With global cases of coronavirus 2019 (COVID-19) soaring to 200,000, almost every industry across the globe is feeling its impacts. After being declared a pandemic by the World Health Organization, a National Emergency in the United States, and a public health emergency by almost every U.S. state, serious efforts are being made to prevent transmission of the virus, including the closure of businesses and workplaces, and the cancellation of events like sports, conferences, concerts, theaters, and political rallies.
Amidst a fractured federal response, President Trump announced the recommendation to limit social gatherings to no more than 10 people. State and local governments, especially in COVID-19 “hot zones,” are taking more coercive measures. In San Francisco, gatherings of more than 100 people have been prohibited; bars, entertainment venues, and fitness studios were closed; and people were ordered to work from home or not at all (aside from those providing essential services). Governors from New York, New Jersey, and Connecticut ordered statewide closures of businesses including bars and restaurants indefinitely, only allowing takeout and delivery. States and localities across the U.S. are implementing similar restrictions on mass gatherings and business operations – further limiting tourism and trade. At the organizational level, major events like the NCAA’s March Madness basketball tournament have been cancelled, despite major preparations and investments by cities, universities, athletes, and fans.
It is unquestionable that these measures will have massive repercussions and lasting impacts on the American economy, businesses large and small, as well as individuals and families. Given that COVID-19 has generated unprecedented orders for business closures and social distancing, we must examine what safeguards our legal system can offer. Are there protections for people who cannot go to work because they are sick or under quarantine orders? And if so, who provides the monetary compensation? When businesses are forced to close or events forced to cancel, are there any protections to help businesses recover from extreme losses of income due to an infectious disease outbreak? While our current legal system offers scattered safeguards in select jurisdictions, it is only now becoming obvious that reforms are needed to ensure an economic safety net, everywhere, as part of pandemic preparedness.
Legal Landscape of Protections for Employees and Businesses
Across the U.S., millions of employees (18% of American workers) are now unemployed or otherwise unable to work due to the repercussions of COVID-19. This includes those that are subjected to isolation or quarantine orders, those that cannot get to work because of transportation closures, those that must stay home to care for children whose schools are closed, and those whose workplaces are shut down, where telework is not an option. Other workers are facing or fearing layoffs as businesses struggle with huge income losses. Yet in the absence of applicable federal law, whether an employee can receive any type of benefit largely depends on state and local law, as well as employer policy.
Currently in the U.S., only 12 states, Washington D.C., and about two dozen localities have laws that require some level of paid sick leave. Even so, employees’ allocated sick time may fall far short of the recommended 14-day quarantines for COVID-19. Nine states have laws requiring paid family medical leave, where a person can take off work to care for someone who is ill and still receive a percentage of their income. However, this may not apply to care for children home from school, or persons quarantined, who may not be exhibiting any symptoms of illness. Plus, gig workers and those who are self-employed (approximately 16 million Americans in 2019) are not covered by laws requiring paid sick and family medical leave. Some companies including Uber have said that they will compensate drivers who test positive for COVID-19, or if they are asked by a public health official to be quarantined.
Other states are taking emergency approaches in direct response to COVID-19. California is allowing persons who test positive, or have been exposed to COVID-19, to file for disability, and Governor Newson has waived the one-week waiting period for recipients to start receiving disability benefits. Similarly, New York has waived the 7-day waiting period for unemployment insurance for persons out of work due to COVID-19 closures and quarantines. Though laudable, these measures may put a huge strain on states’ systems: New York experienced a 65% increase in unemployment benefit inquiries, causing the online system to briefly crash on March 16.
And what about businesses? Due to forced closures and recommendations for social distancing, businesses like restaurants, shops, and theaters will experience extreme losses. Where events are cancelled, such as Broadway shows and plane flights, industries may be liable to compensate persons for the cost of their tickets, depending on their refund policy. And businesses are often required to keep paying employees who are out of work for COVID-19 under the paid sick and family medical leave laws and policies described above.
While businesses are usually insured to cover losses for a variety of reasons, (including disasters causing physical damage like fires, hurricanes, flood), losses due to pandemic and social distancing have largely been an oversight – until now. Some jurisdictions and agencies have reacted quickly to implement emergency measures to help businesses survive the crisis. New York City is offering grants to small businesses (with fewer than 5 employees) to cover 40% of their payroll costs for two months. Other hard-hit businesses in the City can apply for interest-free loans up to $75,000. The federal Small Business Administration, which has historically provided low-interest loans for businesses suffering physical damages from natural disasters, is now doing the same for businesses impacted by COVID-19. Yet while these protections are important, businesses everywhere are still struggling. This pandemic has uncovered the need for a national safety net to help all businesses and their employees stay afloat in the midst of a nation-wide outbreak.
Can Federal Lawmakers Provide a Lifeline to Employees and Businesses?
Lawmakers at the federal level are taking some measures to bolster safeguards for employees and businesses impacted by COVID-19.
On March 14, the House passed the Families First Coronavirus Response Act, which is designed to help workers across the country care for themselves and their families during the crisis. The Senate followed suit, and President Trump signed the bill into law on March 18. The measure provides states with $1 billion in emergency grants for processing and paying unemployment insurance. Further, the Act implements two new provisions to provide emergency sick leave: the Emergency Family and Medical Leave Expansion Act (EFMLEA) – which will provide up to 10 weeks of protected paid leave for eligible employees affected by COVID-19, and the Emergency Paid Sick Leave Act (EPSLA) – which will provide eligible employees with up to two weeks of paid sick leave for COVID-19 related reasons.
But following negotiations and amendments to the legislation, the emergency sick leave provisions were made dangerously narrow. The EFMLEA and the EPSLA do apply to employers with over 500 employees, leaving those employees without the guarantee of paid emergency leave. The EFMLEA also allows the Department of Labor to grant exemptions to small business employers with fewer than 50 employees, if the adhering to the requirements would “jeopardize the viability of the business.” In reality, the provisions only cover about 20% of American workers, leaving out millions, including those that desperately need paid leave like many service workers at bars and restaurants.
And while the Families First Coronavirus Response Act could help some businesses retain employees through paid leave assistance, it does nothing to address the root of the problem: the extreme losses of income that businesses will face when they are forced to shut and lock their doors for weeks, and maybe months. What may be needed is the rapid construction of a national compensation fund, to help businesses address extreme losses due to COVID-19. But would that be feasible under current federal law? The answer may be yes.
Where a national emergency has been declared under the federal Stafford Act (as COVID-19 was declared by President Trump on March 13), billions of federal dollars were unlocked to assist states and localities in responding to a crisis. This includes financial assistance to help communities struggling from long-term economic distress or sudden economic dislocation, including under the Economic Adjustment Assistance (EAA) program. Under the EAA program, regions can apply for grants to cover up to 100% of the costs of projects designed to meet needs arising from severe unemployment, or from severe changes in economic conditions. Historically, the EAA program has been used to assist regions with economic distress resulting from the physical damage of natural disasters. In response to Hurricanes Gustav and Ike in 2008, Congress appropriated a total of $500 million in EAA disaster supplemental funding to Gulf Coast states. It is not hard to imagine that this same program could – and should – be used to provide a much needed lifeline to localities suffering economic strife due to pandemic.
The Future of Pandemic Preparedness: Economic Safeguards
It is yet to be known how long business closures will last and employees will be out of work, how many employees will find themselves unemployed, or whether businesses will have the capacity to successfully reopen in the aftermath of the COVID-19 outbreak. What is for certain, though, is that there will be lessons learned for protecting employees and businesses during future pandemics. Every worker should be able to stay home to protect themselves, their families, and their communities from an infectious outbreak, without worries of job or income loss. Every business should be able to comply with recommended or ordered closures without fearing irrecoverable financial losses. The COVID-19 pandemic is revealing the lasting damages that can occur when safeguards are not in place; whether our legal system adjusts to solidify these protections will be critical for the future of pandemic preparedness.
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All the best, Max Steinbeis