Overview
In my Top 25 article for 2020, ranking and detailing the then-coming year’s most notable legal issues for dealers, I made no reference to the Coronavirus pandemic, also known as a COVID-19 contagion. At publication time in December 2019, the virus was not even a blip on the radar screen. By late March and early April 2020, however, state governments and/or circumstances had either shut down or mightily reduced operations of every franchised car dealer in America, along with thousands of “non-essential” businesses.
The power and scope of this disease were both more sudden and profound than any other major catastrophe in modern history. As this article goes to press, over 9,000,000 people world-wide in over 180 countries had contracted the disease with close to a half million deaths. In the U.S., the growing counts were over 2.6 million afflicted, and more than 127,000 deaths. These horrifying numbers will rise over the coming months. No one had imagined that major auto manufacturers would re-fit their factories into makers of medical equipment during March and April, while they ceased car production. Dealers in many states all but flat-lined.
Before February 2020, there was still little news, much less warning, about COVID. Most early information from government officials, the World Health Organization (WHO) and a bevy of experts, was comforting: This illness would not be a serious problem for Americans. In a visit to constituents in San Francisco on February 24, 2020, Speaker of the House Nancy Pelosi said, “We want to be vigilant about what is out there in other places. We want to be careful about how we deal with it, but we do want to say to people ‘Come to Chinatown. Here we are careful, safe and come join us.’” (Emphasis added.) Speaker Pelosi was spectacularly mistaken. Similarly, President Trump under-estimated the growing threat.
In late January, when the Trump administration preemptively forbade most travel to and from China, many experts and organizations, including WHO, criticized the step as overwrought, or even hysterical or “xenophobic”. Until March 2020 there was little concern about what became the global pandemic that would dominate and suppress most business activity in the United States (and the rest of the world) by the end of the first quarter. No one then forecast that millions of Americans would be afflicted by the disease, or that over 125,000 would succumb from it (as of the end of June 2020). No one in the early days foresaw that record low unemployment in January would morph suddenly to record high unemployment in a period of less than three months.
As with businesses generally, the pandemic changed everything for American dealers in 2020. Its consequences continue. A variety of impacts will remain even if unemployment dips back to a level under 6%, and open business numbers return to something close to the pre-COVID “normal” of late 2020 or early 2021. The enduring consequences will include enormous financial and economic stresses such as permanent closures and reductions in operations and workforces for many businesses.
The consequences of the Coronavirus pandemic became the number one legal trend for dealers (and others) during the spring of 2020. It will top the list in 2021 as well, even if vaccines and treatments tame the disease itself. That is, even when the pandemic subsides, Americans will likely retain many of the habits formed to prevent disease spread. The economic landscape will not be the same as it was. There will be more people working at home; business and leisure travel will stay below past years; city centers will see diminished vibrancy; education, particularly at the college level, will offer many more online programs and degrees. These facts will surely influence how dealers conduct business for years to come, and how they fare in sales, service and profitability. Rigorous cleaning and social distancing will be more or less permanent fixtures of dealership behavior everywhere. Online shopping and home delivery will be ever-increasing aspects of the retail auto business, even though a majority will likely prefer shopping at dealership locations.
Between March and June 2020, those dealers who stayed at least partially open, or were open at times with reduced staff, had to obey constantly changing rules from state governors. They stayed compliant with guidance from the Trump administration and a panoply of federal agencies such as the CDC, in addition to the panoply of state rules. As the states hit benchmarks in the “phases” for reopening at varying times, dealer attention to protective measures will go on.
In the Spring of 2020 schools and universities shut down the remainder of their academic years; restaurants closed en masse except for providing delivery and curbside pick-up; hospitals provided little service outside the coronavirus arena; Broadway went dark; and on and on. Only “essential” businesses and services continued. Applicable rules varied from state to state, based mostly on local conditions, but also, at times, with political considerations in mind. Often, it is impossible to reconcile the differences between states in their “phasing” decisions and the specific details thereof. By June, the dealer reopenings and increased operations were evident pretty much everywhere. But it’s not “back to normal,” and many operational changes could endure for a long time. Dealers adhered to “the Four Cornerstones”: (1) Face Coverings; (2) Social Distancing; (3) Sanitization; and (4) Screening.
The unprecedented federal injections of monies into the hands of individuals and businesses unquestionably rescued the country and millions of out-of-work citizens from a much worse fate. Such actions, however, also raised the yearly deficit and national debt to breathtaking highs. It is not unreasonable to anticipate that America’s national debt could top $25 trillion by 2021. Thousands of dealers received help that hopefully bridges them to healthy business outcomes by late 2020 or sometime in 2021. Additional federal help is envisioned throughout 2020.
On June 23, 2020 Doctor Anthony Fauci expressed “cautious optimism” to a congressional panel about the prospect of a deliverable COVID-19 vaccine by late 2020 or early 2021. On the other hand, some fear a return of COVID in a second or even third wave. The legal implications – for dealers and many businesses – are immense and ongoing.
Yet dealer optimism is in the air. Most dealers are especially busy with new car sales (as of late June 2020). Factories are having trouble keeping up with demand. Paradoxically, the contagion motivates millions of consumers to shop for cars as they eschew the human proximity inherent in public transportation. The obsessive push to buses and trains will take a rest, as will “shared rides,” and popular taxi substitutes like Uber and Lyft.
With all the many variables in play, this update is to help dealers navigate the daunting legal impacts on them. Scores of dealer-based organizations – state associations, the National Automobile Dealers Associations, the National Association of Dealer Counsel and others – have provided regular invaluable guidance in blast emails and webinars. These were in addition to regular briefings by the President’s task force and many state governors. The CDC (Center for Disease Control and Prevention) website continues to be accessed by millions each day. Each state provides valuable and critical information daily. In addition, law firms and businesses of all kinds have published almost daily emails and webinar offering insight on this incredible era dominated by the COVID-19 pandemic. The contemporaneous information trend will certainly continue.
How Dealers and the Industry HAVE Weathered the Coronavirus Storm: Give Credit to the Federal Government FOR THE RESCUE MONIES.
Dealers and Americans generally now have a taste of what the Great Depression wrought upon America in the 1930s, even though the consequences have been ameliorated by an avalanche of federal monies. Tens of millions of Americans suddenly out of work; GDP cratered; schools shut; families huddling at home; independent and proud people seeking help and food supplies. In important ways, this chapter of American (and world) history was even worse than in the 1930s, because the pandemic sickened more than two million Americans, and killed over 125,000 by July 2020. Without doubt, emergency government payments saved the day big staving off much worse financial and health calamities.
Yet here we are now, edging toward economic recovery, with businesses reopening and optimism on the upswing. Auto dealers especially are now seeing fruits of high pent up demand. The major stock indexes, which had fallen by over 20%, rebounded to record, or near record, highs, but took downward hits whenever fears grew of the continuing vitality of the COVID virus. At the same time, there are prospects in sight to tame the savagery and lethality of COVID-19. A safe and effective vaccine, as well as treatments for the stricken, could result in a total end of the pandemic within a few months, or in early 2021, as Doctor Anthony Fauci suggested to a congressional panel on June 23, 2020. Reports of research and testing progress signal encouraging possibilities.
The economic blow to America could have been worse, much worse. Across party lines, the Congress enacted and the President signed bills that rushed rescue monies in the trillions of dollars to individuals, businesses and state and local governments. See especially the CARES Act. Although many dealers shut their doors totally, or nearly so, for a time, laid off employees, and/or stopped retailing and/or cut down on service, the flow of federal dollars assured that most dealers could stay solvent and be back in full operation. Many dealers were highly innovative in conducting online sales and making home deliveries, as well as pick-ups for service. From all accounts, dealers remained upbeat, monitoring state and local conditions and rules to keep their workforces and do what was possible to stimulate revenue.
THE BASICS OF LAWFUL AND SAFE OPERATIONS DURING AND EVEN AFTER THE PANDEMIC APPLY TO ALL DEALERS.
The fundamentals of CDC and other guidance:
- During the time of Coronavirus, a safe workplace for employees and visitors envisions at least these measures:
- Enforcing rules and guidance to keep the afflicted and highly vulnerable at home
- Rigorous cleaning and disinfectant practices at the business
- Daily health checks; taking temperatures
- Testing for infection
- Distancing
- Face masks and other PPE
- Improved ventilation
- Capacity controls
- Tailoring your workplace to the requirements is not optional.
- OSHA “Guidance on Preparing Workplaces for COVID-19” is an indispensable resource.
- Protection of the most vulnerable must be part of your plan, based on age and health conditions.
- Advertise your safety measures.
Be prepared to continue most Phase 2 safeguards for a long time, in Phase 3 and 4, and maybe permanently.
THE LEGAL LANDSCAPE FOR DEALERS
Make no mistake about this. Dealers must comply with laws, regulations and safety guidance pertaining to COVID-19. The consequences of not doing so range from de-licensing to fines to private litigation by individuals claiming negligent or willful exposure to COVID-19. The requirements vary considerably from state to state, and even within areas of particular states.
Full compliance is key to legal defenses. Failure to comply could invite allegations of negligence or willful conduct in exposing customers or employees or visitors to COVID-19. Unfortunately, often the guidance is confusing or even contradictory. In worst cases, the government could close a non-compliant dealer down, and/or de-license the operation and/or assess fines. Changes in requirements happen often. If there is ambiguity, default to the more protective choice.
In addition to good, basic sales and service practices, a dealer’s return to, and ramping up, the business depends mightily upon strict compliance with government mandates and guidance. Of course, this wisdom transcends the potential of adverse legal consequences. If any of your employees or customers succumb to COVID-19 from exposure in your workplace, the dealer’s reputation will sink as fast, and as profoundly, as a restaurant serving contaminated food.
Dealers are well advised to make their meticulous adherence to safety and health rules a positive attraction for consumers. Recent polling data reveal that shoppers for cars want to visit dealerships in person, and to take test drives, as long as health and safety procedures are observed. Therefore, in addition to actually taking all the necessary steps, dealers should publicly promote that they are doing so in all advertising. In addition, there should be signage at the dealership reassuring customers and other visitors that every humanly possible effort is being made to protect them.
BASIC LEGAL CHECKLIST
The legal checklist dovetails with the health and safety checklist. To avoid or minimize the risks of liability (which could be civil or criminal), careful adherence to federal and state guidelines is a must. As indicated above, changes are frequent, and careful monitoring of those changes is indispensable to minimizing risk – including legal risk.
- Know what the rules are. Update your knowledge every day, by accessing federal and state websites.
- Establish and enforce all person-to-person safety and health measures.
- Post prominently all the basic measures, updating them as appropriate.
- Do not allow afflicted persons on the premises, to include anyone showing symptoms of COVID-19.
- Bring cured COVID-19 employees back to work only after a doctor’s clearance.
- Keep plenty of PPE handy and available for employees.
- Assure that no symptomatic people are permitted on the premises.
- Advertise to the public how safe you are. Never exaggerate.
- Except for loosening capacity restrictions, dealers should anticipate that many of the Phase 2 requirements could be permanent best practices, even in Phases 3 and 4, and thereafter.
THE ABC’S OF THE PANDEMIC
- CARES Act (Coronavirus Aid, Relief and Economic Security Act): Economic relief package committing means to all efforts for the impact of COVID-19 on Americans.
- PPP (Paycheck Protection Program): Monies allowed through the CARES Act to provide loans to businesses to fund payrolls.
- COVID-19: A virus originating in Wuhan, China that attacks the human respiratory system. It is highly contagious and may be fatal.
- EIP (Economic Impact Payments): Payments authorized under the CARES Act.
- EEOC (Equal Employment Opportunity Commission)
- ADA (Americans with Disabilities Act)
- OSHA (Occupational Safety and Health Act)
- CDC (Center for Disease Control and Prevention): Go to cdc.gov.
- NIAID (National Institute of Allergy and Infectious Diseases): Go to niaid.gov.
- NIH (National Institutes of Health)
- White House Guidelines, “Opening Up America Again.” (whitehouse.gov/openingamerica)
- PPE (Personal Protective Equipment)
CONCLUSION
The balance of 2020 will be a time of reckoning for America’s dealers with not only the remaining days of the COVID pandemic, but also with the aftermath. They must calculate the realities and consequences of COVID-19, and they must cope with complex varieties of unknowns. Expect the unexpected. We hope that medical remedies will soundly defeat COVID-19 sooner than later. Optimism is good and healthy, but in the day-to-day workplace, where dealers oversee the actions of their employees and invite customers into their premises, they must be constantly mindful of what is safe and healthy. Complacency can become an unhealthy, even deadly, adversary. Dealers need to stay the course with steady, well informed leadership and practices. Employees and customers alike will respond with respect and loyalty.
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▪ Eric L. Chase is an attorney and a member of Bressler, Amery & Ross, P.C., a law firm with six offices in four states and the District of Columbia. [973.514.1200] Mr. Chase devotes a significant part of his practice to the representation of franchised automotive dealers nationwide, and he has been lead counsel in numerous landmark decisions. He has authored over 100 published articles in this field and nearly 200 altogether. He is a frequent guest speaker to dealer and professional associations and other automotive-related audiences. His biography appears in Who’s Who in American Law, Who’s Who in America and other similar publications. For many years, Mr. Chase has continued to be selected by his peers as a Super Lawyer. He holds a B.A. from Princeton, a J.D., cum laude, from the University of Minnesota, and a Graduate Certificate in International Security from Stanford. The views set forth in this article are his own and do not necessarily reflect the views of his firm or any of its clients. Nothing in this article is intended to constitute legal, financial or tax advice. Each reader should consult with his or her professional advisor regarding any such advice.
This article has been posted with permission from DealersEdge.