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Is Your Business Essential? Guidance on Difficult Decisions in a Time of Uncertainty

Client Alert

Authors: Kristin H. Jones and Michael A. Schwartz

3/21/2020
Is Your Business Essential? Guidance on Difficult Decisions in a Time of Uncertainty

As restrictions tighten in counties and states across the country, many businesses are having to decide whether they can continue to operate. In New York, only “essential businesses” may remain open. In Pennsylvania, only “life sustaining businesses” may remain open. In California, businesses may remain open if they are “needed to maintain continuity of operation of the federal critical infrastructure sectors,” as explained by guidance issued by the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency.

Each jurisdiction has a list or guidance on what kinds of businesses must close and what can remain open. Some businesses can easily identify themselves on one of the lists and make their decision. For others, particularly in service and supply industries, it is less clear, and the stakes are high on many fronts. Some steps businesses can follow include the following:

  1. Follow the most restrictive guidance. At the moment, decisions about restrictions on our daily lives are being left to state and local governments. In deciding whether it should remain open, a business should look at the state and local guidance in each jurisdiction where it has operations, and consider following the most restrictive guidance. Typically, the most guidance is at the county or city level.
  2. Make the decision at a functional or operations level. In making their decision about whether to remain open, businesses should critically assess each of their business functions or operations and determine at that level whether each function or operation should remain open. Businesses that decide to keep all of their operations open because some or a few of their functions are “essential” or “life sustaining” could be subject to scrutiny. Governments at every level are relying on businesses to exercise good faith and judgment in making these hard decisions, and businesses would be well-served to carry out that obligation by looking at what goods and services they are providing actually are “essential” and “life sustaining” during these unprecedented times.
  3. Look to see if the jurisdiction has a process for requesting approval or a waiver to remain open. If a business believes it should remain open, but it is unclear under the guidance whether it may do so, businesses should look to see whether their jurisdiction has a process for obtaining permission or a waiver. At the moment, only a few jurisdictions have such a process in place. In New York, businesses that are not covered by the state’s guidance on what constitutes an essential function can file a request to be designated as essential.  In Pennsylvania, the state has provided a form for businesses to apply for a waiver. However, these state processes are currently overwhelmed with requests, and many jurisdictions do not currently have the resources to put these types of processes in place.
  4. Consider proactive notice to state or local government. Businesses who are not clearly covered by guidance on whether they should remain open, but feel that they are “essential” or “life sustaining,” should consider proactively writing a letter to their local government notifying officials of their decision to remain open, particularly in jurisdictions that do not have an approval or waiver process. The letter should explain why the business has made the decision and provide specific detail on its “essential” or “life sustaining” functions or operations. The letter should offer the contact information of the person(s) at the business with the authority to make the decision about whether to keep the business open. This type of transparent disclosure shows good faith and gives a state or local government the opportunity to contact the business if it disagrees with its decision to remain open.

In addition, there are some practical considerations in making the difficult decision about whether to keep a business open, particularly in the most restrictive jurisdictions such as California, New York, and Pennsylvania. 

First, government officials are not making the decisions about closing businesses lightly. These painful decisions are based on a genuine belief that these steps are necessary to protect lives. In jurisdictions that have asked non-essential businesses to close, a business that remains open should do so only if it genuinely believes, after a good faith self-assessment, that it is a necessary part of efforts to protect human health and safety.

Second, businesses that remain open with employees in the field will be subject to public scrutiny. If it is not obvious why a business remains open, while others have made the sacrifice and closed, they may be questioned.  Questions, for example, on social media could hurt a company’s reputation. A competitor or neighboring business may complain to law enforcement or the health department, prompting a visit and/or a costly investigation or enforcement action. A rule of thumb many businesses are using is whether a person driving by your open business or seeing your personnel in the field would understand why the business is still operational.

Third, businesses that remain open will be judged by hindsight. If, for example, one or more employees of a business that remain open contract COVID-19, the business could face a risk of liability if the company’s decision-making process was not reasonable and justified.

Finally, if a business remains open, particularly in the most restrictive jurisdictions, a few things it should do include:

  1. Make sure it is following all of the recommended guidance to protect the health of its employees, including hand washing, social distancing, and not gathering in groups. Employees should be thoroughly trained on how to protect themselves.
  2. Make sure its employees understand and can articulate why the business is essential. Employees in businesses that are open or who are out in the field may be questioned. Sheriff’s offices, other law enforcement officers, and health department officials are visiting businesses and asking hard questions. If employees are not prepared to provide meaningful explanations, the business could be ordered to shut down and possibly be subject to fines and enforcement actions.
  3. Continually re-assess the decision to remain open. The restrictions and guidance for businesses are changing on an hourly basis. Businesses should be keeping a close eye on developments in the jurisdictions in which they operate to make sure their decisions are based on the most current information.

The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship.

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