California Executive Power and Industrial Facilities in the Wake of COVID-19

On March 4, 2020, Governor Gavin Newsom declared a state of emergency and, pursuant to his broad authority under the California Emergency Services Act (CESA) (Cal. Gov. Code §§ 8550-8669.7) and other statutory provisions, has issued eight Executive Orders (EOs) to date attempting to address the COVID-19 pandemic. These EOs have waived certain statutory and regulatory requirements, vested agencies with new authorities, and directed certain agencies to temporarily change their oversight focus. These EOs, together with the Governor’s power to issue additional EOs under CESA, could have direct impacts on California facilities and operations, while potentially providing an avenue to help facilities overcome unique compliance issues created by the pandemic.

Some pertinent examples of the Governor’s powers under the CESA and other statutes include:

• “During a … state of emergency the Governor may suspend any regulatory statute, or statute prescribing the procedure for conduct of state business, or the orders, rules, or regulations of any state agency, … when the Governor determines and declares that strict compliance with any statute, order, rule or regulation would in any way prevent, hinder, or delay the mitigation of the effects of the emergency.” (Cal. Gov. Code § 8571).

—  The Governor’s first EO during the COVID-19 crisis (EO N-25-20), as amended by EO N-29-20 (¶ 3), broadly grants a number of state agencies discretion to waive waiting periods, grant extensions to file taxes, suspend staff work hour limitations, and to suspend certain requirements of the Brown Act and Bagley-Keene Act to allow agencies to hold public meetings via teleconferencing without observing the formal requirements for telephonic hearings.

—  Facilities needing to set an administrative hearing (e.g., for variances, appeals, etc.) should be able to work with oversight agencies to schedule such hearings even if the formalities of the Bagley-Keene Act or Brown Act cannot be followed due to mandated social distancing.

—  Businesses also should provide timely feedback to oversight agencies on statutory or regulatory requirements that will be difficult or impossible to meet as a result of the COVID-19 response. We expect that the Governor will be issuing additional EOs as the COVID-19 response continues, and it is possible that feedback from oversight agencies could lead to EOs that invest agencies with more flexibility to extend deadlines or waive requirements.

• Determining and addressing the needs of the state for, among other things, medicines supplies, materials and equipment, and commandeering and using public and private property as needed, subject to payment of reasonable value for that service (Cal. Gov. Code §§ 8570(i), 8572).

—  EO N-25-20 directs the California Health and Human Services Agency and the Office of Emergency Services to coordinate the commandeering of any property needed for use as temporary residences or medical facilities to quarantine and/or treat COVID-19 patients, subject to the execution of agreements or contracts arranging for that use. The CESA would allow the Governor to expand this EO to include commandeering of equipment and supplies as needed to battle COVID-19. 

• Request information and make surveys of public and private industries, resources, and facilities as necessary to address the emergency. (Cal. Gov. Code § 8570(h)).

—  Businesses should be aware that the Governor and state oversight agencies are empowered to require information and survey responses from businesses in responding to COVID-19. This could include reporting on the number of facilities and/or employees known to be exposed to the virus, compliance with social distancing guidelines, and/or measures the business is taking to mitigate risks from COVID-19.

• Directing state agencies to shift regulatory and enforcement focus to prioritize emergency response. (Cal. Gov. Code § 3100).

—  EO N-27-20 directs the California Department of Social Services (DSS), the Department of Public Health (DPH) and the Division of Occupational Safety and Health (Cal-OSHA) to focus their efforts on technical assistance and supporting compliance, and reserve enforcement activities only “where there are allegations of the most serious violations impacting health and safety.”

—  Businesses facing compliance challenges during this time should keep in mind that, because oversight agencies like DSS, DPH and Cal-OSHA have been directed to prioritize technical assistance over enforcement, these and other California agencies should have a duty to assist businesses to find a path to compliance rather than resort immediately to enforcement, especially where strict compliance may be difficult or impossible due to the response to the pandemic.

As the COVID-19 response intensifies, we expect that the Governor may invoke these CESA powers again to cover situations where the COVID-19 response mandates additional accommodations (e.g., to modify strict compliance with statutory and regulatory requirements, and/or to waive existing laws and regulations to facilitate crisis response). We encourage businesses to work directly with their oversight agencies to ensure that all agencies are prioritizing technical compliance assistance and utilizing the flexibility the CESA allows (through action of the Governor), and communicating with the Governor’s office about areas where additional flexibility may be needed.

Pillsbury’s experienced crisis management professionals are closely monitoring the global threat of COVID-19, drawing on the firm's capabilities in supply chain management, insurance law, cybersecurity, employment law, corporate law and other areas to provide critical guidance to clients in an urgent and quickly evolving situation. For more thought leadership on this rapidly developing topic, please visit our COVID-19 resources page.