Oregon businesses cited by the state for violating coronavirus safety standards nonetheless received more than $12.5 million in federal pandemic relief loans last year through the Paycheck Protection Program.
The relief program doesn’t specifically require that businesses comply with safety rules to be eligible for coronavirus relief loans, or to have those loans forgiven. That means businesses that resist those rules are still able to access the free government help without experiencing the same level of economic hardship of those that fall in line.
Most Oregon businesses appear to be complying with state safety rules, despite the severe economic consequences for restaurants, gyms, theaters and others that have been forced to stop or sharply limit indoor activities.
Among the businesses that aren’t complying, though, a few have made a show of defying the state’s safety protocols. That hasn’t stopped some of those same businesses from accepting the government handouts.
“These employers received a significant amount of taxpayer dollars from the federal government to make sure they could keep people employed,” said Jess Giannettino Villatoro, political director for Oregon AFL-CIO, one of the state’s largest labor groups.
“Nobody wanted this money to flow into the state more than Oregon’s workers because that meant they continued drawing a paycheck,” she said, “but what no one expected at the onset of that money landing is that those employers would go on to put their workers’ lives at risk.”
HANDOUTS AND FINES
At least 31 businesses that have been cited by the Oregon Occupational Safety and Health division (Oregon OSHA) for violating state regulations aimed at stopping the spread of COVID-19 also accepted loans from the federal Paycheck Protection Program, which Congress created last March to help businesses keep workers on payroll and cover other expenses during the pandemic.
Many businesses will ultimately have their loans forgiven, turning them into outright government grants.
Seven businesses that accepted loans were cited and fined by Oregon OSHA for willfully and sometimes repeatedly violating state rules.
Kevista Coffee in Bend was fined $8,900 by Oregon OSHA in July after the state alleged that it willfully failed to require face coverings. The state was continuing to receive complaints about the cafe earlier this month. Between Dec. 30 and Jan. 5 alone, five people complained to Oregon OSHA that the cafe wasn’t requiring masks or physical distancing. One complaint noted that the coffee shop was asking for donations to help in its fight against Oregon OSHA, according to state records.
“A blatant disregard for stated government orders and the health and safety of patrons is insulting,” another complainant wrote. “Not a single employee had a mask, nor did any of the dine-in patrons. … The interior space was packed with people freely conversing and dining without masks or regard for distancing.”
While it allegedly flouted coronavirus safety requirements, the cafe benefited from a $32,185 relief loan from the federal government. Kevista Coffee didn’t respond to a request for comment from The Oregonian/OregonLive.
The Paycheck Protection Program application requires businesses to certify that they are “not engaged in any activity that is illegal under federal, state or local law.” But a spokesman for the U.S. Small Business Administration said that loan requirements didn’t state that businesses must follow emergency coronavirus orders to be eligible for loans or loan forgiveness.
Salem-based gym chain Courthouse Club Fitness accepted a federal coronavirus relief loan of over $1 million last April to help keep a reported 368 staff members employed during the heart of the pandemic.
But when Oregon Gov. Kate Brown mandated that gyms close in November in an effort to slow the spread of COVID-19, the Salem gym refused. Oregon OSHA fined the gym $90,000 for operating four facilities in defiance of state regulations. The gym appealed the fine and continued operating.
In January, the agency issued the gym a second fine of $126,749 for continuing to defy Brown’s mandates, by far the largest fine it has issued for a coronavirus violation.
Owner John Miller defended his gym in a since-deleted Facebook post, questioning Brown’s logic for closing gyms and vowing to stay open, despite the second fine.
Miller said the gym had been taking safety precautions while remaining open and contended that the one COVID-19 case linked to the business occurred when an employee contracted the virus elsewhere.
It’s unclear if that’s true – contact tracing in Oregon, like other states, is scattershot and traces only a fraction of infections back to their origins. County health officials also don’t disclose details of specific cases.
“I repeat my pledge to support any reasonable request to help in the fight against covid,” Miller wrote on Facebook. “Voluntarily bankrupting a business my members depend on for their health, and 300 employees depend on for a living, is not reasonable.
Courthouse Club Fitness did not respond to a request for comment about its federal loan.
Liz Merah, a spokesman for the governor, said earlier this month that businesses that defied public health orders risked creating new spikes in COVID-19 cases and setting their communities back.
She said Brown’s executive orders are enforceable by law and that a violator could be charged with a Class C misdemeanor, punishable by up to 30 days in jail. However, the state hasn’t taken that approach to force businesses into compliance, even in cases when they have repeatedly defied state orders.
“Our focus is on voluntary compliance,” Merah said. “If Oregonians and businesses don’t take these measures seriously, and we don’t see reduced case numbers, communities will end up staying in more restrictive risk levels for longer periods of time.”
But that compliance hasn’t been a prerequisite for businesses that have applied for coronavirus relief money.
In an effort to get money into the hands of struggling businesses as quickly as possible, the federal government approved Paycheck Protection Program loans last year with only limited vetting.
That led to the program handing out multimillion loans to large and established companies and failing to prevent fraudsters from accessing tens of millions of dollars. When the program reopened earlier this month to first- and second-time applicants, it did so with new fraud safeguards in place.
However, there remains no explicit requirement that businesses abide by local and state coronavirus mandates to access the money, beyond standard language requiring them to abide by the law.
Juley Fulcher, worker health and safety advocate for Washington D.C.-based watchdog group Public Citizen, said the federal government didn’t adopt a workplace coronavirus safety standard last year, making it more difficult for them to tell businesses what guidance to follow. President Joe Biden last week directed the federal Occupational Safety and Health Administration to explore adopting an emergency temporary standard.
Still, Fulcher said the federal government could have required businesses to adhere to guidance from the Centers for Disease Control and Prevention to receive federal loans. Individual states also have issued specific mandates to employers to protect workers and consumers. Oregon OSHA adopted its own temporary coronavirus workplace rule last fall and Gov. Kate Brown has issued numerous executive orders regulating businesses in an attempt to slow the spread of the virus.
Fulcher said she believes the Small Business Administration would be arguably within its rights to claw back money from businesses that certified they were in compliance with state laws and then flouted state coronavirus mandates, if those regulations were in place when the business accepted the loans. However, there is no indication that the agency has plans to take that action.
“There was no attempt to look at how workplaces were handling COVID protections and connecting that at all to the ways that federal funding was given out,” Fulcher said. “It’s a real problem that these companies are benefiting from federal funding to address COVID-related issues and aren’t bothering to protect their workers.”
BUSINESSES PUSH BACK AGAINST RULES
Glamour Salon owner Lindsey Graham reopened her Salem salon in defiance of Brown’s public health orders last May, saying that she had to resume operations to pay her bills and provide for her family.
Her business was fined $14,000 by the state for willfully defying Brown’s order requiring salons to close. Graham appealed the fine. The same month, Graham’s corporation, Glamour LLC, accepted a federal loan of more than $35,000 to keep 14 employees on payroll. Graham said she used the money to pay employees and cover some expenses at multiple tanning salons and a gym that she also owns, but didn’t use the money for the salon because the hair stylists who work there are independent contractors, not employees.
While the loan program allowed employees to get paid, Graham said it did little to alleviate the stress of business owners. Businesses were required to use 60% of the money for payroll before covering other expenses in order to be eligible for loan forgiveness.
Graham said she stands by her decision to open against state rules and to apply for the federal loan. She contends that she didn’t break the law, saying that law enforcement would have charged her with a misdemeanor if Brown’s orders were really being enforced as law. Graham filed a lawsuit in December challenging Brown’s authority to shut down private businesses.
“If saving lives was the agenda then Walmart should have closed,” Graham said. “Everyone should have locked down with no exceptions, including liquor stores and weed stores.”
Oregon, like other states, has tried to strike an uneasy balance of public safety and economic health. But the science around how the coronavirus spreads is in its infancy and the governor and other public health officials have struggled at times to explain why some businesses must close while others remain open, and why the ground rules frequently shift.
The regulations in place now are significantly more relaxed than what Oregon adopted last spring. But many businesses continue to chafe at restrictions that currently prohibit indoor dining in most of the state, for example, and limit the number of clients inside a gym to just six.
Oregon OSHA had received nearly 19,000 complaints related to COVID-19 workplace violations but had issued just 73 citations to businesses for violating coronavirus safety requirements as of Jan. 14. The state generally reserves formal citations and fines for situations where employers commit willful or egregious violations of coronavirus public health rules.
The agency issued a $8,900 fine to Casey’s Restaurant in Klamath Falls in December for potentially exposing employees to COVID-19 by continuing to allow on-premise dining.
The family-owned restaurant, which accepted nearly $80,000 in federal money, defended its actions in a video posted earlier this month by the Freedom Foundation, a conservative think tank. The foundation announced Thursday that it will run commercials defending the restaurant’s decision to fight against the “death sentence” it has been issued by state regulations.
“I’ve had a feeling that we need to fight for our freedom,” said co-owner Annie Patzke in the video. She did not respond to an email seeking comment on the federal loans.
Employees and customers have continued to express concerns about businesses that have flouted coronavirus safety rules.
Casey’s Restaurant in Roseburg, which is not related to the restaurant in Klamath Falls, accepted a $123,600 federal loan to keep 23 employees on payroll, but then allegedly remained open for on-premise dining last spring in violation of state regulations. The restaurant continued to remain open after Oregon OSHA issued a Red Warning Notice, which requires that businesses cease all actions that violate public safety rules.
Oregon OSHA levied a $13,900 fine against the restaurant last May. It then issued another $280 fine to the restaurant in November for allegedly failing to require employees to wear face coverings and not mandating physical distancing.
But the agency continued to receive complaints about the restaurant in December. One complaint contended that the restaurant had replaced workers with volunteers so it would fall outside of Oregon OSHA jurisdiction and was boasting that it remained open.
The restaurant declined to comment. Brown allowed restaurants in Douglas County, where the restaurant is located, to open for limited indoor dining on Jan. 1.
Charlie Fisher is Oregon state director of OSPIRG, which promotes consumer protections, environmental standards and public health measures. He said he understands why the federal government prioritized getting loans into the hands of businesses quickly during the heart of the pandemic last year instead of requiring stringent vetting.
But with the Paycheck Protection Program open for another round of loans, Fisher said the federal government should be putting a greater emphasis on ensuring that the money isn’t going to businesses that are undermining public safety.
“The government is providing these loans to businesses so they can either stay closed or operate in a manner that is safe,” Fisher said. “By ignoring the rules, they are in a lot of ways prolonging the pandemic for everyone.”
— Jamie Goldberg | firstname.lastname@example.org | @jamiebgoldberg
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