At some point, the biggest American companies are going to tell their employees it’s time to leave home and return to work.
That decision will be fraught with risk without widespread testing for the COVID-19 virus. For some industries, such as Wall Street banks, ubiquitous testing is essential to bringing back their workforce to offices around the globe. For other industries, such as automakers, plans are already being made to open factories in a few weeks, with Fiat Chrysler and Tesla both saying they expect to begin production again on May 4.
Other industries, especially retail, are looking to China for guidance. China’s economy has been slowly coming back online in recent weeks as the government lifts lockdown orders. As people begin shopping there again, retailers like Levi Strauss said they’ll be looking at consumer habits and adapt accordingly once stores open in the U.S. Other retailers are expecting an acceleration of the shift to online shopping as people are forced to order goods online during the lockdown. That’s bad news for malls and other brick-and-mortar stores that will have to adapt to lower foot traffic.
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How the U.S. will go from widespread quarantine to some semblance of normal is still a giant unknown. But returning to work will almost certainly happen in waves, driven by consumer demand and employer desperation, said Erik Gordon, a professor at the University of Michigan’s Ross School of Business.
“For some things demand will snap back immediately,” said Gordon. “Those jobs — dentists, health care, barber shops — there’s a backlog of demand. Then there’s a similar category, like restaurants and bars, where people may be cooped up for so long that they’re desperate to go out to eat or get a drink. For other industries, the same urgency may not exist. It’s going to take a while for people to start buying new cars and new homes. And for some industries, like retail and airlines, things may never get back to normal.”
Employers’ back-to-work plans will also depend on geography, according to Peter Cappelli, a professor of management and director of The Wharton School’s Center of Human Resources at the University of Pennsylvania. Employers in rural areas and suburbs that saw fewer confirmed cases of coronavirus and resulting deaths will have an easier time convincing workers it’s safe to return to the office than cities such as New York and New Orleans, he said.
The close quarters of city offices may add another barrier to urban employers whose workspaces are not built for social distancing.
“If you drum it into everybody’s heads that they should be six feet away from each other and then you go back to an office and you’re in the cubicles or an open office plan, in particular, that will be creepy for people,” he said.
Any return to work effort will be a gradual process rather than setting a national “go back to the office” day, said Gordon. Still, many companies are already in a hurry to get employees back to work, Cappelli said. Corporate eagerness has only grown as companies see employees’ productivity dropping and their businesses “bleeding money like crazy.”
“When the restrictions are lifted, if the states ever say ‘the quarantine is over,’ I don’t think we’re going to have a big problem with people sitting on their hands,” Cappelli said. “We weren’t set up to do distance working. In most places, we just sent people home and hoped for the best.”
Several obvious hurdles
One major limitation on any reopening will be child care. Parents can’t go back to work if schools and day cares aren’t open. Many educational facilities have already proactively cancelled through the month of April, if not longer. With all schools making independent decisions on reopening, it’s nearly impossible to have a coordinated effort in the near term that’s not on a case-by-case, employee-by-employee basis.
Another is simply having enough knowledge about the spread of the disease, which comes down to testing as many people as possible.
“We have to start planning, restarting life,” New York Gov. Andrew Cuomo said this week at a news conference. “We’re not there yet, but this is not a light switch that we can just flick one day and everything goes back to normal. We’re going to have to restart that economy. We’re going to have to restart a lot of systems that we shut down abruptly and we need to start to plan for that. My personal opinion: It’s going to come down to how good we are with testing.”
Several state governors talked Tuesday with Scott Gottlieb, the former head of the Food and Drug Administration, about plans to get people back to work, The Wall Street Journal reported earlier this week.
“I’m worried we don’t have the systems in place to carefully reopen the economy,” Gottlieb told the Journal. “You need to be able to identify people who are sick and have the tools to enforce their isolation and [tracing of people they contact]. You have to have it at a scale we’ve never done before. We need leadership.”
Former Wells Fargo CEO Dick Kovacevich told CNBC employees should start returning after cities “bend the curve” on new cases. Kovacevich said when there’s evidence new cases are going down rather than up, sick people should stay quarantined while people who have recovered from the virus and others under 55 should go back to work if they’re comfortable with it. Social distancing in restaurants and in the workplace should continue, he said, but the country should “see what kind of response we get” and assess the results.
But simply getting beyond the peak of cases shouldn’t be enough to get people back to work, said Gordon. Rather, new cases will have to drop to nearly zero for the public to be comfortable returning to work and begin patronizing bars and restaurants, said Gordon.
Legally OK, reputationally questionable
The tension between getting up and running as soon as possible versus taking chances with the health of employees is both a moral and a legal quandry. Employers have a relatively low legal risk, but a high reputational one, if they rush people back to the office, said Jonathan Segal, an employment attorney at law firm Duane Morris who specializes in human resources and minimizing companies’ legal and business risks.
Employers have a duty under the Occupational Safety and Health Act to make sure they provide a safe workplace. But it will be hard for an employee, client or customer to prove they were exposed to COVID-19 at the workplace, rather than the dry cleaner or grocery store, Segal said.
In addition to certain industries reopening before others, companies will also likely introduce employees slowly back to the workplace, rather than bringing everyone back at once, Segal said. A gradual return would help maintain social distancing in early days and would also give companies time to require employees to fill out health assessments or get tested, he said. The U.S. Equal Employment Opportunity Commission issued guidance in mid-March, saying it’s legal for companies to ask employees if they have symptoms of COVID-19, such as a cough or shortness of breath, and take their temperature.
Companies that have been able to sustain with employees working from home may want to extend those policies until workers are comfortable coming back on their own, Segal said.
“In the absence of an all-clear, employees may say, ‘I don’t want to come back to work and if I do, I want that to be the exception not the rule. I want to come in on Wednesday and sign what I need to sign and pick things up. I want to come in at 4 in the morning,’” Segal said.
CNBC spoke to executives and experts in a variety of industries to get a more specific read on return-to-work policies.
Here’s a snapshot of what they’ve said:
Airline industry executives are among the most pessimistic about returning to normal anytime soon, saying the current crisis is worse than what they experienced after 9/11. Airlines have reduced service by 60% or more, canceling international routes and cutting almost all service in and out of New York. Airlines have also put hundreds of planes in storage because demand remains largely absent. About 40% of the world’s fleet of the world’s fleet of jetliners were in use as of Tuesday, according to aviation-research firm Cirium.
Business trips have ground to a halt because of the virus, bad news for hotels and airlines that thrive on frequent travelers whose last-minute and flexible rates often carry a premium. Ninety-eight percent of companies have canceled international business travel and 92% have done the same for all or most domestic trips, according to a survey by Global Business Travel Association (GBTA) that was released Wednesday.
“No one is going to give the all clear unless it’s safe from a virus perspective,” said Scott Solombrino, COO and executive director of GBTA.
U.S. air carriers are applying for $25 billion in grants that Congress approved last month as part of its $2 trillion coronavirus relief package, but executives are warning employees they still face trouble and prolonged weak demand because of the pandemic and economic trouble. “I wish I could predict this would end soon, but the reality is we simply don’t know how long it will take before the virus is contained and customers are ready to fly again,” Delta’s CEO Ed Bastian told employees in a memo last week.
United Airlines CEO Oscar Munoz and president Scott Kirby, who takes over in May, outlined their concerns for employees last month, saying “based on how doctors expect the virus to spread and how economists expect the global economy to react, we expect demand to remain suppressed for months after that, possibly into next year. We will continue to plan for the worst and hope for a faster recovery, but no matter what happens, taking care of each of our people will remain our number one priority. That means being honest, fair and upfront with you: if the recovery is as slow as we fear, it means our airline and our workforce will have to be smaller than it is today,” they wrote.
Even when quarantines largely end, a general economic downturn will cause consumers and businesses to seek less expensive options than flying, said Gordon. Months of Zoom conference calls may convince many large businesses that corporate travel is simply unnecessary, leading to sharp declines among airline’s highest margin customers.
“You’ve got companies sending armies of people from point to point when we have teleconferencing and when most of what we’re looking at is in easy-to-share digital form,” Gordon said. “The airline industry won’t snap back to anything like what it was — maybe ever.”
Automakers could look to China for answers on how to safely restart business activity in the U.S. While demand for cars won’t bounce back quickly, unlike in other industries, factory workers have a clear outline on what it would take to return to production. Carmakers and suppliers in China have implemented protocols to ensure working conditions were safe to return to for employees. Aside from extensively cleaning and sanitizing work areas, there are new processes to keep workers more separated, including when entering and exiting plants and offices.
Other initiatives include all employees continuing to wear masks, limiting in-person meetings and even taking employee temperatures when entering facilities.
Fiat Chrysler said Wednesday the company has implemented such protocols to “gradually and safely return” to work in China for white-collar and blue-collar employees. The Italian-American automaker said earlier this week it plans to begin restarting its U.S. and Canadian plants on May 4 with additional protocols such as redesigning work stations to maintain proper social distancing and expanding cleaning protocols at all of its locations.
“As a result of these actions, we will only restart operations with safe, secure and sanitized workplaces to protect all of our employees,” the company said in an emailed statement, citing officials have been working with government officials and unions on the procedures.
Tesla head of North American human resources Valerie Workman wrote an email to workers Tuesday indicating that the carmaker also intended to resume production of electric cars at its Fremont, California car plant on May 4, CNBC reported Tuesday.
Detroit Mayor Mike Duggan said Tuesday that expectations are for the Motor City, a growing hot spot of COVID-19, to “lead the country in strategies in reopening businesses.”
“We have a team working on return to work,” he said, citing a grant program for small businesses in the city and a program that allows the city to buy meals from local restaurants to support them and give them to Detroit police, fire, EMS, and healthcare workers.
Banks and financial services
Unlike many industries, investment banks and other financial services have been able to transition to an at-home working environment fairly smoothly. Nearly all Goldman Sachs employees were working from home in about two weeks, according to a person familiar with the matter.
Investment banks and many other large American corporations will likely take their leads from health authorities, such as the Centers for Disease Control and Prevention. Since tests will likely be given first to anyone in close contact with sick patients, such as health workers, it may take months for rank-and-file Americans to get tested. Goldman is in talks to purchase infrared body scanners to screen people coming into buildings who are obviously sick. Temperature scanners are one method to test for fevers and illness and should also help with the psychological barrier of workers’ feeling safe at he office.
JPMorgan Chase CEO Jamie Dimon wrote in a letter to shareholders on Monday that returning to work can be expedited if tests are made widely available that can determine if people have recovered and are now relatively immune from COVID-19.
“Initially, we need a buffer period of days or weeks for people to be tested, and then for those who test negative for the virus, we need to discover whether virus antibodies appear through serology testing,” Dimon said.
Retailers brace for change in shopping habits
The retail industry is going through a seismic shift, with the coronavirus accelerating many trends that were already taking place before the crisis, albeit at a slower rate up until now.
Shoppers’ habits are being reshaped, as they have more recently pivoted to stocking up on essentials. Stores selling apparel and other discretionary items have been temporarily shut, with hundreds of thousands of retail workers being furloughed.
When, and in some cases if, those brick-and-mortar stores reopen again, they’ll be staffed differently to adapt to changing consumer habits. Consumers are now becoming more comfortable than ever shopping online, when it is the only choice they have.
Thousands of stores across the country, including Gap, Macy’s, Apple and Nike, have been temporarily closed. The biggest mall owner in the U.S., Simon Property Group, has shut all of its malls and outlet centers for the foreseeable future, furloughing 30% of its staff. Lululemon CEO Calvin McDonald said he believes retail shops will be closed because of the pandemic for longer in the U.S. than they were in China, where COVID-19 originated. In China, the majority of Lululemon’s stores were only closed for two weeks before they began reopening, with shoppers returning more slowly, the CEO told CNBC earlier this month.
“In the U.S. and Canada, we are going to be closed for a much longer period of time. That will create a much more pent-up demand,” McDonald said.
In the interim period, however, more people are going to be shopping online, and those habits are going to stick, McDonald said, calling this the “new reality of retail.”
Levi Strauss CEO Chip Bergh told CNBC earlier this week that the denim maker is in the midst of trying to learn from China, where shoppers are returning to stores, what merchandise people are looking for. This will guide the company in its production and marketing decisions.
“We are really trying to learn from the reopening of stores in China,” he said. “What are [shoppers] concerned about when they come back to stores? What are they looking for?”
Nike has also said it is using China as a “playbook.”
Stalled by the coronavirus, another mall owner in the U.S. has already rewritten the blueprint for its American Dream project, still in the works, in New Jersey. Prior to the coronavirus pandemic hitting the U.S., American Dream was slated to be a mix of 55% entertainment-related tenants and 45% retailers, when it was completely finished. Now, the project will be roughly 70% entertainment and 30% retail, developer Triple Five Group told CNBC.
“There is no doubt that when this is over, there will be retailers that were just making it along ... trying to survive. Those retailers that were on the bubble — I fully expect a number of those retailers to be gone,” said Don Ghermezian, co-CEO of American Dream. “They cannot handle having no income coming in,” he said.
“And some of them are furloughing. It is a very difficult time. I fully expect there will be records set for retailers’ closing [in 2020]. This virus has exacerbated that situation. A lot of retailers aren’t going to reopen.”