Legal Alert

Manufacturers: Qualifying as ‘Critical,’ ‘Life Sustaining,’ or ‘Essential’

March 20, 2020

According to information provided by the National Association of Manufacturers today, a majority of US manufacturers responding to NAM’s polling continue to operate at full capacity, with over 80 percent operating at full or slightly reduced capacity. However, respondents expect that to change in the next two weeks, with the number of companies operating at full capacity expected to drop from 63 percent to 20 percent.

This week has seen a number of state and local governments adopt shut-down orders, requiring most businesses, including many manufacturers, to shut down operations. These orders generally exempt some categories of manufacturing businesses, but the way in which those exemptions are defined varies, and is often vague.

The U.S. Department of Homeland Security (DHS) has guidance identifying “Critical Infrastructure Sectors” that must continue to operate, if possible. California’s Governor Newsom has ordered all Californians to stay at home except for “essential needs” and as necessary “to maintain continuity of operation” in the Critical Infrastructure Sectors identified by DHS.

Pennsylvania Governor Tom Wolf ordered the closure of all businesses that are not “life sustaining,” and included a lengthy list of affected sectors, including manufacturing, identifying which sectors may “continue physical operations” because they support “life sustaining” functions. However, Governor Wolf announced at a press conference today that businesses could seek waivers/exemptions from the order and that the Department of Economic & Community Development will be processing those applications. The business exemption application form can be found here.

This is by no means a complete list of shutdown orders. (Check Ballard's COVID-19 Tracker here for information about orders and legislation in your state.) However these examples highlight the challenges faced by manufacturers when shutdown orders are issued by jurisdictions in which their facilities are located. Given the lack of clarity of such orders as they are rushed out, manufacturers often cannot clearly answer the question: Am I covered?

For manufacturers in sectors that are exempt, there is a further question to answer: What physical operations are necessary to meet the critical business and public need? Many business functions can be performed remotely without interfering with production (even if there is an inevitable loss of efficiency).

Therefore, even manufacturers deemed “critical,” “essential” or “life sustaining” may be required to shift employees in certain functions (e.g., human resources, payroll, sales) to remote work arrangements when doing so would not interfere with the manufacturer’s production.

Because these orders typically require almost immediate compliance (the Pennsylvania order required closure in roughly three hours), manufacturers are under immediate pressure to sort out these issues, document compliance and, where necessary, seek waivers or other relief if its manufacturing sector does not receive an exemption in the initial order.

Ballard Spahr lawyers are working with dozens of manufacturing clients now to confirm or secure authorizations for continued operations. This includes guiding clients through applicable exemption and waiver processes. If your facility is impacted by a shutdown order and you require assistance, please contact Brendan Collins.

Copyright © 2020 by Ballard Spahr LLP.
(No claim to original U.S. government material.)

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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

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