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A Novel COVID-19 Approach to Prohibiting the Closure of Essential Services

March 25, 2020

We have been writing about the various shelter-in-place orders issued around the country and, most recently, the many cybersecurity concerns and have now established a dedicated COVID-19 page where you can find all of the most recent statewide orders issued to date. (Please note that Pennsylvania’s order now applies to only seven counties, not the entire state.) In fact, if you are reading this alert, you have already found this page! Scroll down to view the executive orders. We also have compiled every order issued to date in Colorado as well.

As we have pointed out in prior alerts, almost all of the shelter-in-place orders have exemptions to allow essential businesses to remain open, including those in the “critical infrastructure” category defined by the Cybersecurity and Infrastructure Security Agency (CISA). However, nothing in the shelter-in-place orders requires essential businesses to stay open. Therefore, even if a government or private business is defined as essential, it may still limit services and, in some cases, either completely or partially shut down. For example, in some orders, the Colorado legislature is identified as essential, but it has suspended its session; the courts are identified as essential but in some cases are canceling trials and hearings and only accepting electronic filings; some restaurants that could be offering takeout services have entirely shuttered.

So, the question arises: How will we ensure that critical infrastructure continues to function when, despite its social responsibility to provide services, it decides to shut down for reasons such as oil prices, lack of employees, lack of cash flow, or fear of exposing individuals to COVID-19?

The answer is that some cases may be contractual. A business may have a contract with a supplier that requires the supplier to provide goods or services. If a supplier refuses to provide goods or services, despite being contractually bound to do so, the courts may provide redress through injunctive relief, depending on the circumstances. However, in most cases, the redress available may be simply monetary compensation, which will necessarily save the company that needs its supply chain to function in order to provide its goods or services. However, what happens if the supplier declares bankruptcy and triggers the automatic stay? The time delay alone may prove fatal to its business partner.

Arizona recently issued an order titled “Prohibiting the Closure of Essential Services.” But even this order does not require essential businesses “not to close.” Instead, the Order prohibits cities, counties, and towns in Arizona from issuing conflicting shelter-in-place orders which would require an essential business to shut down, including any golf course (of course) or restaurant, as long as (in those cases) previously-issued restrictions on food and beverage service and in-restaurant dining are followed.

The answer may partially be found in the forthcoming and widely anticipated federal stimulus bill known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

This bill, which was recently passed in the Senate, provides emergency loans to distressed industries such as aviation and forgivable bridge loans to provide cash flow to allow qualifying small businesses to continue operations through incentives and grants. Check back on this site for a summary of the CARES Act once it becomes law.

In Colorado, the tools in Governor Polis’ quiver include the special powers granted to the governor pursuant to the Colorado Disaster Emergency Act, C.R.S. §§ 24-33.5-701 et seq. This Act, among other things, allows the governor to:

(a) Suspend the provisions of any regulatory statute prescribing the procedures for conduct of state business or the orders, rules,

or regulations of any state agency, if strict compliance with the provisions of any statute, order, rule, or regulation would in any

way prevent, hinder, or delay necessary action in coping with the emergency;

(d) Subject to any applicable requirements for compensation under section 24-33.5-711, commandeer or utilize any private

property if the governor finds this necessary to cope with the disaster emergency;

and

(i) Make provision for the availability and use of temporary emergency housing.

Check back on this site for more information about the CARES Act once it becomes law.

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