How Will State and Local Governments Reopen Businesses After COVID-19?

Brownstein Hyatt Farber Schreck

From the federal government to the states, governmental entities have begun planning how and when to reopen the economy. Governments must strike the appropriate and delicate balance between the competing interests of preserving and protecting public health and economic resiliency and growth. As signs begin to emerge showing that extreme social distancing and stay-at-home orders are working, states and the federal government are beginning to chart out their plans to reopen their economies while working to ensure that there is not a resurgence or relapse of COVID-19 that would have tragic consequences.

Authority of States to Reopen the Economy

Since the outbreak of COVID-19 in the United States, nearly every state in the country has declared a state of disaster or emergency and decision makers in numerous counties, cities and localities have followed suit. The powers associated with a disaster or emergency declaration are broad, and vary by jurisdiction, but can include virtually limitless tools such as prohibiting public congregations of people, traffic on streets, rationing, price controls, seizures of private property and goods like medicine, as well as relaxing medical licensing requirements to permit out-of-state medical professionals or doctors with expired licenses to assist in response and treatment. States also have the power to suspend laws and regulations.

A key emergency power that state and local governments have exercised is distinguishing between essential and non-essential businesses and, correspondingly, implementing a variety of restrictions on the operations of businesses that are deemed non-essential. Restrictions imposed on non-essential businesses range from telecommuting mandates to workforce reductions and business closures. As a result, the designation of essential businesses has impacted millions of Americans.

Further, every state governor has the authority to issue quarantine or stay-at-home orders, and to modify, expand or rescind those orders. The president does not have the legal authority to undo a state-level quarantine order.

As such, when a state or locality imposes mandatory quarantines or curfews, orders mandatory social distancing, seizes medicine or personal protective equipment, or prohibits congregations of certain numbers of people—all of which may harm economic productivity—the state (and in some cases, the locality) alone retains the ability to terminate such limitations.

The path forward: how and when states will reopen

President Donald Trump has released new guidelines for a science-based framework to reopen the American economy, formally known as Opening Up America Again. The guidelines are not mandatory and are set-out in an 18-page document. 

The guidelines are based on up-to-date data and state readiness. The goal is to take a phased and deliberate approach to mitigate the risk of resurgence and protect vulnerable populations, including the elderly and those with underlying health conditions. The guidelines are intended to be implementable on a statewide or county-by-county basis and include specific recommendations for individuals and employers. They suggest three phases for states to reopen, with progressively relaxed levels of social distancing. Each phase would require a 14-day period of a "downward trajectory" of cases to advance to the next one. 

In Phase One, states or regions would have social distancing guidelines similar to those in place now. For individuals, vulnerable populations should continue to shelter in place. All individuals when in public (e.g., parks, outdoor recreation areas, shopping areas) should maximize physical distance from each other and should avoid socializing in groups of more than 10 people. "Strict physical distancing protocols" would be ordered for places such as restaurants, theaters, sporting venues, churches and gyms. Bars would remain closed, and schools and organized youth activities that are currently closed should remain closed. Visits to senior living facilities and hospitals should be prohibited. Gyms could remain open if they adhere to strict physical distancing and sanitation protocols.   

In Phase Two, states and regions that show no signs of a rebound could expand gatherings to 50 people and resume non-essential travel. Working from home would still be encouraged. Schools and youth activities could reopen,  Large venues (e.g., sit-down dining, movie theatres, sporting venues, places of worship) can operate under moderate physical distancing protocols.  Bars could operate with "diminished standing-room occupancy", where applicable and appropriate.  Vulnerable people still would be urged to stay home and visits to senior care facilities and hospitals should be prohibited. 

In Phase Three, states and regions could expand guidance so that vulnerable individuals can resume public interactions but should practice social distancing. Visits to hospitals and nursing homes could resume. Employers would be able to resume unrestricted staffing of worksites. Large venues can operate under limited physical distancing protocols. Bars could operate with increased standing room occupancy, were applicable. Gyms can remain open if they adhere to standard sanitation protocols. 

It will ultimately be left to individual governors to formally lift state stay-at-home orders.  President Trump has made it clear that states have the freedom to tailor the approach that meets their diverse needs. As noted below, some governors have been looking to the federal government for guidance, but most governors will ultimately make decisions based upon the evolving conditions in their states. 

President Trump also encouraged states to work together to harmonize their regional efforts. As noted below, states have already begun forming regional pacts and working together. 

As states move forward, it is clear that three things will drive the timing: data, data and data. State and local leaders, taking cues from what has been successful in countries like South Korea, the Czech Republic and Denmark, have consistently stressed that the availability of COVID-19 testing kits will be a major factor as they weigh when and how to resume normal economic operations. Singapore’s response efforts have been cited as one of the world’s “gold standards” for handling the pandemic. They have now reported a second wave of cases that provide a preview of what Americans may face if they lift the stay-in-place and social distancing orders too quickly.

Dr. Anthony Fauci, the top immunologist on the White House coronavirus task force, has emphasized that some parts of the country could begin to reopen by the end of May but the approach would differ: “It’s going to have to be something that is not one-size-fits-all.” He explained that restarting the economy will depend on “where you are in the country” and the nature of the outbreak in that region. As to the timing of reopening, Dr. Fauci has said that the United States does not have the critical testing and tracing procedures needed to reopen the nation’s economy.

Governors are paying acute attention to the number of ventilators their states possess, as that figure is a key indicator of whether their states’ medical providers can respond if there is a sudden spike in cases or an unexpected resurgence of the virus. However, most state and local decision makers have acknowledged that until a vaccine is developed, the availability of testing kits, access to ventilators and other cautionary measures (e.g., social distancing, use of personal protective equipment, reductions of in-person workforces) will not alone be sufficient to stimulate a full return to economic normalcy.

State and local governments are running scenarios and assessing the protocols necessary to put in place to reopen their economies.

This is how some states are developing plans around reopening their economies:

  • Northeastern States Regional Pact: New York, New Jersey, Connecticut, Massachusetts, Pennsylvania, Delaware and Rhode Island. On April 13, New York Gov. Andrew Cuomo (D) announced that he, along with six other states’ governors in the northeast United States, are forming an alliance to explore how to collaboratively lift restrictions put in place to combat the spread of COVID-19. Cuomo said that the interstate working group’s focus will be on gradually increasing economic activity by slowly expanding the states’ essential workers designations, but all the governors cautioned a large-scale reopening could only occur if there was a commensurate decrease in the rate of the spread of the coronavirus. Each state plans to name a public health and economic official to a regional working group. The chief of staff of the governor of each state also will be a part of the group, which will begin work immediately to design a reopening plan. Cuomo (D) has already announced that nonessential businesses in his state would be closed through at least May 15 and that he has coordinated that decision with other states.
  • West Coast Regional Pact: California, Oregon and Washington. California Gov. Gavin Newsom (D) announced his state’s participation, along with Oregon and Washington, in the Western States Pact on April 13. The regional pact consists of four principles, including protecting vulnerable populations, ensuring adequate treatment capacity, mitigating coronavirus’ impact on disadvantaged communities, and developing a robust testing and tracking system, which the states agreed should guide their collective decisions on how to increase economic activity. On April 14, the individual governors released their state-specific plans, which included more individualized health and science-based metrics for each state.
  • Midwestern States Regional Pact: Michigan, Ohio, Wisconsin, Minnesota, Illinois, Indiana and Kentucky. On April 16, seven Midwest governors announced that they will work in close coordination to reopen their economies. The seven governors said they will take a “fact-based, data-driven approach to reopening our economy in a way that protects families from the spread of COVID-19.” The statement noted that they would “make decisions based on facts, science, and recommendations from experts in health care, business, labor, and education.” The governors will, at a minimum, examine these four factors when determining when best to reopen their economies: sustained control of the rate of new infections and hospitalizations, enhanced ability to test and trace, sufficient health care capacity to handle resurgence and, best practices for social distancing in the workplace.
  • California: Newsom outlined a more specific framework for reopening the California economy, which would be guided by “science and public health, not politics.” Newsom said the state would use real-time data, science and examples on a daily basis as the loosening of orders goes forward “to toggle that dimmer, so we get exactly the appropriate lighting, so that we can ultimately transition to herd immunity and that vaccine.” Newsom said that Californians should prepare for a new reality where residents continue to wear masks, and where they may be greeted at restaurants by waiters wearing masks and gloves with disposable menus in venues that have half as many tables. Local school officials would develop new protocols, he said, for physical education classes and recess at schools, as well as processes to deeply clean and sanitize schools, parks and playgrounds to keep infection rates down. California Gov. Newsom has offered detailed criteria as to when California would reopen its economy. Newsom said the dates would be determined by the ability to do six things: expand testing to identify and isolate patients, maintain vigilance to protect seniors and high-risk people, be able to meet future surges in hospitals with a “myriad of protective gear,” continue to collaborate with academia on therapies and treatments, redraw regulations to ensure continued physical distancing at private businesses and schools, and develop new enforcement mechanisms to allow the state to pull back and reinstate stay-at-home orders. In California, some local governments have put in place stricter guidelines than those set in the current statewide stay-in-place order, and that could continue as the state begins to reopen the economy in California.
  • Colorado: Gov. Jared Polis’ (D) stay-at-home order has outlined three phases for how decisions will be made on reopening society: urgent, stabilization and recovery. Phase 1, which is ongoing, involves mandating that people stay indoors, with the goal of suppressing the virus’ growth and expanding testing, tracing and health care capacity. The state is also using this time to conduct a cost-benefit analysis of social distancing policies. Colorado will enter Phase 2 as the risk of the spread lessens, and the state feels comfortable with its ability to handle new patients, introduce mass testing and trace the contacts of those with the virus. Polis opined that Phase 2 could last “two months, three months, 10 months—however long it is until there’s a cure or a vaccine.” Large gatherings, including sporting events and concerts, would still be banned, but some nonessential businesses could reopen. Polis has theorized that in May, a dine-in restaurant may be able to seat 25% of its normal capacity and that percentage could be increased on a rolling basis moving forward. Polis has encouraged all business owners to consider how they might provide for greater distancing if and when they reopen. The final recovery phase will only be possible through a vaccine, cure or herd immunity, which would mean a significant portion of the population has been infected. All restrictions would lift under this phase, and individuals could resume their normal way of life as health officials monitor for outbreaks. Polis has also said that Colorado could re-instate the stay-at-home order if necessary.
  • Texas: Gov. Greg Abbott (R) is working closely with the White House on his plan to reopen the state’s businesses. He called for a staggered approach in which businesses that have a minimal impact on the spread of the virus would open up first.
  • Alabama: Kay Ivey (R) has indicated that the state had been developing a reopening plan, but acknowledged it was too early to set a timeline. She said she hoped to work with the Trump administration—but would focus on what is best for Alabama. Lt. Gov. Will Ainsworth announced the formation of a task force to reopen the state's economy.

Many other states have indicated that they are exploring when and how to reopen, but it is crucial to note that very few have committed to a target date and none has speculated that their individual economic sectors could come back online at once.

Five Tips for Businesses Looking to Reopen

Ultimately, businesses will be allowed to reopen and this will occur before the pandemic is completely eradicated. The piecemeal, non-specific approaches governments are taking in regard to how and when to resume normal economic operations present an unprecedented challenge for employers and business owners. Even if your business is ultimately authorized to reopen, state and local governments will still very likely impose strict social distancing, capacity and other coronavirus-related rules (e.g., certain operating hours for vulnerable populations, free delivery) that businesses will have to observe. In fact, a state or local government may condition the reopening of your business upon your ability to demonstrate that your business can operate in compliance with these types of mandates. Here are five tips that can help get your business back on track as quickly as possible:

1. Demonstrate that your business is important and should be reopened. Most state and local governments’ impositions on economic activity primarily center on whether the business is considered essential or non-essential. In the first wave of limitations, governments have focused on allowing what they have deemed to be essential. Critical businesses have been allowed to continue to operate with public health restrictions like social distancing. These businesses include, but were not limited to, health care operations, critical infrastructure, critical manufacturing, critical retail, critical services, news media, financial institutions, construction, defense, services necessary to maintain public safety and sanitation and critical government functions.

Even though your business may have initially been deemed non-essential during the height of the COVID-19 pandemic, businesses that can demonstrate that their business provides or supplies a key community service—particularly as governments encourage a return to normalcy—will likely be among the first to reopen.

Further, businesses that may be deemed non-essential should be prepared to advocate for allowing essential personnel to work. By way of example only, this includes operating phone systems, processing mail and the administration of these businesses.

Alternatively, businesses should consider whether it is feasible to temporarily transition their business to serve a function that has already been deemed essential, as that likely provides the most immediate route to reopening while state and local governments mull how to ease restrictions.

Governments are also facing significant budgetary shortfalls as a result of decreased revenue and additional burdens being placed on their enterprise. As a result, they will likely have fewer resources to deal with the impacts of the pandemic. To the extent that your business can provide expertise or resources for the government, you should consider advancing these ideas to the appropriate government official.

Finally, to the extent your business participates in a trade association or organization, you should contact that association to see what efforts are being made to connect with decision makers who are deciding when and how to reopen. Most governments have begun discussing ideas with thought leaders in their communities.

2. Be flexible. In an ever-changing environment of both regulation and new societal practice, flexibility will be a necessity. Your ability to innovate and change could very well determine whether your business survives.

  • Brick-and-mortar stores may be better served by accommodating curbside pickups and online orders.
  • Consider expanding your operating hours and set aside a portion of those hours for at-risk populations.

3. Create a plan for physical distancing. Harvard researchers have opined that people around the world might need to practice some level of social distancing intermittently through 2022 to stop the disease from surging again and overwhelming hospital systems unless hospital capacity is increased or effective vaccines and treatments are developed. Businesses should begin to make plans that provide adequate social distancing within the workplace. And, they should also be prepared to demonstrate that when regulatory restrictions are eased, they can accommodate physical distancing for both their employees and customers.

  • Set limitations on the number of people inside of your business at any given time.
  • Spread employees’ shifts out over longer periods of time, which will allow fewer and shorter interactions.
  • If possible, return to work in phases.
  • Ditch co-working spaces and open offices that encourage longer periods of close interactions.
  • Close common areas where personnel are likely to congregate and interact.
  • Create incentives for remote working.
  • Continue to encourage telework, whenever possible or feasible with business operations.

4. Demonstrate that you have a plan to protect the health and welfare of your customers and employees.

  • Issue and require that your employees use appropriate personal protective equipment.
  • Plan to pre-screen employees’ temperatures and assess symptoms before they enter the work facility as long as regulatory guidance permits that.
  • Set guidelines for regularly monitoring employees’ health for potential symptoms in compliance with applicable laws.
  • Create and implement protocols for disinfecting the workplace on a regular and systematic basis.
  • Require that employees stay home if they are sick.
  • Provide a place to wash hands or provide alcohol-based hand rubs containing at least 60% alcohol.

5. Consult with legal counsel and devise a plan to ensure that protecting the health of your workforce and returning them to work does not run afoul of employment laws.

  • All the same, EEO and OSHA considerations that normally inform personnel management decisions will be important to factor in as you gradually bring back your workforce, so be mindful of possible adverse impacts that your plan may have on certain protected classes of workers, particularly with refusals to work due to safety concerns.
  • However, the EEOC has revised its guidance to indicate that currently, certain inquiries, including temperature screenings and asking if an employee has lost his or her sense of smell, do not constitute an improper medical examination in violation of the ADA. So, to the extent those practices will be utilized, it is acceptable until the EEOC revises that guidance. As to temperature screenings of non-exempt employees, certain states, including Colorado, require payment for such time.
  • Given that it is unlikely that schools will reopen during the current school year, keep in mind that many of your employees may still be faced with managing child care issues, and under the federal FFCRA, if the employer is a covered entity and depending on the state orders in place at the time, employees may be entitled to paid leave and/or extended FMLA leave (in addition to whatever state laws may require and provide).
  • The same leave entitlement and paid leave considerations apply if your employees are suspected ill with COVID-19 or become ill; consider leave entitlements under the federal FFCRA as well as state laws.
  • To the extent the quantity of work is substantially reduced or duties are changing substantially, consider whether you should re-classify any of your salaried, exempt workers to non-exempt, given that an exempt salaried worker normally must be paid for the full week in which any work is performed, among other considerations.
  • Related to the above, non-exempt workers must be given required rest and meal breaks, and all time worked and overtime must be tracked and paid; pay particular attention to this with hourly workers who are new to telework to ensure they are tracking all worked time. Note also that for your non-exempt workforce, certain jurisdictions like Illinois have strict reimbursement requirements for equipment used to work remotely.
  • Check your group health plan so you know how long coverage will be provided to employees who are not currently working, or how many hours an employee must work to be eligible for coverage, as that may affect the coverage that may be provided and how you stagger their return.
  • If you have/had over 100 full-time employees, be aware that you may be subject to federal and/or state WARN Act notice requirements if a certain percentage of your workforce has been laid off or furloughed longer than six months, so consult legal counsel about this nuanced wrinkle.
  • Continue to closely monitor federal, state and municipal guidance regarding return-to-work guidelines, which we expect will be promulgated and revised on an ongoing basis for the foreseeable future.

These are just a few of the myriad employment law considerations. Look for upcoming client alerts for a more complete list.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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