Corporate Suicide

We’ve seen how the pandemic has taken its toll on small businesses throughout the country, particularly in the service and hospitality industries. In the face of continuing staffing shortages, they are trying their best to recover by adjusting their hours of operation and/or modifying their product and service offerings. They are intelligently adapting their operations both to please their customers and stay in business.

By contrast, some large companies in those same industries appear to be committing business suicide right now over vaccine mandates. Take the airlines. A few of these companies, Southwest and American in particular, who not long ago were keenly competitive and hyper concerned about minute details of their service to gain the slightest edge, have abandoned the most basic of business principles. They wrought havoc with their operations and their customers in a reckless haste to impose a vaccine mandate on their workforce. They did this without any federal rule in effect compelling them to do so and at a time when COVID cases in the US were clearly trending downward (CDC COVID data tracker). Why? Part of the problem can be blamed on COVID-19, but certainly not all of it.

First, let’s clarify the issue of federal vaccine mandates. The most talked about mandate from the Biden Administration – requiring all businesses with more than 100 employees to be fully vaccinated – didn’t formally exist until yesterday (11/4/2021). Nearly two months after President Biden announced he was asking the Occupational Safety and Health Administration (OSHA) to institute this rule, it is still not legally in effect and won’t be until next year (1/4/2022). Up to now, only the threat of it being in place has existed. Biden did sign two Executive Orders mandating all federal employees be fully vaccinated as well as any contractors that do business with the federal government. However, the order pertaining to federal contractors also does not go into effect until January 4^th and it applies only to those company employees working under “covered federal contracts”. It does not apply to every employee of that company.¹ The order also gives broad flexibility to those companies with federal contracts in determining how they would enforce this mandate. For example, it is up to those companies, not the government, to adjudicate exemption requests from their employees who are working on federal contracts. Both Southwest and American airlines do have some federal contracts and thus would be subject to this executive order for some of their employees when and if the rule goes into effect.

Given the above facts, some large businesses have decided not to institute company-wide vaccine mandates until they are legally bound to do so (which they are not at this moment). However, others have decided to enact company-wide vaccine mandates before any of the Biden federal mandates go into effect. Their reasons include wanting to be prepared for whenever a federal mandate does go into effect, a belief that their customers want everyone in the company vaccinated so they are “safe” to interact with, or simply because their competitors are doing it.²

There are, of course, downsides to imposing a vaccine mandate within a company. Management and employee relationships become strained as religious and moral objections come to the fore. Some employees will justifiably argue that their freedom to choose what goes into their body is being violated (this is even true for some of those who have gotten the vaccine). Some don’t want to get vaccinated for personal reasons. All these things change the mood and tenor of the workplace and give it an atmosphere of confrontation and job uncertainty. Employee morale drops like a stone.

Up to now (and at least until January 4^th) it has been a voluntary choice by any private business to go ahead with a company-wide vaccine mandate. No authority or law has forced them to do so. Many of their workers have resigned, been fired, or gone on extended leave as a result. The damage has already been done. Was that corporate decision in the best business interest and really worth it?

For an answer, we need look no further than what happened to Southwest on the weekend of October 11^th and what happened to American airlines last weekend. Both airlines announced company-wide vaccine mandates in early October. Each company consciously chose to prioritize the enforcement of this mandate over the delivery of their product/service. They knew as a result they would suffer staffing shortages from employee protests and/or resignations that couldn’t be immediately filled. They went ahead and did it anyway. Both airlines suffered thousands of flight cancelations and delays in the weeks following their announcements.

Did both these companies believe that most of their customers would prefer they enforce a vaccine mandate now rather than wait for the government stated deadline (1/4/2022)? If so, they must have concluded that any and all service delays caused by this decision would be preferable to the negative customer response of not enforcing their own vaccine mandate. Did they believe that without the mandate, many of their passengers would fear getting COVID-19 from an American or Southwest company employee? And that this fear would be greater than the risk of getting COVID-19 from another passenger sitting right next to them? Or did they think that if they didn’t enforce a mandate, their customers would see it as “flaunting the law” (even though there was no actual law in effect at the time) and would therefore seek out another legally “pure” airline?

To make matters worse, each of these companies fecklessly compounded their problems by trying to put the blame on the weather for the service disaster that unfolded. Even if bad weather did contribute in some way to the massive number of flight cancellations and delays on those two October weekends, it is plainly obvious to everyone that weather wasn’t the root of the problem. For one thing, why didn’t the weather equally affect all the other airlines? Is the infamous Charlie Brown rain cloud only stalking Southwest and American? With an obvious case of staffing shortages because employees are being forced to get a vaccine or be fired, publicly stating that the weather is the dominant cause of the problem is just plain stupid – even if it’s party true. Talk about killing the trust between a business and its customers!

Of course, it’s always difficult to know in hindsight how things might have gone differently had Southwest and American not imposed vaccine mandates. But it’s also hard to imagine anything turning out worse than what actually happened. Both Southwest and American now appear to realize this as they have each dramatically changed their stance on their self-imposed mandates in recent days. Southwest is now strongly encouraging their unvaccinated employees to apply for an exemption (hinting those exemption requests will be liberally approved). And American has now delayed implementation of their mandate until January 4^th (hinting they may want to see what happens in the courts with the federal vaccine mandate before enforcing their own).

What we can’t understand is why these well-established companies abandoned their finely tweaked business decision logic and instead just dove off a cliff and went “all in” with vaccine mandates. Their workers all but told them what would happen. It makes no sense from the points of view of employee relations, company profit, or customer satisfaction. These companies have shown they know how to survive and run their business at a high level of efficiency to keep up with their competitors. So why did they ignore all those years of hard-earned knowledge and business experience during the last month? At the very least, if they truly felt the federal government was backing them into a corner that was going to destroy their business, why haven’t they pursued legal action against the government to try and save themselves?³ Their choice instead looks very much like business suicide.

Now that OSHA has finally released their formal vaccine mandate rule, it can be challenged in court. Nineteen states have already filed suit to block the mandates for both federal contractors and private businesses. Each of these has an excellent chance of prevailing in court prior to the new OSHA enforcement date of January 4^th. If the OSHA rule does get overturned in the next few weeks⁴, all the pain these companies put themselves through will have been entirely for naught.

¹ The text of the executive order on this point is as follows: “This order promotes economy and efficiency in Federal procurement by ensuring that the parties that contract with the Federal Government provide adequate COVID-19 safeguards to their workers performing on or in connection with a Federal Government contract or contract-like instrument as described in section 5(a) of this order”.

² Some of these companies may also be attempting to burnish their “woke” credentials by trying to appear as “proactively” combating the spread of COVID with their own self-imposed vaccine mandates. We’d love to see the concrete business logic behind this kind of decision.

³ Some companies, Southwest and American airlines among them, are based in states that have laws prohibiting the enforcement of vaccine mandates. This is another untested avenue of legal action these particular companies could pursue to help themselves. Thus far, they have not done so.

⁴ One of the key points about the OSHA mandate rule that will be difficult for OSHA to defend in court is the “emergency” context under which they derive the authority to implement such a rule. Here is the exact text of the OSHA act that applies in this case:

The Secretary shall provide, without regard to the requirements of chapter 5, title 5, Unites States Code, for an emergency temporary standard to take immediate effect upon publication in the Federal Register if he determines –

(A)

that employees are exposed to grave danger from exposure to substances or agents determined to be toxic or physically harmful or from new hazards, and

(B)

that such emergency standard is necessary to protect employees from such danger.

How does a rule that will take 4 months to take effect comport with a “grave danger”?