Resources for Addressing Economic Losses due to the Public Health Emergency

The ongoing COVID-19 public health emergency, including the directive to close winery tasting rooms, is causing significant disruption to California’s businesses.  Businesses that have, or are unsure whether they may have, insurance coverage for losses caused by this situation should contact their carriers promptly to inquire into their potential claims.

In addition, because there is a declared disaster including many counties in the San Francisco Bay area and other wine regions, affected wineries and other businesses typically are eligible to borrow up to $2 million under the U.S. Small Business Administration (SBA) Economic Injury Disaster Loans (EIDLs) program.  Major employers may be able to borrow more than the typical $2 million limit.

These low-interest loans can provide working capital to cover ordinary and necessary financial obligations that cannot be met due to the ongoing public health emergency.  Rates are set by a formula that is capped at 4%. Loans can be obtained to cover the actual economic injury, as determined by the SBA.  The loans are intended to help businesses through the disaster and recovery period.

The approval of a loan is not guaranteed and loans must go through an underwriting process.  Approved loans generally require collateral. The available amounts may be reduced or offset by the availability of business interruption or other insurance that covers the same losses.  The SBA also assesses ability to repay as well as other potential contributions to cover the losses from business owners and affiliates in considering whether to approve the loans. To learn more or apply for a loan, go to https://disasterloan.sba.gov/ela.

Whether or not you are interested in an SBA loan, be sure to contact your insurer to confirm whether you may already have coverage for the ongoing interruption.  For more information on the current declared disaster allowing for SBA EIDLs in California, including eligible counties and other terms, a fact sheet is available at https://disasterloan.sba.gov/ela/Declarations/ViewDisasterDocument/3429.  Those in other states can visit https://disasterloan.sba.gov/ela/Declarations/Index to determine if they are in an eligible location.

For a list of Coronavirus related resources, please see our Resources Page.  

Additional Guidance For Wineries in Light of Recent Government Actions

Since the Governor’s announcement on Sunday recommending the temporary suspension of on-premise alcoholic beverage businesses, including winery tasting rooms, certain cities and counties have instituted “Shelter-in-Place” ordinances, and both the California ABC and the California Wine Institute have issued additional guidance on the operation of alcohol beverage licensed premises, including wineries.

Given the various orders and guidance currently in place, we have provided below a brief summary of the current state of play for wineries. Please note that things are rapidly changing and while we will do our best to issue updates, we highly recommend that all licensees sign up for the California ABC email updates, and also keep an eye on orders from their local governments.

GOVERNOR’S DIRECTIVE – Statewide Recommendations

  • On Sunday, March 15, 2020, Governor Gavin Newsom announced that he was directing the closure of “all bars, nightclubs, wineries, brewpubs, and the like.”
    1. The California ABC has since clarified that the directive is aimed at suspending on-premise retail privileges (that is, the service of alcohol for consumption at the licensed premises).  For wineries, the directive applies to their tasting room and event operations in pouring wine and serving customers for on-premise consumption.  It has no impact on their production operations, and wineries can continue to have consumers purchase and pick up wine for off-premise consumption, subject to any further local restrictions such as the shelter-in-place orders discussed below.
    2. After discussing the directive with the Governor’s office, Wine Institute has recommended that wineries take the following steps:
      • Ensure visitor and employee safety by intensify cleaning and sanitation procedures;
      • Operate the facility in compliance with social distancing guidance (such as instituting procedures to keep individuals 6 feet apart);
      • Implement recommendations from the CDC and California Department of Public Health re washing hands, avoiding close interpersonal contact, encouraging employees to remain at home when sick, and instituting additional precautions for older employees and customers.

For other operational recommendations, please see our Employer Guide to Navigating COVID-19 from earlier this week.

LOCAL GOVERNMENT “SHELTER-IN-PLACE” ORDERS – Enforceable Restrictions

  • As of March 18, 2020, a number of counties in Northern California (including Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Santa Cruz, and Sonoma) have issued shelter-in-place orders.
  • Wineries that have operations in any jurisdiction that have implemented such an order have legal obligations to alter their current operations to comply with their specific county’s order.
    1. In its recent guidance, issued prior to the Sonoma County order, Wine Institute concluded that winery businesses meet the definition of “essential businesses” because they constitute “businesses that supply other essential businesses (grocery stores and other food outlets) with the support or supplies necessary to operate.”  According to Wine Institute, wineries can engage in the following activities in those Shelter in Place jurisdictions:  “vineyard management, wine production operations, bottling, warehousing, sales, delivery and shipping.”  However, this “does not include wine tasting and events ….”
    2. The Sonoma County order includes a provision that more directly addresses winery operations.  Specifically, the following activities are deemed “essential” under the Sonoma County Ordinance:  “Agriculture, food, and beverage cultivation, processing, and distribution, including but not limited to, farming, ranching, fishing, dairies, creameries, wineries and breweries in order to preserve inventory and production (not for retail business).”  It is unclear whether, by excluding “retail business,” Sonoma County is restricting wineries and tasting rooms from engaging in the sale of wine in sealed containers for off-premise consumption, or whether the language is only meant to address retail sales for on-premise consumption.
    3. Napa County’s order goes into effect at 12:01am on Friday March 20.  It includes a provision that deems the following businesses as “essential”:  “Any form of cultivation of products for personal consumption or use, including farming, ranching, livestock, and fishing, and associated activities including but not limited to activities or businesses associated with planting, growing, harvesting, processing, cooling, storing, packaging, and transporting such products, or the wholesale or retail sale of such products, provided that, to the extent possible, such businesses comply with Social Distancing Requirements set forth in subsection (j) of this Section 10 and otherwise provide for the health and safety of their employees.”

Please note that this is a rapidly evolving situation, and many more cities and counties may implement Shelter-in-Place measures over the next days and weeks ahead.  It is also possible that the ordinances on which this blog post, and Wine Institute’s guidance are based, may be revised.

ADDITIONAL ABC GUIDANCE

  • ABC has issued additional guidance regarding the Governor’s directive on steps licensees can take to minimize risk.
  • ABC has stated that retail licensees that comply with the Governor’s directive or local government restrictions will not have their licenses suspended.
  • ABC offices in shelter in place jurisdictions are closed to the public.  ABC Staff will be available to answer questions over the phone, and you can still mail applications to those local offices.  Other ABC local office closures will be posted here.
  • ABC is not currently accepting, processing, or approving special event or daily licenses in light of guidance on gatherings.

ADDITIONAL WINE INSTITUTE INFORMATION

Wine Institute has a helpful resource page dedicated to Coronavirus related updates, which can be accessed here.

If you have any questions regarding alcohol beverage licensing, please contact John Trinidad or Bahaneh Hobel.

For a list of Coronavirus related resources, please see our Resources Page.  

Employer Guide to Navigating COVID 19

Below is an outline of topics designed to assist California employers in navigating COVID 19 and the related economic fallout.  Everything is changing quickly and this is based on what is currently known and available.

Communications with Employees:

  • Number one priority in this situation continues to be the safety of your employees.
  • It is crucial to regularly communicate with your employees regarding the status of office closures, layoffs, pay or any other updates that affect your business.
  • Make sure you have cell phone and/or personal email addresses to communicate outside work hours.
  • Consistent with the Governor’s order, all employees older than 65 or those with a chronic illness should not return to work. These employees should work from home if possible, or if they are unable to work from home, let them know who they should contact to discuss their options for taking time off.
  • All other employees should work from home if they are able to do so. If employees still need to come to work, they should follow the CDC’s recommended social distancing requirements and stay at least 6 feet away from others. Advise employees to stay in their office or designated workspace as much as possible, and not to congregate in meal or break areas.
  • Note that if the Bay Area Counties March 16, 2020 “Shelter in Place” Order extends to your county, most employees will be required to stay home and will be unable to come to work. Certain workplaces considered essential are allowed to remain open.  A list of the Essential Businesses can be found in the order linked here.
  • All in person meetings should be cancelled if possible and phone conference or webinars should be used instead.
  • Advise employees to immediately notify you if they develop symptoms of COVID-19 or are exposed to someone who has tested positive for COVID-19.
  • Ensure that you have updated contact information for all employees and you are able to reach them when they are outside the office to provide necessary information.

Reduction in Hours or Pay and Layoffs:

  • If a reduction in force or pay is necessary, let your employees know as soon as possible.
  • Whether a temporary closure results in a furlough (with the idea of employees returning on a certain date) or a layoff (uncertain date of return, if ever) can impact whether accrued vacation/PTO needs to be paid out. With so much uncertainty, our general recommendation is to pay out the accrued time, but financial constraints may make this impracticable.
  • You can reduce hours for non-exempt employees and reduce work schedules as needed. You do not need to pay out any accrued PTO for employees in order to make up the difference in hours.
  • You can also reduce salaries for your exempt employees, as long as the reduction in salary does not result in the employees getting paid less than the minimum threshold required for employees to retain their exempt status. Currently the minimum threshold for exempt employees is $54,080 per year for employers with 26 or more employees and $49,920 for employers with less than 26 employees. This reduction can be made before the beginning of a full workweek.
  • Talk with your insurance broker about continuing health benefits for employees on furlough and or a temporary layoff situation.
  • Make preparations for how you will continue to receive mail at your office or do other essential functions as needed during the period when you have a reduced work force. If your office needs to close temporarily, make sure clients and customers are notified.

Employer Resources:

  • The Employment Development Department (“EDD”) has a helpful website with information about the COVID 19 impacts.
  • Employers might be able to avoid potential layoffs by participating in the Unemployment Insurance Work Sharing Program, which allows you to retain your workers by reducing their hours and wages no more than 60 percent and partially offsetting the wage loss with UI benefits. More information can be found here.
  • There is pending legislation at the Federal level that may expand FMLA leave and paid sick time leave for employees that need to take time off due to the coronavirus. We will keep you updated as soon as the emergency law is finalized.

Employee Resources:

  • Employees who are unable to work due to having or being exposed to COVID-19 can apply for disability insurance through the state. The Governor’s order waived the one-week waiting time period so employees can collect disability insurance during their first work off of work.
  • Employees who are unable to work because they are caring for an ill or quarantined family member with COVID-19 can apply for Paid Family Leave (“PFL”), which provides up to 6-weeks of benefit payments for eligible employees.
  • Employees who have to miss work to care for their children due to school closures caused by the coronavirus outbreak may be qualified to received unemployment insurance benefits. The Governor’s order also waived the one-week waiting time period for unemployment insurance.
  • Employees who have reduced hours or lose their jobs (either permanently or in a temporary layoff) can apply for unemployment insurance as well. The Governor’s order waived the one-week waiting time period for unemployment insurance so employees can collect unemployment in their first week out of work.
  • Employees can access the EDD website for answers to FAQs regarding the various benefits they may be entitled to.

Our goal is to help employers navigate this difficult situation. For more information contact Jennifer Douglas or Marissa Buck.

For a list of Coronavirus related resources, please see our Resources Page.  

TTB Allows Returns of Products Purchased for Events Cancelled due to CORONAVIRUS

Today, TTB announced that it would permit returns of alcoholic beverages that were originally purchased for events that have been canceled due to Coronavirus. As TTB stated:  “Given the unexpected and widespread nature of the concerns involving COVID-19, TTB will not consider returns of alcohol beverage products purchased to sell during such cancelled events to violate federal consignment sales rules provided the products were not initially purchased or sold with the privilege of return.”

Federal regulations typically prohibit consignment sales, which they interpret broadly to include the sale or purchase of alcohol beverage products with the privilege of return. (27 CFR 11.21).Typically, returns for ordinary and usual commercial reasons are not permitted, but returns because a product is overstocked or slow-moving does not constitute a return for ordinary and commercial reasons and are prohibited. (27 CFR 11.45.)

Acknowledging that wholesalers and retailers likely had already purchased product for various events such as festivals, concerts and sporting events that have seen widespread cancellations in recent days, TTB has taken the position that returns resulting from these cancellations would be permitted.

Local officials and event organizers have begun announcing cancellations of widely-attended events, such as parades, festivals, fairs, concerts, and sporting events based on concerns about COVID-19. These announcements may be made after wholesalers and retailers purchased large quantities of products to sell during.

Note that returns of alcoholic beverages to retailers would still be considered consignment sales under California law and we are working with California ABC to understand their position on such returns given the mass cancellations of events and gatherings.

For more information about how to address the return of alcoholic beverage products, please contact Bahaneh Hobel.

For a list of Coronavirus related resources, please see our Resources Page.  

Governor Issues Guidance / Directive on Closure of CA Bars, Clubs, Winery Tasting Rooms, On-Premise Retailers

On Sunday, March 15, 2020, Governor Gavin Newsom announced that due to efforts to reduce the potential spread of the novel coronavirus, he was directing the closure of “all bars, nightclubs, wineries, brewpubs, and the like.”  Restaurants, however, are not directed to close at this time, but are subject to reduction of occupancy and social distancing guidelines.  Although the Governor did not explicitly state as much, the closure directive appears aimed at suspending on-premise retail privileges (i.e., the service of alcohol for consumption at the licensed premises), whether those privileges are exercised at stand-alone premises or at locations tied to alcohol beverage production facilities, such as tasting rooms.

The directive is not an order, but has the same force as the Governor’s guidance last week regarding non-essential social functions over 250 attendees.

While the Governor announced that the directive would apply to “wineries,” it appears that this may only apply to a winery’s tasting room operations, and does not impact production operations.  A number of on-premise licensees may also have off-premise retail privileges. It is unclear whether the Governor’s directive allows these licensees to sell sealed bottles for consumption off the licensed premises during the closure period.

We have been in contact with representatives of the California Department of Alcoholic Beverage Control and expect further guidance on Monday, March 16.  We will update this post with any additional information.

If you have any questions regarding alcohol beverage licensing, please contact John Trinidad or Bahaneh Hobel.

For a list of Coronavirus related resources, please see our Resources Page.  

Communicating with Employees about COVID 19

It is important that employers stay on top of their employees’ workplace safety.  We recommend disseminating information to your employees about the COVID 19 outbreak and staying on top of developments. Below is a sample communication, but, of course, you should make sure it accurately reflects your workplace and the steps you are taking.  One of the biggest issues will be how to handle pay if extended absences become necessary. There is no one size fits all answer.  It should be handled consistently within your company and will depend on your current policies, any government assistance that may become available and the extent to which your employees may be out of work.

SAMPLE NOTICE:

Given the spread of coronavirus disease 2019 (COVID-19) in the U.S. in recent weeks, we ask that you please follow these simple guidelines in an effort to keep all employees healthy and safe. While vigilance is asked of all of you, we do not believe there is cause for panic. If you have any questions or concerns, please contact [insert name].

  • Wash your hands often – Use soap and water and wash for at least 30 seconds, or if soap and water are not available use hand sanitizer that is at least 60% alcohol.
  • Do not touch your face.
  • Clean and disinfect surfaces often.
  • Cover your cough or sneeze with a tissue and then throw it in the trash. If a tissue is not available, use your elbow (not your hands) and turn away from any people nearby.  The CDC does not recommend wearing masks.
  • Avoid shaking hands with people if possible, including clients, customers and guests – this is for your own protection and theirs.
  • Health care providers are requesting that anyone with fever, cough, or shortness of breath contact the doctor or hospital in advance of going and follow any procedures they have in place.
  • We are monitoring our workplace safety, and in order to do that it is important that you notify [Human Resources/person’s name] if you will be out of the office due to any illness. If you are feeling sick, stay home from work. Any specific medical information will be kept confidential.
  • Immediately notify [Human Resources/person’s name] if you were exposed to someone who has tested positive for COVID-19, or if you were exposed to someone who has been put in quarantine due to possible contact with someone with COVID-19.

Information is evolving daily and we encourage you to designate a point person to stay on top of the situation so that you can effectively respond to the needs of your workforce.  For further questions contact Jennifer Douglas.

For a list of Coronavirus related resources, please see our Resources Page.