Updated February 12, 2021
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Dealership Operations and Health Requirements
Regional Stay Home and Other Local Orders (Updated January 26, 2021). Yesterday, the California Department of Public Health ended the Regional Stay Home Order across California. However, virtually all California dealerships remain in counties within the restrictive “purple” tier.
How does this impact occupancy? The lifting of the Regional Stay Home Order raises the occupancy limit for most retailers (including dealerships) from 20% to 25%. A notable exception appears to be Santa Clara County, which appears to continue to impose a 20% occupancy limit. (see below)
What about the sale of food or drinks? Prohibitions on the sale of food and drinks for in-store consumption have also been lifted. However, dealerships that offer food or drinks to customers should take care to reduce the transmission of COVID-19 by being mindful of how food and drinks are offered to customers. For example, frequently touched surfaces (such as vending machine keypads) should be regularly cleaned. Also, dealerships that offer drinks should consider using cup dispensers instead of placing cups on tables.
What about employee breakrooms? Dealerships in Santa Clara County are still required to close their employee breakroom. Dealerships outside of Santa Cara County should take care to reconfigure and/or stagger employee lunches to ensure that social distancing is practiced.
After incorporating this new information, the following represents our best understanding of the current status of vehicle sales operations in California:
- Purple Tier Counties (Virtually all California dealerships)
- Key Limitations: 25% indoor occupancy limit. (This includes dealership sales and parts departments. It’s unclear if this includes service departments, but dealers should use their best efforts to reduce occupancy in all areas.)
- Applicable Jurisdictions: Click here for your county’s status.
- Counties Not in the Purple Tier
- Key Limitations: 50% indoor occupancy limit.
- Applicable Jurisdictions: Click here for your county’s status.
- Notable Local Restrictions
The state has clarified that capacity restrictions are based on fire department occupancy limits and the fire code. “In most cases the capacity limit does NOT include staff under the fire code; individual premises will know from their own individualized fire department occupancy limits whether staff are included.” (Click here.) As such, dealers should generally be able to exclude staff from calculating occupancy/capacity limits at their store. If you have questions on this, consider contacting your local fire department.
Regardless of what occupancy limit applies in your county, it’s a good idea to use your best efforts to limit the number of persons inside your dealership. In the event a health inspector visits your dealership, they will want to know that you are taking these restrictions seriously and are taking necessary precautions to mitigate risk. These occupancy restrictions should be implemented in conjunction with other safety precautions, such as social distancing, daily employee symptom checks, face coverings, and the reporting of “outbreaks” to local health departments.
The State of California and various local jurisdictions have issued orders that greatly impact dealership operations. Outlined below is a summary of these requirements.
Local Jurisdictions Adopt Travel Quarantine Requirements. California recommends that people quarantine for 14 days following non-essential interstate travel. (Click here.) However, several local jurisdictions are now requiring residents to quarantine following non-essential travel. On December 28, the Los Angeles Public Health Department imposed a requirement that residents quarantine for 10 days following travel outside of LA County. (Click here) Santa Clara County has also imposed a requirement that residents quarantine for 10 days following non-essential travel more than 150 miles outside the County’s borders. (Click here.) These orders should not be read to apply to dealership employees that commute to work from outside LA or Santa Clara counties, as such commutes are considered “essential” travel.
A 10 Day Quarantine Is Now Possible For Employees That Come in Close Contact With an Infected Individual. (Updated December 23, 2020) Last week, the California Department of Public Health (CDPH) adopted revised quarantine guidance that allows asymptomatic close contacts (within 6 feet of an infected person for a cumulative total of 15 minutes or more over a 24-hour period) to discontinue quarantine after Day 10 from the date of last exposure with or without testing. (Click here) This reduces the quarantine period from 14 to 10 days.
All exposed asymptomatic contacts permitted to reduce the quarantine period to less than 14 days must:
• Adhere strictly to all recommended non-pharmaceutical interventions, including wearing face coverings at all times, maintaining a distance of at least 6 feet from others and the interventions required below, through Day 14.
• Use surgical face masks at all times during work for those returning after Day 7 and continue to use face coverings when outside the home through Day 14 after last exposure.
• Self-monitor for COVID-19 symptoms through Day 14 and if symptoms occur, immediately self-isolate and contact their local public health department or healthcare provider and seek testing.
Also, dealers considering allowing employees to return after 10 days instead of 14 days should note that Cal/OSHA has not updated its regulations on COVID-19 exposure, which require a 14 day quarantine period. (Click here.) Therefore, dealers that wish to continue requiring a 14 day quarantine period still have a basis to do so.
Statewide Operation and Health Requirements. All dealerships in California should review and implement the statewide guidance on COVID-19 dealership operations. (Click here.) All dealerships should post a copy of the state COVID-19 checklist to demonstrate that they are reducing the risk and are open for business. (Click here.)
On July 24, the California Department of Public Health issued a “COVID-19 Employer Playbook” that summarizes key requirements to operate a business in the current pandemic environment. This includes following industry-specific guidance and checklists and response protocols for when employees contract COVID-19. You can download the COVID-19 Employer Playbook by clicking here.
Face Masks. On June 18th, the California Department of Public Health issued guidance requiring Californians to wear face coverings statewide in many circumstances, including in most public indoor settings (such as inside dealership showrooms). Workers must wear face coverings in many additional circumstances, such as when they are working in spaces visited by members of the public or when they are unable to physically distance from others. Dealers throughout California are encouraged to promptly review this guidance, which can be accessed by clicking here.
Online Sales and Remote Deliveries. Dealers interested in online sales should review the DMV memorandum on online sales, which you can access here.
Consult Your Tax Professional Before Claiming the Employee Retention Credit. (Updated February 12, 2021) The most recent federal COVID stimulus bill (also known as the Taxpayer Certainty and Disaster Tax Relief Act of 2020) made a number of changes to the employee retention tax credits previously made available under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), including modifying and extending the Employee Retention Credit (ERC), for six months through June 30, 2021.
Another significant change provides that retroactive to March 27, 2020, employers who received Paycheck Protection Program (PPP) loans may now potentially claim the ERC for qualified wages that are not treated as payroll costs in obtaining forgiveness of the PPP loan. As a result, many businesses (including dealerships) that received PPP loans are evaluating whether they may now qualify for the ERC.
Two tests determine whether a business is eligible for the ERC. The first test requires a business to show a 50% decline in gross receipts during a calendar quarter in 2020 (or a 20% decline in 2021) when compared to 2019. The second test evaluates whether there has been a full or partial suspension of business operations due to a state or local COVID-19 health order.
Several dealers have contacted CNCDA about whether the recent state and local orders restricting occupancy at dealerships could constitute a “partial suspension” of business operations, which would potentially qualify the dealership to claim the ERC. Although the IRS continues to update its FAQ on this topic, it appears unlikely that an occupancy limitation alone qualifies a business to claim the ERC. You can access the IRS’s FAQ on this topic by clicking here.
If your dealership is considering claiming the ERC, please consult an experienced tax professional.
A Note About Completing Your PPP Loan Forgiveness Application. (Updated January 26, 2021) Over the past few weeks, we’ve received several inquiries from dealerships throughout California on when dealerships had “been ordered to shut down by a state or local authority due to COVID-19.” This question is important for dealers that are completing their PPP loan forgiveness application.
In-store dealership vehicle sales operations were arguably shutdown throughout California from March 19, 2020 through April 17, 2020. California’s statewide order issued on March 19, 2020 directed everyone to stay at home that was not needed to maintain “continuity of operations of the federal critical infrastructure sectors” as outlined in the federal Cybersecurity & Infrastructure Security Agency (CISA) documentation. (click here) “Auto sales” was not included in the CISA guidance until version 3.0 of the guidance was issued on April 17. As such, dealerships statewide were likely subject to a partial shutdown order from March 19 through April 17. Moreover, various local jurisdictions adopted more restrictive orders, including Los Angeles County, various Bay Area counties, and Fresno County.
Congress Passes New Stimulus Bill; Includes New PPP Loans; Does Not Extend FFCRA Paid Leave. (Updated December 23, 2020) On December 21, Congress passed a $900 billion pandemic relief bill. The bill includes various important elements, including the expansion of unemployment benefits and the creation of a new round of Paycheck Protection Program (PPP) loans.
On December 22, NADA released a detailed summary of the key elements of interest to dealers in the new stimulus bill. You can access this resource by clicking here.
Dealers should note that the pandemic relief bill does not extend employer paid leave obligations in the Families First Coronavirus Response Act (FFCRA), which expires on December 31, 2020. This means that beginning January 1, federal law will no longer require employers with fewer than 500 employees to provide paid leave to employees quarantining due to COVID-19 exposure. However, employers that continue to provide paid leave may still claim FFCRA tax credits until March 31, 2021.
Paid Leave Obligations for California Dealers After the FFCRA Expires. (Updated December 23, 2020) Although there will not be a federal requirement for employers to provide paid sick leave beginning January 1, Cal/OSHA’s emergency regulations on COVID-19 (adopted on November 30) require most California employers (including dealerships) to provide paid leave to employees that cannot work due to a COVID-19 quarantine. However, this paid leave obligation “does not apply where the employer demonstrates that the COVID-19 exposure is not work related.” (Click here to access the regulations.)
Therefore, if an employee is quarantining due to COVID-19 exposure outside of work, an employer would not have an obligation to pay an employee while the employee is in quarantine. However, if an employee is quarantining due to work related exposure or if it is unclear where an employee contracted COVID-19, and the employee cannot work due to the quarantine, an employer would be required to pay an employee while quarantining.
Dealers should also note that the state of the law on this issue is in flux. There is substantial uncertainty as to whether Cal/OSHA has the legal authority to impose paid leave obligations on employers, and its authority is being actively challenged in the courts. Moreover, it’s very possible that the legislature (or Congress) will address this issue by passing new laws in early 2021. Finally, it is also unclear whether the extension of the tax credit in the FFCRA will extend the operation of AB 1867, which requires California employers with 500 or more employees to provide paid COVID sick leave akin to the FFCRA.
Bottom line: although the FFCRA paid leave mandate will expire on December 31, California dealers with fewer than 500 employees should still provide paid leave to employees quarantining due to COVID-19 exposure, unless they can demonstrate that the exposure was not workplace related. Dealers may still be entitled to the FFCRA tax credit until March 31, 2021.
CNCDA began remote operations on Tuesday, March 17, 2020. Since this time, CNCDA staff has been in continuous contact with local and state officials on issues involving coronavirus and your business. Our legal hotline (916-441-2599) continues to operate and staff is fully accessible by phone or email to our members. And we are continuously developing compliance resources (such as this website and member alerts) to help our members during this difficult time.
This website is designed to provide California new motor vehicle dealerships with resources on issues involving the coronavirus (COVID-19). CNCDA will use its best efforts to continue to update this website, but this situation is rapidly evolving. Please also note that the materials on this website are for educational purposes, and are not intended as legal advice. For legal advice, contact competent counsel. For the most current information, please visit government websites for your jurisdiction or call CNCDA at 916-441-2599.
Media contact: Jenny Dudikoff, 916-599-5415