How a typical employer in rental and leasing operates
A rental and leasing employer sells time on an asset it owns to a customer who has something to do with it: a job to build, a trip to take, an event to hold or a household to furnish. Every one of its revenue functions therefore depends on an activity the customer performs somewhere else, under someone else's roof, on a date the customer chooses, and every one of those activities was the object of a governmental order in 2020 and 2021. The construction site was shut or conditioned by order; the traveler was confined, quarantined or barred at the border by order; the wedding, the festival and the convention were prohibited or capped by order; the showroom was closed to the public by order; the motor-vehicle office through which the fleet is titled and sold was closed by order; and the branch itself, its yard, its counter and its crews, operated under the workplace infection-prevention and exposure-control orders (screening, distancing, face coverings, written prevention plans and the exclusion of exposed workers) and the quarantine orders that fixed how it could function. This section describes the industry by function so that the layers, quarters and functions sections can state, for each function and each quarter, which order reached it and how.
The industry and its groups
The rental and leasing industry (NAICS 532) comprises four groups. Automotive equipment rental and leasing (NAICS 5321) rents passenger cars at airport counters and neighborhood branches and rents trucks, utility trailers and recreational vehicles. Consumer goods rental (NAICS 5322) writes rent-to-own agreements for electronics, appliances and furniture, rents formalwear and costumes, rents home health equipment, rents recreational goods and rents party and banquet equipment and supplies. General rental centers (NAICS 5323) rent tools, equipment and party goods from a single counter to contractors and households alike. Commercial and industrial machinery and equipment rental (NAICS 5324) rents construction, mining and forestry machinery and other commercial equipment, including office machinery and event staging and audio-visual equipment.1 In 2019 the industry counted 55,243 establishments and 579,043 employees; the average establishment employed about ten and a half people, and the workforce was built of counter and rental clerks, drivers and delivery crews (commercial drivers for the truck classes), yard and shop mechanics and washers, event set-up crews, outside sales representatives, branch managers and back-office staff.2 The employer this analysis describes is that typical establishment and the multi-branch operators built from it.
EQ, construction and industrial equipment rental
The equipment renter rents aerial lifts, earthmoving equipment, compaction equipment, generators, pumps, light towers and tools to contractors, industrial plants, utilities and governments by the day, week and month, and charges for delivery and pickup, damage waivers, fuel, re-rented equipment, parts and merchandise, and sells used rental equipment out of the fleet.3 Equipment rental accounted for about eighty-five percent of the revenue of the largest public lessor in the second quarter of 2020, and construction for roughly half of that rental revenue.4 The rented machine earns nothing at the yard; it earns on the customer's job site, and it is delivered there by the renter's own trucks and drivers, serviced there by the renter's field mechanics and picked up when the job is done. The function therefore has three places an order can reach it: the customer's job site, which a construction shutdown closes and a job-site standard conditions; the road between yard and site, which a stay-at-home order confines to essential travel and a job-site protocol governs at the gate; and the yard itself, which a workplace standard, an indoor face-covering and exposure-control order and a quarantine order govern. An order that stops the job stops the rental where the machine stands; an order that limits the crew, the hours or the visitors on the site limits the deliveries, the service calls and the utilization the rental depends on.
CR, car and truck rental
The vehicle renter operates in three modes. At airports it rents from counters and consolidated rental car facilities under operating agreements with the airport authority that fix a percentage fee and a minimum annual guarantee and that govern its shuttles, its access roads and its space in the terminal; its customers arrive on scheduled flights and are, in large part, travelers from other States and other countries.5 At neighborhood branches it rents to the insurance-replacement customer whose vehicle is in a body shop, to the local business and to the household. In its truck classes it rents one-way and local moving trucks and commercial trucks and trailers. Its revenue is transaction days multiplied by revenue per day, and its economics turn on fleet utilization: a fleet bought from manufacturers and their dealers on a schedule set months ahead, registered and plated through the State motor-vehicle agency, and sold at auction and to dealers when its rental life ends, each disposal requiring a title transaction at the same agency.6 The function is reached by every order on the traveler (a stay-at-home order confining travel to essential purposes, an arrival quarantine, an entry proclamation, a land-border prohibition), by every order on the airport (the face-covering order on the transportation hub, an airborne-transmission control enforced by the airport operator under federal directive, and an airport authority's rules), by every order that fixed the airline network the traveler flies on, by the order that closed the motor-vehicle office through which the fleet is registered and sold, and by every order on the branch as a workplace.
PR, party, tent and event rental
The event renter rents tents, tables, chairs, linens, china, glassware, staging, dance floors, lighting, heaters and inflatables for weddings, corporate and association events, festivals, fairs, graduations, worship services and school events, and it delivers, installs and strikes what it rents with its own crews and trucks. It also tents restaurants, testing sites and outdoor classrooms when orders push activity outdoors. Its season runs from May through October with graduation, festival and holiday peaks, and its book is built months in advance: a wedding tented in June was reserved in the preceding autumn, and a gathering ban issued in March cancels a season.7 The function is reached directly by every order limiting group meetings: a prohibition of gatherings above ten, or of any size, is an order on the event the tent serves; a cap of fifty on a reception is an order on the number of chairs; a face-covering or vaccination-proof condition on an indoor venue, the airborne-transmission controls the 2021 orders attached to every indoor gathering, is an order on every event held there; a convention center closed or converted to a field hospital is a venue removed from the market; a fire marshal's or building department's suspension of tent permits is an order on the installation itself.
CN, consumer rental
The consumer-rental employer writes rent-to-own agreements for furniture, appliances and electronics in its showrooms and through retail partners' stores, rents formalwear for proms and weddings, rents home health equipment to patients discharged from hospitals and to home-health agencies, and rents recreational goods (bicycles, boats, skis) to visitors and residents.8 Its showroom is a retail store, and it was treated as one by every order that closed non-essential retail to the public, confined it to curbside or delivery, capped its occupancy, required appointments or attached masked-entry and exposure-control conditions to its floor. Its formalwear line follows the prom and wedding calendar the gathering orders cancelled; its home-health line follows the elective-procedure suspensions and hospital discharge patterns of 2020; its recreational line follows the traveler and the closed park, beach and marina.
YD, yards, counters, showrooms and delivery
The yard and the counter are where every contract in the industry is written and every asset is dispatched, cleaned, inspected and returned. The counter is a walk-in retail space; the yard is a workplace with mechanics, washers and drivers; the delivery fleet moves the asset to the customer and back. Every workplace infection-prevention and exposure-control order reached the yard: distancing, screening, face coverings, written prevention plans, exclusion of exposed employees, occupancy limits at the counter and appointment-only service. Every order that closed the motor-vehicle office reached the yard's registration, plating and title work for the fleet, and every order that closed the recorder or the notary reached its lien and disposal paperwork.
SC, fleet and inventory supply
The industry buys what it rents. Vehicle fleets come from the original equipment manufacturers and their dealers on annual purchase programs; equipment fleets come from equipment manufacturers and dealers; tents, linens, china and staging come from manufacturers and importers; parts come from distributors. Disposal runs through auctions and dealers. The supply function was reached by the orders that idled the manufacturers' plants in the spring of 2020, by the entry proclamations and land-border notices that governed imported equipment and parts, by the motor-vehicle closures that stopped plating and title transfers, and by the semiconductor shortage that the federal government itself traced to the pandemic's plant shutdowns and that constrained fleet acquisition through 2021.9
MK, marketing, shows and events
The industry sells at trade shows, contractor events, bridal shows, association meetings and open houses, and the event renter sells at the venues it serves. Every gathering cap, convention prohibition and venue closure reached the function directly.
HR, hiring, licensing and testing
The industry hires commercial drivers who must hold and renew commercial driver licenses through the State motor-vehicle agency, hires counter staff and crews whose onboarding requires in-person paperwork and, for many positions, drug testing at collection sites, and depends on the motor-vehicle office for the credentials its truck-rental customers must present. The closure of motor-vehicle offices, the suspension of skills tests and the extension of expiring credentials by order reached the function in every State.
OP, office and administration
Reservations, dispatch, billing, collections, fleet administration and accounting are office functions, and they operated under the telework mandates, office-capacity caps and workplace standards of the States that issued them.
WF, workforce availability
The industry's workforce is hourly, largely in place, and cannot wash a car, deliver an excavator or erect a tent from home. Its availability was fixed by the school and child-care closure orders of 2020 and the face-covering and quarantine orders of the 2021-22 school year, by the paid-leave mandate that ran from April 1 through December 31, 2020, by the quarantine and isolation orders on exposed persons, by the federal conveyance order, the airborne-transmission control under which many employees commuted by bus and rail, and by the vaccination and testing conditions of the third quarter of 2021.
CB, the customer base
The industry's customers are construction contractors and the owners of their projects; airlines, airports and travelers, corporate travel programs and insurers; couples, planners, venues, caterers, hotels, corporations, associations, schools and municipalities; and consumers and the retail partners through which consumer agreements are written. Each customer class was itself the addressee of orders: the contractor of the construction shutdown and the job-site standard; the traveler of the stay-at-home, quarantine, entry and border orders; the event host of the gathering ban; the venue of the closure, capacity and vaccination-proof order; the retail partner of the non-essential retail closure. Every order on the customer base was an order limiting the commerce of this industry, because the commerce the order limited was the transaction the industry exists to perform.
Revenue lines and their sensitivity to orders
The industry's revenue lines are the rental charge itself (time-based), delivery and set-up labor, damage waivers and ancillary fees, re-rent, parts and merchandise, and the sale of used fleet. The rental charge is a function of utilization; utilization is a function of the customer's activity; and the customer's activity was what the orders limited. The largest public vehicle renter reported that in the second quarter of 2020 "local and national governments around the world instituted shelter-in-place and similar orders and travel restrictions, and airline travel decreased suddenly and dramatically," that its United States rental-car revenues fell "$1.3 billion, or 70%," that transaction days fell sixty-nine percent and utilization fell "to 28% from 82%," and that it and its subsidiaries filed petitions under chapter 11 on May 22, 2020; its largest competitor reported that "[g]overnmental authorities have taken and continue to take measures to address the outbreak, including restrictions on travel and other orders, including partial shelter-in-place orders," and that its Americas revenues fell sixty-five percent on a fifty-nine percent decrease in volume.10 The largest public equipment lessor reported that rental volume "declined in response to shelter-in-place orders and other market restrictions" while "[a]ll our branches in the U.S. and Canada remain open to provide essential services," that fleet productivity fell 13.6 percent, and that "'social distancing' policies, which have required closing many businesses deemed 'non-essential' ... have the effect of significantly reducing demand for equipment rentals"; its principal competitor reported that its "business was deemed essential and was allowed to remain open, however, many industries in which our customers operate were required to temporarily close their facilities or delay or cancel projects and events," so that equipment rental revenue fell 19.6 percent "primarily related to the impact of the regulatory orders addressing COVID-19 ('COVID-19 Orders') as customers we serve that were not designated essential businesses were closed throughout a significant portion of the quarter," and sales of rental equipment fell 38.8 percent.11 The two largest rent-to-own lessors reported that "stay-at-home orders" had "resulted in store closures or reduced hours and scope of operations for many of Progressive Leasing's retail partners," that every Company-operated showroom closed in March 2020 and shifted "to e-commerce and curbside service only ... except where such curbside service was prohibited by governmental authorities" (as Delaware's Tenth Modification prohibited it, Ex. DE-013), and that "temporary shelter-in-place orders and closure of non-essential businesses" produced "the temporary or partial closure of certain locations in all of our U.S. operating segments," with "approximately 65% of our staffed Preferred Lease locations" initially closed because the retail partners that host them were closed.12 The "demand" those filings describe is not a customer's preference; it is a customer ordered closed, confined or quarantined, and the orders that did it are catalogued in the layers section below. Those are the industry's own statements, filed under the securities laws while the orders ran, of the mechanism this analysis establishes: the orders reached the industry through its customers, its sites, its travelers and its showrooms, and an essential designation on the yard did not open the job site, the airport or the wedding.
The workforce and where it lives
The industry's employees live in the communities its branches serve and commute by car and, in the largest metropolitan areas, by transit. Their children attended the public schools that every State closed in March 2020 and that ran remote or hybrid through the 2020-21 year, and that required face coverings of students and quarantined exposed students in the 2021-22 year under State and district orders. A yard mechanic, a delivery driver and a tent crew cannot telework, and a parent whose school closed by order, an employee quarantined by order after an exposure, and an employee who could not lawfully board a bus without a mask were each a worker the orders removed or conditioned.
Seasonality and geography
Equipment rental peaks with the construction season from April through October and with industrial turnarounds; car rental peaks with summer leisure travel and the holidays and depends on airline schedules; event rental is concentrated in the May-to-October wedding and event season and books months ahead; rent-to-own is steady with tax-refund and holiday peaks; formalwear peaks with proms in April and May and with weddings.13 The spring 2020 orders therefore fell on the opening of the construction season, the opening of the event season and the prom season at once, and the winter 2020-21 re-tightening fell on the holiday travel and event peaks. Geographically the industry is everywhere its customers are: equipment yards in every metropolitan area and along every highway corridor, airport counters at every primary airport, event warehouses in every metropolitan area, and rent-to-own showrooms in every retail corridor. A multi-branch operator therefore faced a different order at each branch, which is the circumstance Q&A-20 of Notice 2021-20 (the "Notice") addresses by making a multi-location employer suspended in some jurisdictions eligible "with respect to all of its operations in all locations."14
The counterparty map
For each class of counterparty, the orders that reached it are catalogued in the layers section and applied in the quarters and functions sections. Contractors and project owners: the construction shutdowns of Pennsylvania, New York, New Jersey, Michigan, Washington, Vermont, Boston, the Bay Area and Alaska and the job-site standards of every State (the fifty States; function EQ). Airlines, airports and travelers: the stay-at-home orders of forty-two States and the District, the arrival quarantines of Hawaii, Alaska and the tri-State, New England, mid-Atlantic and mountain States and Chicago, the entry proclamations and land-border notices, the conveyance order, an airborne-transmission control on every airport and shuttle, and the airport security directives, the Department of Transportation's minimum-service orders and the airport authorities' rules (the federal layer and the sector regulators; function CR). Event hosts and venues: the gathering bans and caps of every State and the largest metros, the convention-center closures and conversions, and the face-covering and vaccination-proof conditions of the third quarter of 2021 (the fifty States and the metros; function PR). Consumers and retail partners: the non-essential retail closures, curbside rules, capacity caps and face-covering duties (functions CN and YD). Manufacturers, dealers and auctions: the plant closures of the spring of 2020, the entry and border orders and the motor-vehicle office closures (the counterparties and the interconnected economy; function SC). Motor-vehicle agencies, recorders and notaries: the closures, appointment regimes and credential extensions of every State (the sector regulators; functions YD and HR). Schools, child care and transit: the closure, face-covering, quarantine and conveyance orders on the workforce (the interconnected economy; function WF). Each is an order from an appropriate governmental authority limiting commerce, travel or group meetings, and each reached this industry by the mechanism the statute names.