COVID-19 and its effects, are unprecedented in modern times. Beyond the health-related concerns regarding this virus, its impact on financial markets as well as virtually every commercial industry has been negative.
Hospitality, travel, and food and beverage industries have been particularly affected. From prohibitions to group gatherings which demand that dining rooms be closed
(or reduced), to the public’s abject fear of contracting the virus and self-quarantining, the employees who work in these industries are facing massive layoffs with no comparable employment alternatives.
One estimate reported that the United States could suffer from 20% unemployment. The market gains achieved throughout the past 3 years have all been wiped out (as of the time this article is being written).
On January 31, 2020, the Secretary of Health and Human Services declared COVID-19 a public health emergency. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. On March 13, 2020, the President of the United States declared the outbreak and its affects a National Emergency.
On March 1, 2020, the governor of Florida directed the State Health Officer and Surgeon General to declare COVID-19 a public health emergency pursuant to F.S.A. 381.00315 and to follow through with the directive pursuant to F.S.A. 381.0011(7).
F.S.A. 381.00315(1)(b) defines a “Public health emergency” as:
any occurrence, or threat thereof, whether natural or man made, which results or may result in substantial injury or harm to the public health from infectious disease, chemical agents, nuclear agents, biological toxins, or situations involving mass casualties or natural disasters. Prior to declaring a public health emergency, the State Health Officer shall, to the extent possible, consult with the Governor and shall notify the Chief of Domestic Security. The declaration of a public health emergency shall continue until the State Health Officer finds that the threat or danger has been dealt with to the extent that the emergency conditions no longer exist and he or she terminates the declaration. However, a declaration of a public health emergency may not continue for longer than 60 days unless the Governor concurs in the renewal of the declaration. The State Health Officer, upon declaration of a public health emergency, may take actions that are necessary to protect the public health. Such actions include, but are not limited to:
1. Directing manufacturers of prescription drugs or over-the-counter drugs who are permitted under chapter 499 and wholesalers of prescription drugs located in this state who are permitted under chapter 499 to give priority to the shipping of specified drugs to pharmacies and health care providers within geographic areas that have been identified by the State Health Officer. The State Health Officer must identify the drugs to be shipped. Manufacturers and wholesalers located in the state must respond to the State Health Officer’s priority shipping directive before shipping the specified drugs.
2. Notwithstanding chapters 465 and 499 and rules adopted thereunder, directing pharmacists employed by the department to compound bulk prescription drugs and provide these bulk prescription drugs to physicians and nurses of county health departments or any qualified person authorized by the State Health Officer for administration to persons as part of a prophylactic or treatment regimen.
3. Notwithstanding s. 456.036, temporarily reactivating the inactive license of the following health care practitioners, when such practitioners are needed to respond to the public health emergency: physicians licensed under chapter 458 or chapter 459; physician assistants licensed under chapter 458 or chapter 459; licensed practical nurses, registered nurses, and advanced registered nurse practitioners licensed under part I of chapter 464; respiratory therapists licensed under part V of chapter 468; and emergency medical technicians and paramedics certified under part III of chapter 401. Only those health care practitioners specified in this paragraph who possess an unencumbered inactive license and who request that such license be reactivated are eligible for reactivation. An inactive license that is reactivated under this paragraph shall return to inactive status when the public health emergency ends or prior to the end of the public health emergency if the State Health Officer determines that the health care practitioner is no longer needed to provide services during the public health emergency. Such licenses may only be reactivated for a period not to exceed 90 days without meeting the requirements of s. 456.036 or chapter 401, as applicable.
4. Ordering an individual to be examined, tested, vaccinated, treated, or quarantined for communicable diseases that have significant morbidity or mortality and present a severe danger to public health. Individuals who are unable or unwilling to be examined, tested, vaccinated, or treated for reasons of health, religion, or conscience may be subjected to quarantine.
a. Examination, testing, vaccination, or treatment may be performed by any qualified person authorized by the State Health Officer.
b. If the individual poses a danger to the public health, the State Health Officer may subject the individual to quarantine. If there is no practical method to quarantine the individual, the State Health Officer may use any means necessary to vaccinate or treat the individual.
But, what does this all mean? And, how does this allow the government to enact measures that interfere or possibly impair contracts such as rental obligations or mortgage payments?
Generally, the government (state and federal) can ask for cooperation from landlords and lenders alike and to the extent the landlords and lenders are willingly cooperative, this article is inapplicable.
The issue arises when the government, during a state of emergency, declares the temporary suspension of rent and mortgage payments to the dissatisfaction of landlords and lenders.
Article I, Section 10 of the United States Constitution is known as the “Contracts clause” and provides that “[n]o State shall … pass any law … impairing the Obligation of Contracts.” While this sounds pretty straight forward, this constitutional prohibition is subject to the inherent police power of the State to protect its citizens. Energy Reserves Group, Inc. v. Kansas Power & Light Co., 103 S. Ct. 697, 704 (1983); Keystone Bituminous Coal Ass’n v. DeBenedictis, 107 S. Ct. 1232, 1251 (1987).
Regardless of whether the alleged impairment to the contract is considered to be “substantial”, the impairment may still be found to be constitutionally appropriate if the state has a significant and legitimate public purpose as a reason for the change. An example of this would be to address a large general social or economic issue.
Should I continue to pay my rent or mortgage obligation: Yes; And, you should continue to do so unless and until the Federal, State or Local government tells you (or issues a statement telling you) that there is a forgiveness or a forbearance plan in place.
Corey B. Friedman