As COVID-19 spread across the country over the past few months, most states issued stay-at-home orders that forced numerous businesses to close. Now, with many states loosening their restrictions to restart their economies, some state lawmakers are hoping to encourage businesses to reopen by granting them immunity from lawsuits by customers and employees infected with the SARS-CoV-2 virus.
As of April 6, 41 states had issued stay-at-home orders requiring the closure of businesses not deemed essential, according to the National Conference of State Legislatures. Many businesses also closed on their own initiative to protect their workers and customers.
A survey of small businesses with fewer than 500 employees - which account for 99.9 percent of the nation’s more than 30 million businesses - by MetLife and the U.S. Chamber of Commerce in late March found that 24 percent had already shut down at least temporarily. Of those that hadn’t yet closed, 40 percent said they would probably have to shut down by mid-April, bringing the total business closure rate to 54 percent. On top of that, 43 percent of the surveyed businesses said the shutdowns would force them to close permanently in less than six months, with 10 percent saying they wouldn’t survive for even a month.
The shutdowns are taking a heavy toll not only on businesses, their employees and the nation’s economy, but also on state government revenues, at the same time that the pandemic has forced states to provide additional public services. According to the Center on Budget and Policy Priorities, states could see budget shortfalls totaling over $500 billion next fiscal year.
“Even after accounting for the federal fiscal aid that’s been provided so far and states’ own rainy day funds that they can draw down, states still face shortfalls of as much as $360 billion, not including the substantial new costs they face to combat the COVID-19 virus,” CBPP reported.
Those immediate and long-term economic concerns largely explain why many state officials have so been anxious to get their economies going again. As of May 4, about half of the states had eased their pandemic restrictions, allowing businesses to reopen as long as they followed certain guidelines, such as allowing fewer customers and maintaining social distancing, despite warnings from public health experts that those actions would likely lead to more COVID-19 cases and deaths.
Some businesses have opted to remain closed. A group of restaurant owners who collectively operate over 120 restaurants in Georgia - which became one of the first states to allow businesses to reopen, on April 24 - announced their decision not to reopen in a full page ad in the print edition of the Atlanta Journal-Constitution.
“We agree that it’s in the best interest of our employees, our guests, our community, and our industry to keep our dining room closed at this time,” the ad said.
According to the U.S. Chamber of Commerce, however, “the largest area of concern for the overall business community” in relation to the reopening of the economy may be “exposure liability,” or the potential for lawsuits against businesses alleging they are responsible for customers, employees or others becoming infected with COVID-19.
The Chamber said plaintiffs might have a hard time proving causation, but if enough suits are filed, “the scope and magnitude of the litigation still may exert enough pressure to threaten businesses or industries with bankruptcy.” It added: “The threat of exposure-related lawsuits also will deter some businesses from reopening even after it is determined that they could safely operate by following the guidance of appropriate health authorities.”
The Chamber suggested those eventualities might be avoided by granting companies that follow public health guidance “safe harbor” from lawsuits alleging negligence, “so long as the companies’ actions do not amount to gross negligence, recklessness, or willful misconduct.”
U.S. Senate Majority Leader Mitch McConnell (R-Kentucky) took up that cause when he announced at the end of April that his chamber would reconvene on May 4, saying there was an “urgent need” to provide “strong protections from opportunistic lawsuits” against the “brave healthcare workers battling this virus and the entrepreneurs who will re-open our economy.”
U.S. House Speaker Nancy Pelosi (D-California) doesn’t share that view.
“I don’t think that at this time, with coronavirus, that there’s any interest in having any less protection for our workers,” she said, as the New York Times reported.
But McConnell indicated Democrats would have to compromise on the liability issue before Republicans would agree to any more federal pandemic relief for states, including hundreds of billions of dollars Democrats are seeking to bolster state and local government budgets.
Some states aren’t waiting around to see how the issue plays out in the nation’s capital, however. At least five - Alabama, North Carolina, New Jersey, Ohio and Utah - have introduced legislation that would provide businesses immunity from claims by individuals potentially exposed to COVID-19 on their premises, according to LexisNexis State Net’s legislative tracking system. And North Carolina and Utah have already passed their bills.
Utah’s measure (SB 3007 a), which came in a special session held online, was passed by sizeable margins in both the House and Senate (54-21 and 22-6, respectively) but only after significant “virtual” debate in each chamber.
The bill’s sponsor, Sen. Kirk Cullimore (R), said it would allow businesses to open without having to worry about “frivolous” negligence lawsuits, as the Salt Lake Tribune reported.
“There have been a rash of businesses that are nervous about these claims,” he said. “So I thought that we should give those businesses some assurances...that they will get immunity from these types of claims.”
But Rep. Brian King (D) described the bill as “opportunistic special interest legislation.”
“It gives a get-out-of-liability free card to just about all businesses and professionals for any misconduct connected with COVID-19,” he said.
According to the text of the bill, businesses would not have immunity in cases of “willful misconduct, “reckless infliction of harm” or “intentional infliction of harm.” And Cullimore said he didn’t think the measure’s enactment would encourage business to neglect their duty.
“I think the free market is going to work itself out,” he said, according to Fox 13 News in Salt Lake City. “That patrons and employees are not going to want to work or participate in businesses that are not demonstrating active care for their employees and patrons and maintaining cleanliness.”
Illinois attempted to go in the opposite direction on the issue, shifting the burden of liability for COVID-19 illnesses more onto employers. On May 1, the Illinois Workers Compensation Commission adopted an emergency rule (IL 18412 2020) creating “a reasonable rebuttable presumption” for first responders, health care workers and employees of essential businesses, including grocery and hardware stores, that their exposure to COVID-19 was “connected to their employment.” [Several states have introduced and at least two - Alaska (SB 241) and Minnesota (HB 4537) - have enacted legislation to do much the same thing, though generally just for first responders and health care workers.]
Days after adopting its rule, however -- and after a county judge blocked it - Illinois repealed it.
“It was clearly an overreach,” the Illinois Manufacturers’ Association and Illinois Retail Merchants Association said in a joint statement.
But the legal risks COVID-19 poses to the business community may not be as great as they are being made out to be, according to John Goldberg, a professor at Harvard Law School and an expert on tort law. As Goldberg told the New York Times, under existing law, plaintiffs must prove negligence, and proving causation would “be daunting if not impossible.”
“You never say ‘never’ in the world of liability, but the idea this is a looming tidal wave of lawsuits that are going to succeed seems to me overstated,” he said.
Opponents of Utah’s SB 3007 made that same case, noting there didn’t appear to have been any COVID-19 claims filed in the state. Sen. Jani Iwamoto (D) called the bill the solution to a problem “that isn’t there,” according to the Tribune.
But lawsuits have been filed against Walmart in Evergreen Park, Illinois, where an employee died of COVID-19 complications, and against the Smithfield Foods meat packing plant in Milan, Missouri, where more than 100 workers tested positive for the illness. And supporters of SB 3007 appeared to view the bill as a way to get ahead of any potential litigation in their state.
“We’re already seeing suits come up in other states related to COVID-19,” Utah Senate Majority Whip Dan Hemmert (R) told the Tribune. “I think we’re better off just nipping this in the bud, even though it may be hard to prove.”
-- By KOREY CLARK
Handful of States Addressing COVID-19 Liability for Businesses
At least five states - Alabama, North Carolina, New Jersey, Ohio and Utah - have introduced legislation this session that would provide businesses immunity from claims by employees, customers and others potentially exposed to COVID-19 on their premises, according to LexisNexis State Net’s legislative tracking system. North Carolina and Utah have already enacted their measures.