Rogue Businesses Go Underground to Dodge Virus-Era Restrictions

(Bloomberg) -- With customers panicking over unkempt pets, Norm Candalore couldn’t stand to stay shut a day longer. He was inside his suburban Pittsburgh pet-grooming salon one April evening when an elderly woman pulled up, distressed at having clipped her collie’s nails too short and causing them to bleed.

“When this lady left, I looked at my daughter and I said, ‘We’re opening up,’” Candalore said. “I called all the local police departments and told them what we were doing.”

With that, he joined a cohort of small businesses gone rogue, operating in defiance, or ignorance, of state and local shut-down orders. The phenomenon is largely anecdotal, but evidence points to a growing number of such businesses making secret house calls across the U.S. or opening their shops to the public and waiting for authorities to shut them down.

Most states have begun reopening at least parts of their economies in recent weeks. Georgia was the first shuttered state to reopen, allowing nail salons, hairdressers, fitness centers and bowling alleys to restart on April 24. Much of the South and the U.S. heartland soon followed.

Rogue Businesses Go Underground to Dodge Virus-Era Restrictions

However, harder hit states are taking a more conservative approach. Michigan has extended its broad stay-at-home order until May 28, giving an exception for manufacturing workers. New York allowed for some curbside retail as well as construction and manufacturing to resume Friday in five regions, excluding New York City.

The piecemeal approach is infuriating some business people. Thomas DeVore, a lawyer in southwest Illinois, is representing pubs that reopened in rural areas despite the state’s shut-down order. He’s seen his list of clients eager to challenge Governor J.B. Pritzker grow to around 100. It’s expected that many Illinois retailers, barber shops, offices and manufacturers could reopen May 29 based on the state’s multi-phase plan.

“You can go into the big-box stores and buy flowers, but you can’t go into your local florist to buy flowers?” DeVore said.

Several businesses have reopened in high-profile fashion lately, sometimes rallying conservative politicians when shut down by authorities. But most businesses opening against the rules are doing it quietly, often by making house calls or by seeing customers by appointment. Candalore shut down in March after Pennsylvania Governor Tom Wolf closed all nonessential businesses, even as Candalore’s phones “blew up” with desperate customers.

“I had 798 messages,” he said. “I can prove it to you.”

He never completely closed.

“I’m probably going to tell you too much, but sometimes we’d sneak in the back door to help a customer out,” Candalore said. “People would park around back. Was it an open business? No. Was it a situation where we were advertising? No. But we never stopped helping people out, and we never will.”

Rogue Businesses Go Underground to Dodge Virus-Era Restrictions

In Washington, D.C., barber Antonio Botticella has been making house calls since before the pandemic. While his rate will drop for multiple customers at a single location, a solo trim runs $180.

Botticella sterilizes his tools after each use, wears a mask and gloves and has a coverall suit for each client, he said. “There is zero skin contact,” Botticella said.

The barber said he’s no scofflaw. He read through the city’s rules and didn’t see anything prohibiting mobile barbers, he said.

However, Washington’s order closing nonessential business applies to hair, nail and tanning salons and barbershops, and it would prohibit house calls, said LaToya Foster, a spokeswoman for Mayor Muriel Bowser.

Businesses operating against the rules are the tip of what economists call the “shadow economy,” an informal system of providing goods and services. It relies largely on cash, and the amount of paper currency and coins in circulation outside bank and government vaults has increased 5.1% since lockdowns began, according to the Federal Reserve. As of May 4, it passed $1.8 trillion, a record.

Ordinarily, the shadow economy represents 8% to 10% of U.S. economic output. But the pandemic could push more people underground, said James Saunoris, an Eastern Michigan University economics professor.

For now, many governments appear to be taking a relaxed approach to enforcement. The Pennsylvania State Police issued 329 warnings as of May 11 and only one citation — to an Amish roofing contractor conducting training meetings without personal protective equipment. That citation came after two warnings.

In California, the Board of Barbering and Cosmetology is looking into 651 complaints of salons remaining open in defiance of state rules that also ban home visits, said spokeswoman Cheri Gyuro. California hasn’t yet taken any enforcement actions.

Rogue Businesses Go Underground to Dodge Virus-Era Restrictions

DeVore, the attorney in Greenville, Illinois, about an hour from St. Louis, argues that power to close businesses resides only with local health departments, and some haven’t acted.

He’s made headlines for suing the governor on behalf of the owner of two rural bars, Poopy’s Pub & Grub and Dookie’s Pub & Grub. Poopy’s, a biker bar in tiny Savanna, reopened briefly this month before receiving a cease-and-desist letter from the state and limiting operations to curbside service.

His clients “can’t wait until the end of May or the end of June,” DeVore said. “These people are saying, ‘You know, Tom, I’m going to be on welfare if I have to wait that long.’ ”

At a mid-May press conference, Governor Pritzker said executive orders “set the ground rules” under a disaster proclamation. “There’s a reason why those exist in the law,” he said.

In inland Maine, brewery co-owner Rick Savage is taking a stand against Governor Janet Mills’ order closing nonessential businesses.

Savage had already closed Sunday River Brewing Co. for six weeks when, on May 1, the governor allowed some businesses to restart, but not restaurants. Dismayed, he reopened his restaurant and brewery on that day and drew a crowd of 150, according to a local news report.

That set off a tussle between Savage and the state, with Maine authorities revoking his liquor and health licenses. Savage reopened soon after, citing a federal license to brew. For now, he acknowledges, he’s not authorized to host customers for dine-in service, but he’s doing so nonetheless, Savage said Friday.

Walmart and Target remain open, he said. “We’re doing the same spacing they are, and maybe more.”

©2020 Bloomberg L.P.

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