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Logo Icon GOVERNOR’S LATEST SHUTDOWN ORDER LEAVES CALIFORNIA SMALL BUSINESS SCRAMBLING

“The mistake is thinking that there can be an antidote to uncertainty.” - David Levithan (2011)

Less than six weeks after California businesses were permitted to slowly begin re-opening following a statewide “shelter-in-place order” arising from the COVID-19 pandemic, Governor Gavin Newsom issued a new executive order on Monday, July 13, 2020 requiring the (re-)closure of thousands of California small businesses. As a result, business owners have scrambled to interpret and understand the latest order – which on its face is incredibly vague and without any definitive timeline.

The latest restrictions on business currently affect 30 counties -- including Los Angeles, Orange, Riverside, Sacramento, San Bernardino, San Diego and Ventura Counties – where the state has detected increased COVID-19 exposure(s) for three consecutive days. Among the businesses/industries effected by the Governor’s directive are those with any indoor operations, including:

  • fitness centers and gyms;
  • churches, synagogues, mosques and other places of worship;
  • movie theaters;
  • zoos and museums;
  • cardrooms;
  • personal care services including hair and nail salons, barbershops and spas;
  • tattoo and massage parlors;
  • wineries and brewhouses;
  • indoor malls; and,
  • “nonessential” office work (a list of those businesses deemed to be “Essential” by the state can be found here).

However, the industry with the most dramatic impact will be California’s bars and restaurants. Governor Newsom’s orders forbids dine-in service with indoor seating. Outdoor seating – with proper social distancing – will continue to be allowed, as will take out and/or delivery services. During the Governor’s press conference, Sharokina Shams of the California Restaurant Association, stated: “We began hearing from many restaurants who were saying to us, you know, I was in survival mode, and now I'm in a place where I just won't be able to survive. I will have to shut down. And that likely will be a permanent shutdown from my restaurant.” By Ms. Sham’s estimation, over one million of the industry’s 1.4 million employees will find themselves with significantly reduced hours, a work furlough or layoff for employees in those businesses forced to close their doors permanently.

At this point, there is no definitive plan to offer further economic stimulus or assistance to either the affected business owners or their employees. Compounding the stressors of the latest shutdown order is the lingering fact that the federal Pandemic Unemployment Assistance (PUA) monies will be exhausted on July 25, 2020. Up to this point, displaced workers were eligible to receive state unemployment insurance benefits (to a maximum of $450/week) PLUS an additional $600 per week in PUA benefits. This federal lifeline – which was part of the Congressional CARES Act passed in April – has not been extended at the time of this writing.

Without any definitive timeline, business owners are left to guess when (or rather, if) they will be permitted to re-open their doors to customers. Absent revenues, many of these small businesses will be unable to pay their debts and obligations, including rent, vendor bills, employer sponsored health and welfare benefits and the like. This will likely result in a significant “second wave” of bankruptcy filings, for those businesses unable to weather the storm.

We face unprecedent challenges in these trying times, and uncertainty has become part of our “new normal”. While there may be no “antidote” for the uncertainty we are facing, adapting to the new normal is an essential function for every California business owner. As you make decisions that will impact the long-term success – and perhaps the survival – of your business, the attorneys at Poole Shaffery & Koegle, LLP would love to be The Law Firm for Your Business® in that decision-making process!