Recently, President Donald Trump stated that the White House is considering invoking the Defense Production Act in order to combat the spread of COVID-19. If the President invokes those powers, it would represent an extraordinary measure allowing the federal government to directly control private sector businesses.
The Defense Production Act, 50 U.S.C. §4501 supra, (hereinafter “the Act”) was passed in 1950 to aid the Korean War Effort. The Act authorizes the President to require businesses to sign contracts (§4511), or to fulfill orders deemed necessary for national defense (§4517). To effectuate production, the Act authorizes the President to provide loans to private businesses to reduce any projected shortfall of critical technology items, or other products critical to national defense. Also, under the Act, the President is authorized to criminalize the hoarding of scarce materials which threatens the national supply. (§4512).
During the Korean War, President Harry Truman utilized the Act to mobilize heavy industry to produce war materiel, as well as to place strict controls on wages and prices. Since the Korean War, the United States Department of Defense has primarily used the Act to provide seed money to companies and researchers in the private sector to develop new technologies, particularly in the areas of chemistry, computer science and ceramics.
Under the current crisis caused by Covid-19, as President Trump has referenced, the Act may be used to increase the supply of needed medical equipment, food production, and to produce other materials deemed necessary to protect the national interest. Industries effected may be manufacturing, food service, liquor distillers and breweries, and hotel/hospitality corporations among others. Any industry affected may have to comply with additional regulations for work performed under the Act, including new wage and hour rules.
If you are contacted by a governmental representative regarding a contract or restriction under the Act, or if you have any questions regarding this legal briefing, please contact any attorney in our Corporate or Litigation Departments at (585) 730-4773.
This Legal Briefing is intended for general informational and educational purposes only and should not be considered legal advice or counsel. The substance of this Legal Briefing is not intended to cover all legal issues or developments regarding the matter. Please consult with an attorney to ascertain how these new developments may relate to you or your business. © 2020 Law Offices of Pullano & Farrow PLLC