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New restrictions announced on businesses due to coronavirus pandemic

On Sunday morning Governor Jay Inslee announced additional restrictions on businesses in an attempt to reduce the spread of COVID-19.

The majority of the restrictions go into effect midnight on Monday, November 16. Specifically,

- Restaurants and bars are closed for indoor service. Outdoor dining and to-go service is permitted. (Restrictions on restaurants take effect Tuesday at midnight).

- Retail stores, including grocery stores, and malls must limit occupancy to 25% and must close food court seating.

- Indoor gatherings, outside one’s household, are prohibited.

- Offices are required to mandate employees work from home, if possible, and must limit occupancy to 25% if they remain open. They must be closed to the public.

- Personal services, such as barber shops and salons, are limited to 25% capacity.

- Religious services can continue, but must limit indoor attendance to 25% of capacity, or 200 people.

- Wedding and funeral ceremonies will be limited to 30 people with no receptions.

- Outdoor social gatherings should be limited to no more than five people.

- Real estate open houses are prohibited.

- Childcare and K-12 education restrictions remain unchanged.

During the first shutdown earlier this year hundreds of businesses closed for good. Washington’s surviving businesses are just now starting to recover, and many will likely not survive another shutdown. Small business owners have extended lines of credit and taken loans to keep their employees on the payroll with the expectation that the shutdown would be for a limited amount of time.

Surviving an uncertain future of a continued shutdowns will put many small businesses, out of business. The good will of many small business owners is eroding. Faced with a stark choice of a government-mandated shutdown or bankruptcy, many businesses may ignore a new shutdown order as they will have nothing to lose, since enforcement of the governor’s order would shut them down anyway.

The shutdown is particularly difficult for many restaurant owners to accept as the state has indicated that the spread of the virus is primarily driven by large, at home gatherings and not by business activity. The Association of Washington Business, in a press release Sunday, acknowledged that businesses in Washington were already doing their part to stop the spread of COVID-19.

In March, when the state mandated the closure of restaurants (along with many other businesses), the immediate effect was obvious. A complete loss of revenue income from sales and mounting expenses primarily from lease payments, employee expenses and spoiled food clean-up.

For many restaurants, the profit margin is razor thin. On food, it can be as low as 2-3%. For restaurants that also have alcohol sales, the profit is higher.

As part of the Cares Act passed by Congress earlier this year, the Paycheck Protection Program (PPP) enabled businesses to keep their doors open. In many cases, without the PPP loan, there was insufficient customer traffic to cover the costs of opening the restaurant. Restaurants have fixed costs, even when closed, including lease payments, electricity for refrigerators, heaters, and other items in the restaurant.

Many restaurant owners are willing to dip into savings to cover short term losses, but at some point, that money will run out. What is critical for the survival of the business is knowing when the restrictions will be lifted so the financial impact can be fully assessed.

State enforcement of the new shutdown will be problematic. The State Labor and Industries department is understaffed due to COVID-19 and unlike the first shutdown, many businesses will not be as compliant.

Washington business owners are quite capable of understanding what is needed to keep both employees and customers safe in the COVID-19 future. A business should be allowed to operate safely without government interference.

Repeated lockdowns, issued by executive order, circumvents the legislature. A special session of the legislature should be called to address the state budget impact of the mandated economic shutdown. Additionally, lawmakers should consider adding a limit to the time executive orders are effective during a state of emergency without legislative confirmation.

As I have previously said, “It is critical that the state take a cautious approach with COVID-19, but the shutdown of the economy will cause more long-term damage, from which, we may never recover.”

– Harmsworth is the Small Business Center Director with the Washington Policy Center.