Client Alerts

From Lockdown to a Showdown: What Questions Should Companies Consider Pertaining to the Authority of the Federal or State Governments to “Reopen” the Economy?

By

Daniel Prince, D. Scott Carlton & Nicole D. Lueddeke

As the discussion about “reopening” the economy intensifies, an important legal question has arisen: What authority, if any, does the federal government have to allow employees to return to work in the face of state and county stay-at-home orders? To date, President Trump has declared his intent of permitting employees to return to work, even if on a gradual basis. And many governors (including of California and New York) are taking a cautious approach to “reopening” businesses to avoid a resurgence of COVID-19 in their respective regions.

The net result is that employers—including companies with operations in multiple jurisdictions—may soon face issues relating to whether and to what extent federal directives could impact state or local mandates. Employers likewise may address matters relating to the well-being of their workforce, although those issues have received considerably more attention and are not addressed here.

This article instead identifies certain issues that companies might consider in the face of (potentially conflicting) guidance from federal and state or local governments.

1. Who has responsibility for public health/welfare issues?

   Generally, states have responsibility for protecting the public health/welfare of their citizens unless preempted by a valid act of Congress.

   The federal government is one of limited, enumerated powers. That is, the federal government may act only where the Constitution authorizes it do so. Case law makes clear that the Constitution has reserved to states the power to make (and enforce) rules pertaining to the public health and welfare of citizens, which includes the right to quarantine and the right to close businesses and schools.

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   So what would happen if the President were to relax the federal guidelines while governors determine stay-at-home orders remain indispensable to manage the health crisis in their states? Under the preemption doctrine and the Supremacy Clause of the U.S. Constitution, federal law is the supreme law of the land, but the President does not have the independent power to compel states and municipalities to relax restrictions designed to mitigate the spread of COVID-19—the President would need the help of Congress.

   Congress does have this power and could, theoretically, choose to effectively displace states’ quarantine power. As a rule, Congress can displace states’ traditional police powers when Congress acts pursuant to one of its enumerated powers, even when the exercise of such authority would preempt contrary state law.

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   See Hodel v. Va. Surface Mining Recl. Ass’n, 452 U.S. 264 (1981).

2. Is there a basis for Congressional action?

   Likely, yes. The most obvious power here is Congress’s authority to regulate interstate commerce. Congress could invoke this power under the Commerce Clause to proscribe state/local stay-at-home orders on the ground that such orders substantially (and negatively) affect interstate commerce.

   As long as such statute was directed at private citizens and interstate commerce directly—and not attempting to mandate state enforcement of federal law—it likely would not implicate the anti-commandeering doctrine.

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   So at least theoretically, Congress could invoke its Commerce Clause power to enact a statute specifying that state orders, laws, and regulations that close businesses that substantially affect interstate commerce or prohibit individuals from going to work are preempted as an undue burden on interstate commerce. This could impact many jobs or industries.

   Further, Congress may, through the Spending Clause, leverage the receipt of federal funds on states’ compliance with specified federal requirements, provided certain conditions are satisfied.

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   This might include, for example, shortening or lifting state/local stay-at-home orders in exchange for increased federal funding for research facilities to develop a vaccine, for medical equipment and supplies like hospital beds or ventilators, or additional training for medical professions on the front lines. While this would not usurp the states’ authority to promulgate health and safety laws, it could incentivize certain jurisdictions to gradually “reopen” the economy with critical health and safety infrastructure support from the federal government.

3. What if my company operates in multiple jurisdictions?

   Even assuming there is no action by Congress, there may be remaining challenges to “reopening” for companies with offices (and personnel) in various jurisdictions. This is especially true if stay-at-home orders differ by state, scope, or if they are lifted at varying intervals based on an assessment of risk. In these instances, companies should obtain advice of counsel to ensure compliance with local law.

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  You can find additional information regarding the CARES Act, which expands unemployment benefits and provides various forms of tax and other relief for employers and states,

here

. Additionally, information on the EEOC’s updated guidance addressing questions arising under federal equal employment opportunity laws related to the COVID-19 pandemic can be found

here

.

   This does not curtail the President’s authority to mandate that federal agency employees and/or military personnel return to work.

  In 1978, Congress invoked the Commerce Clause to complement the states’ police powers by amending the Public Health Service Act to provide the federal government with its own limited quarantine authority, but Congress made clear that nothing in the Act was intended to supersede state and local quarantine authority. See 42 U.S.C. §§ 300gg-23(a) and 300gg-62(a).

  New York v. U.S., 488 U.S. 1041 (1992) and Printz v. U.S., 521 U.S. 898 (1997).

   Under National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012), conditions on federal funding must be unambiguous and relate to the interest that the funding seeks to advance. See also South Dakota v. Dole, 483 U.S. 203 (1987).