Dealers and Repair Shops

For every quarter, the six quarters list the orders in force on the quarter's first and last day, by issuer, date and terms, with exhibit identifiers, and the tables on this page tabulate them. For the third quarter of 2021 alone the list runs to the federal workplace, contractor, conveyance, rail, port, border and entry orders, Hawaii's proclamations and Honolulu's Exhibit B naming "New and used car and truck dealerships," the Cal/OSHA, Virginia, Oregon and Washington workplace standards, the New York exposure prevention plans, the exposure-control, quarantine and vaccination orders of ten States and a dozen metros, and the motor-vehicle, notarial and court instruments of the States.²¹⁸ A form sentence that no orders were in effect is not the "case-by-case" determination the United States described to the District Court, and the National Taxpayer Advocate has recorded that the letters carrying it were issued "based on the results of risk filter analyses rather than a prior examination."²¹⁹ The sentence describes a quarter that did not occur, and the Service's records, whatever they contain, do not contain the Federal Register, the Honolulu emergency orders or the California Code of Regulations.

The word "essential" is not in the statute. Every order that designated repair and maintenance essential in March 2020 said so on the same page that closed the showroom: Pennsylvania's list read "Automobile Dealers No" and "Automotive Repair and Maintenance Yes"; New Jersey's permitted "Car dealerships, but only to provide auto maintenance and repair services"; Nevada's provided that "auto showrooms are to remain closed."²²⁰ The designation was a permission to run the service bays under the orders' conditions, and it exempted no showroom from closure, no counter from the exposure-control orders, no dealership from the capacity caps, the workplace standards, the exposure prevention plans or the quarantine orders.²²¹ The Notice itself provides that an employer so designated "may be considered to have a partial suspension of operations if, under the facts and circumstances, more than a nominal portion of its business operations are suspended by a governmental order," illustrates the rule with "an employer that maintains both essential and non-essential business operations," which is the dealership exactly, and finds in Q&A-17's Example 4 that an essential hospital barred from elective procedures is partially suspended; the United States told the District Court that an employer "could be considered to have a partial suspension due to the governmental order if it was required to suspend certain operations for certain purposes."²²² A dealership that "remained open" for repair under an order that closed its sales floor was partially suspended by that order, which is what the word "partially" means.

The statute says nothing of the source or addressee of the order; it asks whether the order limited "commerce, travel, or group meetings." The Notice's own list of qualifying orders includes "A State's emergency proclamation that residents must shelter in place" and "An order from a local official imposing a curfew on residents," both addressed to the public, and the United States described that list to the District Court as "[c]onsistent with the language in the statute" (Doc. 44 at 12) and told the Ninth Circuit:

a business may be suspended 'due to' a government order addressing a third party.

Br. for Appellees at 41

The orders that reached this industry were, moreover, directed at business operations in terms: "showrooms remain closed to in-person traffic"; "showrooms must remain closed"; "Automobile Dealers No"; "In no case should a showroom exceed 25% of its designated maximum occupancy"; "New and used car and truck dealerships."²²³²²⁴ The position rewrites the statute and misdescribes the orders.

"Comparable operations" and "telework" are not in the statute; Tri-State defines a partial suspension as a temporary delay, interruption or termination of a portion of the business, and a showroom ordered closed to in-person traffic has had its in-person portion terminated for the duration of the order.²²⁵ The Notice's own words confirm it. Q&A-15 provides that where "the closure of the workplace causes the employer to suspend business operations for certain purposes, but not others, it may be considered to have a partial suspension of operations due to the governmental order," and its Example 2 treats a physical-therapy practice whose "workplace, including access to physical therapy equipment, is central to its operations" as partially suspended although it served some of its patients remotely; Q&A-16 provides that where the physical work space is so critical that central tasks cannot be performed remotely "this factor alone indicates that the employer is not able to continue comparable operations"; Q&A-17's Example 3 finds a retailer whose "retail storefront locations" were closed partially suspended although "it continues to fulfill online orders," and its Example 6 finds a large retailer confined to "curbside service" partially suspended.²²⁶ A vehicle is inspected on a lot, driven on a road, appraised in a bay, repaired on a lift and delivered by hand; none of that is portable work, and the orders that permitted "online vehicle sales" through PennDOT's portal or "remote and electronic sales or leases" permitted the portion of the operation that remained, not a comparable operation.²²⁷ The comparable-operations sentence with which Q&A-15 opens is not in the statute, has no force of law by the United States' own account, and is not applied here. The four comparable-operations factors first appeared in the Notice on March 1, 2021; the FAQ posted April 29, 2020 answered the closed-for-some-purposes question with an unqualified "Yes."²²⁸ Remote selling was the modification the orders compelled, and a compelled modification of a more than nominal portion is a partial suspension, which is what Q&A-17 also says. The position substitutes a word Congress did not write for the one it did.

Q&A-13 addresses an employer that suspends operations because of "a reduction in demand," and its own example is "Employer B, an automobile repair service business," which "is not required to close its locations or suspend its operations" and "suspends its operations due to the lack of demand."²²⁹ This analysis relies on no reduction in demand and no response to demand. The exclusion as posted April 29, 2020 reached only "an essential business that is not required to close its physical locations" and that claimed a suspension "for the sole reason" of its customers' order; it was extended to every employer and to any "reduction in demand" only on March 1, 2021.²³⁰ This analysis relies on orders that closed the showroom by name, capped it by percentage, placed its counters under exposure-control requirements, closed the title office through which every sale is completed, closed the plants that fill the lot, conditioned the borders, ports and rail yards across which inventory moves, and quarantined exposed technicians by blanket order, and it treats those orders as orders limiting commerce, travel and group meetings under the statute's text, Q&A-12's logic and the United States' admission that a third-party order counts.²³¹ A stay-at-home order on the customer base is itself an order limiting commerce, and the commerce it limited was this industry's; where Q&A-13 would exclude an order confining the customer, it adds to the statute words the United States has represented have no force of law. The Q&A's own example describes a repair shop under no order at all; it does not describe a dealership whose showroom, title office and plant were closed by order, and the Service's invocation of it against this industry misdescribes both the orders and the industry.

A showroom closed because Executive Order 2020-42 required it, a showroom held at twenty-five percent because Kentucky's Healthy at Work requirements required it, a test drive taken without an employee because the same requirements required it, a prevention program adopted because Cal. Code Regs. tit. 8, § 3205 required it, and a parts counter placed under face-covering controls in Clark County under a misdemeanor ordinance are not voluntary. Q&A-14 by its own terms reaches only a suspension "not due to a governmental order"; every modification described here is traced to an order with an exhibit identifier.²³² Where a dealer group adopted a nationwide policy to comply with the orders of the jurisdictions that bound it, Q&A-20 makes it eligible "with respect to all of its operations in all locations" "whether or not the employer voluntarily adopts consistent measures for its business operations in other jurisdictions," and its example is "a national retail store chain" confined to "curbside service."²³³ A modification traced to an order with an exhibit identifier is not voluntary, and the position that it was describes an employer this analysis does not address.

Q&A-14 reaches, by its own terms, only a suspension "not due to a governmental order," and the United States and the District Court have defined the excluded employer as one "not being ordered to do so."²³⁴ No dealer or repair shop in California, Texas, Florida, New York, Colorado, Ohio, New Jersey or Illinois answered that description in any of the six quarters. The reopening orders permitted the showroom, the service drive and the parts counter to operate only on conditions with the force of law. The standing statutes commanded the same conduct independently: the communicable-disease control acts ("Each person shall act responsibly to prevent and control communicable disease"); the emergency acts' penalties, recited in the orders themselves; the workplace-safety statutes of Texas, California, New York, Ohio and New Jersey; and the general duty clause, 29 U.S.C. § 654(a)(1), enforced by citation from September 2020. The legislatures then fixed the standard of care as compliance with governmental standards, guidance and protocols, in Texas for every action commenced on or after March 13, 2020 and in Florida retroactively, while California, New York, New Jersey and Illinois left every dealer under the ordinary standard of care and the presumptions that attach to a violated regulation or an uncontrolled workplace.²³⁵ The safe-workplace statutes had no COVID-19 content until the health authorities said what a safe showroom, service bay and parts counter required; the measures were taken because those directives defined the duty and would not have been taken without them. "Due to" is but-for causation, and the causation here runs from the command to the measure without an intervening choice. The Notice's own words confirm it: a modification "required by a governmental order as a condition of reopening" is a partial suspension due to the order.²³⁶ A statute that commands conduct is an order from an appropriate governmental authority, as an executive order is; the legislature, the health department and the occupational-safety agency are each such an authority; and the Service's premise, that no command reached the employer, fails wherever one did, which in the Library is every State and every quarter.

The ten percent figure is, in the United States' words, "not determinative," "[e]ffectively ... a safe harbor," "not an eligibility requirement," "a quintessential safe harbor," "a safe harbor rather than a hard floor"; the District Court held it "is not an exclusionary cut-off point"; and Tri-State held that the Notice "provides a method for the test to be met not as a requirement to meet the test" and that reading it as a requirement "would read requirements into the statute that do not exist."²³⁷

a safe harbor rather than a hard floor

Br. for Appellees at 49; see also Doc. 44 at 14, 29-30; Br. for Appellees at 37-38

The figure has no pedigree in the guidance that existed while the 2020 orders were in force and the 2020 wages were paid: no FAQ mentioned "nominal" or any percentage as posted April 29, 2020; "more than a nominal portion" first appeared June 19, 2020; the two deeming rules first appeared in the Notice on March 1, 2021; and the Service's FAQ page and Chief Counsel's memorandum of October 18, 2023 now administer the figure as the definition of "more than nominal" while the United States tells two courts it is a safe harbor.²³⁸ A rule that did not exist when the orders closed the showrooms of twenty-three States, and that the United States describes in court as a safe harbor, cannot be the floor beneath any dealer's claim. The showing for this industry exceeds the safe harbor many times over as a matter of the orders' own terms: the sales function, which the orders closed outright in twenty-three States and the District, is the largest revenue line of a franchised dealership and the whole of an independent dealer's; a showroom held at twenty-five percent of occupancy has three-quarters of its floor closed; a service department at twenty percent of indoor capacity has four-fifths of its lounge closed; a title office closed for sixteen weeks defers every sale of the period.²³⁹ The position applies as a floor a figure the United States has told two federal courts is not one.

The modifications described here are closure, remote-only sales, appointment-only admission, capped occupancy, unaccompanied test drives, curbside delivery, closed title offices, quarantined technicians and conditioned deliveries, and the face-covering orders of July through September 2021 are treated as what they were: workplace infection-prevention and exposure-control requirements, orders from appropriate governmental authorities enforced by fine, that conditioned every showroom, service drive and counter in the States and metros that issued them, universal indoor face coverings being one of the controls they imposed beside the screening, verification, quarantine and exclusion duties that the same instruments carried where they did. Q&A-18 itself lists "limiting occupancy to provide for social distancing, requiring services to be performed only on an appointment basis (for businesses that previously offered walk-in service)" and "requiring employees and customers to wear face coverings" as modifications "required by a governmental order as a condition of reopening a physical space for business or service to the public," and provides that a modification "that results in a reduction in an employer's ability to provide goods or services in the normal course of the employer's business of not less than 10 percent will be deemed to have more than a nominal effect"; the United States told the District Court:

employees having to wear face masks may impact business operations.

Doc. 44 at 30

Tri-State held that "the required protocols and procedures to comply with the Proclamation" were suspensions the order caused and refused the argument that they were nominal.²⁴⁰²⁴¹ The categorical sentence that mask and glove mandates "will not result in more than a nominal effect" first appeared on March 1, 2021; no FAQ carried it in 2020.²⁴² A showroom that admitted walk-in customers for a century and was ordered to admit them "only by appointment" is the appointment-only business Q&A-18 names; a showroom at twenty-five percent occupancy is not a modification with a nominal effect; it is a seventy-five-percent closure.

This analysis relies on no bare declaration as a suspending order. Each instrument in the layers and the six quarters limited commerce, travel or group meetings in terms. Where an emergency declaration is cited, it is cited as the instrument under which those orders were issued and continued, or as proof of a period, which the Notice's own text allows, and where a declaration itself carried operative provisions, as Hawaii's proclamations, Texas's GA-38 and Georgia's Economic Recovery orders did, it is cited for them.²⁴³ The ground answers an argument this analysis does not make.

Chief Counsel memoranda "may not be used or cited as precedent," by their own legend, which Tri-State quoted in declining to rely on the Chief Counsel memorandum the United States offered there.²⁴⁴ The suppliers of this industry were closed by order with a date and an exhibit identifier: Michigan's plants from March 24 to May 11, 2020 by Executive Orders 2020-21 and 2020-42; Pennsylvania's transportation-equipment manufacturing from March 19, 2020 by the life-sustaining list; Mexico's assembly plants from March 30 through May 30, 2020 by federal decree; Ontario's places of business outside its essential list from March 24, 2020; the land borders to non-essential travel from March 20, 2020 to November 8, 2021; the ports and rail yards by the Captain of the Port conditions the Coast Guard's bulletins record and by the Federal Railroad Administration's emergency order; and the semiconductor plants of Taiwan by the Level 3 alert of May 19 to July 26, 2021.²⁴⁵ Nothing here is attenuated: a dealer sells what the plant ships, and the plant was closed. The United States told the Ninth Circuit that the supplier rule "never even mentions a 'physical[ ] clos[ure]' order against the supplier," and told the District Court that an employer is eligible where its operations are suspended "because of the supplier's inability to deliver":

that same employer may still be eligible for the ERC if, under the facts and circumstances, its business operations are fully or partially suspended because of the supplier's inability to deliver (FAQ 12).

Doc. 44 at 13 n.3

Q&A-12's own example is an auto-parts manufacturer whose supplier "is required to fully suspend its operations due to a governmental order."²⁴⁶ Causation is but-for on the United States' own agreed definition: absent the order closing the plant, no law stopped the line.²⁴⁷ The position describes an attenuated chain this analysis does not describe; an assembly plant closed by a Governor's order is not a supply-chain effect, and a Chief Counsel memorandum that cannot be cited as precedent is not the statute.

For the third quarter of 2021 the orders had not lifted: the third-quarter inventory lists, with dates, the orders in force on July 1 and September 30, 2021, and the subsection that follows it names the expired instruments on which the proof does not rest. Where the position means that a suspension compelled by an order that expired on June 30 ended at midnight, it misreads the clause, which asks whether the operation "is fully or partially suspended during the calendar quarter," and it contradicts Tri-State's definition of a suspension as a "delay," Q&A-22's whole-quarter rule and Q&A-16's transition rule.²⁴⁸ A dealer whose lot was emptied by the plant orders of 2020 and the semiconductor orders of 2021 and whose new cars were, in the Federal Reserve's words of September 8, 2021, "largely already spoken for" was not selling normally on July 1, 2021; the position mistakes the date an order lapsed for the date the suspension it compelled ended, and the clause asks about the second.²⁴⁹

The gross-receipts prong is not relied on. The statute makes an employer eligible on either prong, and the United States admitted in Tri-State that the gross-receipts test is "another method to qualify," on which the court held "the fact an employer can be eligible and affected without partial or full suspension is reasonable."²⁵⁰ The suspension prong asks about operations, not revenue, and it is satisfied in every quarter; the Census Bureau's monthly record of dealer sales in 2020 and 2021 is a fact of the period and not the test, and the statute asks what the orders did to the operation, not what the operation earned.²⁵¹ The ground answers a prong this analysis does not invoke; Congress joined the two prongs with "or."

Every instrument this analysis relies on as a suspending order is an order, proclamation, directive, rule, statute or administrative order with the force of law, issued under a recited statutory or constitutional power and enforced by penalty, contempt, license or contract: Pennsylvania's orders under the Emergency Management Services Code and the Disease Prevention and Control Law, Michigan's under the Emergency Management Act and the Emergency Powers of the Governor Act, Kentucky's Healthy at Work requirements made mandatory by Executive Order 2020-323, Nevada's directives under NRS chapter 414 and its emergency regulation, Honolulu's emergency orders under Hawaii Revised Statutes chapter 127A with misdemeanor enforcement, Cal/OSHA's standards under the Labor Code with civil penalties, Virginia's 16VAC25-220 under the Virginia Occupational Safety and Health law, the CDC's order under 42 U.S.C. § 264, the TSA's directives under 49 U.S.C. § 114(l)(2), the President's proclamations under 8 U.S.C. § 1182(f), and the DHS notifications under 19 U.S.C. § 1318(b).²⁵² Where a State made a federal guidance document binding by incorporating it into an order, as Texas, North Carolina, Georgia and Florida did with the CISA list, the binding instrument is the order, and it is the order that is cited; the CISA list itself is cited only for what those orders incorporated.²⁵³ The Notice itself provides that whether an instrument is a governmental order "is determined without regard to the level of enforcement," and the Court of Federal Claims has held that health-department guidance issued under compulsory authority "qualifies as an 'order.'"²⁵⁴ An instrument enforced by fine, misdemeanor, license or contract clause is not a recommendation, and the position that it is misdescribes every instrument this analysis names.

Agreed. An "order" is "An authoritative indication to be obeyed; a command or direction" and, in the Service's own dictionary work, "a command or mandate delivered by a government official"; the United States agreed in Tri-State that the clause is read by "plain meaning."²⁵⁵ "Showrooms remain closed to in-person traffic" is a command; "In no case should a showroom exceed 25% of its designated maximum occupancy" is a command; "any appointment that is in-person at any state or county department of motor vehicles is cancelled" is a command; "a person must wear a mask while boarding, disembarking, and traveling on any conveyance" is a command. Every instrument in the third-quarter finding is a command from a competent authority to do or refrain from doing something on pain of sanction. That is the ordinary meaning, and it is satisfied.

The Service is free to disagree about the weight of these instruments. It is not free to say they did not exist.