell their own ticket if they cannot make the new date.
In this new normal, it is best to be patient and understanding. Both the consumers and businesses want business and events to successfully occur on their scheduled date.
The Ultimate Business Decision
Businesses are making tough decisions in postponing or canceling events. They face losing money and customer . Businesses and non-profits that are considering canceling an event should consult local, state, and federal guidelines for gatherings when making their final decisions. In addition, businesses must determine the risk of spreading COVID at their events.
If the event is not scheduled for many months, some may consider waiting if feasible before making the announcement. However, they must be sure to be giving enough notice to all parties involved in the . Not only will the customers but impacted, but so will vendor contracts. Vendor contracts have notice provisions requiring a certain window of time to notify vendors if the contract terms will materially change or if the contract will be terminated. If a force majeure clause is interpreted under these contracts, it is important to act quickly because of the unprecedented times. In such times it can be complicated to figure out whether the triggering event has occurred, and a legal team may need to be consulted. In addition to a legal team, an insurance provider may need to be notified, if a party purchased event cancelation insurance.
Another option is instead of canceling, they may consider postponing until a future date. However, often it may be difficult to predict when it would be safe to reschedule. This could cause a logistical nightmare with multiple postponed dates.
A final option, if applicable, is moving your event online, using streaming technologies to broadcast performances and to allow for virtual meetings. This could be unsatisfactory to many consumers, who would likely want their money back. It is also not applicable to all events. Like , e.g. a sporting event that is already broadcast on television. The consumers were paying for not just the event, but the environment and experience.
Whatever the businesses choose to do, after the announcement about the alteration of the event, consumers will be eager to know the refund policy. It is best practice to have all information in place before making any announcements.
The first steps of the businesses are to know their refund policies and cancelation clause. Businesses need to follow the language of their refund policies to avoid consumer protection violations. Also, it is important to note that if a business changes its refund policy, it cannot apply that policy retroactively. In addition, businesses should consult State laws when determining whether to offer refunds for canceled events because some states do have statutes to address these issues.
It is also important, during the new normal, to prioritize communication. Businesses should explain their rationale as best possible for postponing or canceling the event. In keeping with earning customer’s goodwill, the business should keep consumers informed of any potential date changes and options for refunds.
In addition to consumers, businesses must deal with sponsors. Again, communication should be prioritized. By keeping a clear line of communication, it should minimize financial losses while maintaining a positive relationship. If a business decides to postpone or move to a virtual event, there could be an option to keep them on as sponsors.
Overall, it is an unprecedented time, and canceling an event is a domino effect. It impacts workers, businesses, sponsors, the local community, and consumers. A general rule of thumb is to be patient and to keep an open line of communication. Even almost two years later, people are still adjusting to the new normal.
With contribution from Kayla G. Shellenhamer, second year J.D. candidate at Widener University