Pagel Weighs in On Stay-At-Home/Shelter-In-Place Orders
During his webinar on March 24, 2020, “SBCA Legal Counsel Gives COVID-19 Follow-Up” (link requires member login), Kent Pagel gave his analysis and guidance regarding then existing state Stay-At-Home/Shelter-In-Place orders as well as a memorandum issued by the Department of Homeland Security's (DHS) Cybersecurity & Infrastructure Security Agency (CISA). The CISA “Memorandum on Identification of Essential Critical Infrastructure Workers During COVID-19 Response,” is referenced by many of the state orders, which SBCA is tracking for component manufacturers (CMs).
Discussion of Stay-At-Home or Shelter-In-Place Orders
Since the manufacturing operations conducted by CMs cannot be done remotely by employees at home, it is challenging to understand and comply with the lengthy stay home orders being issued by many of the states, counties and municipalities. The health and safety of CM employees is a primary concern. But while the COVID-19 outbreak exists, preserving the financial integrity of a business so that truss and component orders are fulfilled and employees have an opportunity to keep working is also very important.
These stay home orders in varying ways direct residents to not leave their homes except to perform what the order describe as “essential activities.” They direct companies, where tele-commuting is not practical, to shut down their workplaces unless their business falls within the “essential Infrastructure” or “essential business operations” descriptions contained within the orders. For the individual residents, leaving home to work for an “essential business” is one of the permitted “essential activities.”
The first step in evaluating these orders is to determine whether residents are being directed or ordered to comply. In other words, is the order mandatory? Mandatory orders will generally reference state statutes that set forth the powers of the governmental entity issuing the order during an emergency. These orders will also indicate that violations are punishable with fines or imprisonment (or similar language). The stay home orders being monitored by SBCA are mandatory.
A second step with regard to these orders is to determine whether, after the orders are issued, they have been revised, amended or supplemented in response to questions or pressure from interest groups. There is often published guidance and FAQs that accompany orders, which can provide valuable information about the intent of orders and to what businesses they apply. These resources should be consulted as they may provide more clarity on ambiguous language contained in some orders. By way of example, SBCA recently reviewed the State of Washington’s stay home order and determined that construction workers at construction sites, including housing construction, was permissible in the state under the “Essential Critical Infrastructure Workers” classification Two days later however, the state governor issued a follow-up proclamation stating that commercial and residential construction was not authorized as “construction was not considered to be an essential activity”.
SBCA has now reviewed 26 state stay home orders and multiple other county and city orders. While these orders have some similar language and references, they are all unique and were analyzed independently. All of the orders included a general instruction that residents stay home or shelter in place and that businesses cease operations except for tele-work, which was actually encouraged. Most orders also provided exceptions for certain businesses to operate on a limited basis if there are “minimum basic operations” that are required to preserve the value of its inventory, ensure security and/or process employee payroll. The orders also contain multiple pages or lists of exceptions for businesses that are allowed to operate and fall usually under a definition of “essential infrastructure” or “essential businesses”.
SBCA’s primary focus was to determine whether commercial construction and/or residential construction was a permitted exception in an order. Other than the states of Pennsylvania, Michigan, Vermont and Washington, construction (including residential construction) is stated to be either an “essential infrastructure” or “essential business” in each of the state orders. For most of the orders where construction is permitted, the orders also describe that manufacturing companies, distributors, and supply chain companies who produce and supply materials to industries or companies that are excluded from the order are themselves excluded, such as would be the case of truss manufacturers selling into the commercial and residential construction supply chain.
Where state orders were silent or vague with regard to suppliers to the commercial and residential construction sectors, SBCA has somewhat aggressively assumed that component manufacturing companies were intended to be included as being part of any commercial or residential construction exclusion after answering this question: “How long can construction occur as an exempt activity if building material suppliers are not able to deliver necessary materials?” The obvious answer is “not long.”
SBCA adopted this position after Governor Newsom established the precedent. Gov. Newsom first issued his Executive Order for all Californians to stay at home except for essential services which included “critical infrastructure”. However, the definition of “critical infrastructure” that was used in Newsom’s order relied entirely on the listing of infrastructure industries set out in the CISA memorandum (which is discussed below), which makes no reference to “construction” whatsoever. However, in consultation with Newsom’s staff, the California Building Industry Association was assured that “home building is considered critical infrastructure.” With this verbal clarification supplementing Governor Newsom’s order, the contractors and builders showed up to work the next day and were asking their building material suppliers, including component manufacturers, to likewise stay open and continue to supply. The CM industry complied and concluded by necessity that home building and construction had to include building material supply.