California Business Roundtable

Executive Summary – Governor Newsom’s mid-March Executive Order (N-33-20) was enacted to protect the public health during one of the most challenging pandemics in modern history. Based on the historical results for the Spanish flu in 1918-19, this executive order with the similar stay-at-home strategy (including no termination date) has been instrumental in helping to “flatten the curve” to save lives. However, just as in similar results in 1918-19, it does not come without a severe economic and personal cost.

In the weeks since this order’s enactment, the economic devastation caused by the COVID-19 pandemic is unlike anything seen in this country since the Great Depression. With all non-essential businesses either closing their doors or severely limiting operations (so called “minimum business operations”), the millions of men and women who work across our great state are in survival mode. California has gone from a full employment economy at 3.2% unemployment to a projected unemployment of almost 20% in just six weeks.

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To summarize:

• During the last six weeks, 3.7 million Californians have filed for unemployment insurance, equivalent to 19% of the labor force.
• These numbers only cover wage and salary workers, and the full dimensions of jobs loss will be seen now that workers among the state’s 2 million self-employed have begun filing for Pandemic Unemployment Assistance (PUA).
• The shutdown is having an immediate substantial and negative impact on state and local government revenues used to support all public services.
• Cities, with their revenues more dependent on business activity and household consumption, are now projecting a $7 billion general revenue shortfall during the next the two years. The League of California Cities recently reported that 90% of its member cities are contemplating layoffs or furloughs.
• Recovery from the most recent recession took the longest on record. Jobs in California took 82 months to return to the pre-recession levels, in large part due to state and federal actions that increased regulations, taxes and fees rather than the usual strategies used in past downturns to promote jobs and competitiveness.

During this crisis, the statewide business community has repeatedly voiced support for Governor Newsom’s public health measures to limit COVID-19’s spread in order to protect and preserve public health and safety.

At the same time, businesses and employers throughout the state have stepped up in amazing and unprecedented ways to support employees, community members and the less fortunate in this time of crisis.

“Unless the Golden State takes the lead in restarting our economy, America’s economy and millions of workers will suffer.”

But six weeks later, the psychological and financial costs are starting to approach the same upward curve as the pandemic models in its earliest days. As the health threat recedes workers grow increasingly anxious by the day wondering how their families will make ends meet if the stay-at-home order continues into late May or June. Most importantly, they worry if the jobs they had prior to the closure will even exist when the order to return to work is given.

Today, California has 29 counties with zero patients in ICU beds and 30 counties with no new COVID positive patients. Now that much more information is available to better understand the virus’ spread and the populations at the greatest risk, it is time to urgently flatten the unemployment curve by a phased-in regional re-opening of California’s economy.

Implicit in this phased re-start is an on-going partnership with public health professionals, government and the business community to establish clear and transparent public health guidelines that businesses can follow to reopen across all sectors of our vast and dynamic economy. These same public health professionals should not be expected to restart a statewide economy on their own. Those groups and individuals with the innovation and real-world experience in job creation and commerce must now lead the way.

Restarting the economy faces huge challenges. According to an April NFIB survey, only 32% of small business owners expect their local economies will return to pre-crisis levels by the end of the year. Thirty-nine percent (39%) expect a return to normal will not happen until 2021, and 29% expect recovery will take longer. These sentiments should give the Newsom Administration great concern, as employers are making investment and rehiring plans based on these expectations. Government actions that raise barriers to investment and rehiring even higher than they are today will delay the recovery even further. Business as usual under California’s high operating costs and high cost of living means many households will continue to face long periods of income uncertainty.

Business has engaged with the Newsom administration as it begins to develop a plan for California’s economic recovery starting May 8th. To paraphrase what was written in an April 27, 2020 letter to three West Coast governors, California will be stronger if we work together – and minimizing our concerns will delay the recovery and cost jobs and revenue. This engagement is even more important with the combination of the three state economies equal to 19% of our national GDP, clearly showing that restarting the West Coast is key to recovering our national economy.

We believe that all California businesses designated as “essential” along with medical professionals and first responders have done a heroic job during the past seven weeks. These essential businesses have quickly innovated mitigation measures and developed best practices that set the foundation for “non-essential’ businesses to quickly implement. However, it is important to note that it will take an estimated one to two weeks or more for a closed business to implement the health and safety procedures necessary to open based on their size, sector and unique requirements. Clear guidelines and cost of mitigation measures will play a critical role in their decision to on how many employees they can afford to hire or whether they can re-open at all.

“…it will take an estimated one to two weeks or more for a closed business to implement the health and safety procedures necessary to open based on [business] size, sector and unique requirement.”

Currently, the Newsom administration has laid out six indicators and four stages in various planning documents in the current Stage 1. Specific and data-informed re-opening guidelines are next to roll out. These guidelines represent the necessary foundation for Governor Newsom to implement Stage 2 and then stage 3 so that California businesses and employees can begin to get back to work and state/local government revenues can begin to recover.

This document outlines the California business community’s recommendations to help restart the economy:

• Set clear expectations and timelines.
• Establish protocols for the continued use of testing, PPE and social distancing to minimize further spread of the disease as businesses re-open.
• Modernize employment laws and regulations to expand opportunities for work at home for the long-term future.
• Address the potential for conflicts between COVID-19 goals and rules, and those established by current law or regulation.
• Provide clear standards to limit misuse of COVID-19 as a “workplace injury,” in particular to enable employers to maintain the telework options they have used to preserve as many jobs and incomes as possible.
• Work with federal government on changes to health insurance (COBRA) to ensure continuity in health care coverage for all employees.
• Pause the minimum wage increase, particularly in the hardest hit regions.
• Pursue litigation relief by repealing Labor Code Private Attorney Generals Act (PAGA), to remove frivolous litigation risks as employers focus on restarting their business and jobs.
• Enact a regulation freeze for at least six months and potentially a longer period based on reaching specified job recovery or unemployment levels, with an exception for those regulations essential to public health and safety.
• Repeal AB 5 and implement an emergency standard to provide alternative work arrangements that provide both businesses and households with greater flexibility they will need during the economy’s re-start.
• Establish a definitive timeline to sunset executive orders enacted during the pandemic.
• Ensure personal and health privacy requirements for Covid-19 mitigations
  (including contact tracing) also contain appropriate litigation protections.

Many states began this effort weeks ago and if California is going to take its proper leadership role in leading a national recovery then we must quickly implement guidelines and major policy reforms to re-open in a responsible, phased effort starting on May 8th. The time to act and to get Californians back to work is now.

California’s economy, businesses, workers and families cannot afford to wait.