The underground COVID economy: Businesses bend rules to survive

The businesses appeared closed, but there were telltale signs of life: light seeping out from behind boarded-up windows, customers coming and going through employee entrances, Instagram posts alluding to in-home appointments.

The COVID-19 shutdown orders imposed in March and again during the holidays crippled large swaths of the California economy. But even before an easing of restrictions announced this week by Gov. Gavin Newsom, some business owners continued to carry on covertly. In Los Angeles and other counties with forced closures, you could still get your nails done and your hair trimmed, practice Pilates inside a studio and eat a restaurant meal with a group of friends — no takeout containers involved.

By continuing to serve customers, the businesses violated the spirit — and in some cases the letter — of public health orders and complicated efforts to stem the spread of the coronavirus, health officials said.

But those who have been operating for months under the radar say their decision isn’t a repudiation of face masks, social distancing or government overreach, or about enabling parties during a pandemic. It’s simply to make ends meet, and in the absence of sufficient financial assistance and clear guidance, they have been relying on themselves — and discreet customers they can trust — to do it.

“I have a son to feed and to support, and rent to pay, and it was just getting too hard to not work at all,” said hairstylist Joanna Ho, 40. “Even when the government was giving us stimulus and unemployment, it wasn’t enough.”

Despite the lifting of statewide stay-at-home orders Monday, business owners remain uneasy. In Los Angeles County, personal care services were allowed to open immediately and outdoor dining can resume Friday. But with still-high infection rates, low hospital bed availability and new, more dangerous coronavirus variants, many are skeptical about how long this reopening will last.

“Maybe it’s best to not open right away and gauge the scene,” said Kevin Meehan, chef-owner of Melrose Avenue restaurant Kali. “Laying off staff for the fourth time would be brutal.”

Many business owners said they could not afford to be sidelined.

A year ago, Ho tended to dozens of clients a week at a beauty salon in Pasadena. When the shop closed last summer, she moved into a downtown Los Angeles loft and set up a station at home, borrowing a professional salon chair, buying air filters and only accepting current clients or referrals, masks required.

Bookings fell by about 75% — “I’m getting by with credit cards and whatever I saved up” — and Ho grappled with whether she should even be working at all.

“I keep going back and forth: Should I, or should I not?” she said. “It’s a gray area for sure. How do you tell? You just try to do the best you can.”

A nail salon in Saratoga continued to serve customers during the most recent stay-at-home order but kept the blinds drawn, the door locked and a “Closed” sign on the window to maintain a low profile.

“I need to work. I need to eat. I need to fight for rent,” said the owner, a single mom from San Jose who declined to give her name and asked that the shop not be identified. “If I don’t work, me and my daughter won’t have a home.”

When customers called for appointments, she’d group them on the same day to avoid having to go into the salon too often. She permanently closed her second studio in Los Gatos and became a one-person operation — all of her nail technicians left weeks ago for other jobs, unable to wait around any longer for restrictions to lift — buffing and polishing nails behind a plexiglass divider.

Business compliance during the pandemic “is essential” to slowing the spread of COVID-19, the Los Angeles County Department of Public Health said in an update this month. The department declined requests for an interview, instead referring to a media briefing and a news release that said teams of enforcement officials “continue to visit businesses across the county every day” to ensure rules were being followed.

From Jan. 3 through Jan. 11, 83 citations were issued to restaurants, gyms, personal care salons, places of worship and other businesses in the county; more than 600 have been handed out since the end of August.

For those that remain out of compliance, citations can be as high as $1,000 per occurrence. The county has been going after repeat offenders in other ways as well, such as shutting off the gas at a Long Beach restaurant on Saturday after the owner continued to offer outdoor patio dining.

Those are serious penalties, but many small-business owners believe the risk is worth it. They point to ever-changing and arbitrary rules about what’s allowed to be open and under what conditions, and say they have been disproportionately affected while big businesses such as supermarkets, mall operators and major retail chains are open with few limitations. If it’s legal to spend all afternoon browsing for shoes and jewelry at Macy’s surrounded by other shoppers, they wondered, why couldn’t they let their customers sit on the terrace or come inside for a quick wax?

The banning of outdoor dining has been among the most controversial of the myriad COVID-19 safety regulations, and restaurants around the state — including in Orange County, Pasadena and Long Beach — made no secret of defying the orders.

SideTrack Bar + Grill in Pleasanton continued offering outdoor dining for a few days in January, posting about its decision on Facebook. The city “looked the other way, and I appreciated that,” owner Todd Utikal said. After reopening at 11 a.m. Monday, the restaurant had a line out the door and its patios were full.

“There is no proof, over and over again, that outdoor dining is the cause of this,” he said. “Granted, we had some angry people who felt we were breaking the rules. But we had logic behind it and it was not greed.”

Some owners came up with workarounds to supplement takeout revenue.

Beverly Hills ramen shop Kazan has been hosting private dining experiences inside or on its patio for small parties. Meehan of Kali said on Instagram in December that he was available to cook “a small dinner party in the safety of your home” at $300 per person.

Public and private gatherings with non-household individuals have been prohibited in Los Angeles County since November (except for faith-based services and protests), and Meehan’s Instagram post upset a few followers who accused him of being irresponsible. But he said taking his restaurant to customers’ homes has kept his business afloat during a tumultuous time for the industry: “I think I’m doing the right thing.”

“I’m legally allowed to cater in people’s homes, and people are entertaining,” he said. “I don’t feel like I’m doing something where I’m exposing myself: I come in and I wear a mask; I bring a cooler full of food; and I’m in some beautiful home in Malibu cooking dinner for four people.”

During the shutdown, downtown L.A. restaurant Rossoblu hosted several multi-course virtual dinners: Participants received food to eat in their own homes while interacting with chef-owner Steve Samson and other diners on Zoom. That netted enough revenue to help the Italian restaurant get through the holiday season. But co-owner Dina Samson drew the line when customers inquired about having Rossoblu participate in in-home gatherings.

“There was one lady — she was basically having big dinner parties at her house and paying chefs to come cook,” she said. “She told me a bunch of restaurants that were doing that, and I told her, ‘I’m sorry, we can’t.’ It’s really crazy — there is that whole underground economy for sure.”

Even though the customer was willing to pay “a lot of money,” Samson said turning the offer down was an easy decision.

“We’re really rule followers, and our team, the people who work for us, are rule followers too, so there was no way they’d let us get away with that,” she said. “We want to be an example, right?”

Health officials have identified indoor dining and gyms as vectors for COVID-19 infection — both settings put customers in proximity for prolonged periods of time, often with masks off — and have served closure notices and cease-and-desist orders to fitness facilities for violating orders during the pandemic.

Gyms remain limited to outdoor operations only. In some cases, fitness studios have faced scrutiny for holding workouts in spaces with a loose interpretation of the word “outside.”

“Nice space in the valet of the parking garage, but so walled in that you feel like you’re inside,” one attendee wrote in an online review after a recent Barry’s boot-camp class at the Beverly Center, where the company has temporarily set up classes.

Other studios found ways to sidestep outdoor-only rules.

Pilates studio owners said a light pivot meant they were allowed to offer private sessions inside. Many teamed up with healthcare professionals and began referring to their businesses as “satellite clinics” offering “wellness classes” instead of fitness studios offering workout classes.

“Wellness Reformer Classes are being run and operated under medical supervision and require a physician’s prescription,” DR Pilates in Larchmont Village said in an Instagram post last month. “Strict adherence to all current CDC guidelines are being held in the studio.”

Another studio, Balance Reform, partnered with a licensed chiropractor, which allowed its clients to “return to your favorite physical exercise worry-free,” according to an email last year.

Michelle Marshall, the chiropractor, said she reached out to the Melrose Avenue studio owner to help the business survive the lockdown. Balance Reform clients had to undergo an initial consultation with Marshall, and, if she found them to be suffering from neck or back issues, she’d recommend one-on-one Pilates sessions. Balance Reform even touted a “bonus”: “If visits are deemed medically necessary, your health insurance may cover the cost of your visit.”

But the partnership was short-lived.

“It was a little too complicated,” Marshall said. “We couldn’t figure out a model that worked during the pandemic.”

In December, Balance Reform announced that it was shutting its doors for good.

“COVID-19 has brought an unprecedented toll on our new small business and through many sleepless nights, we have been forced with the decision to close,” the studio said. “We hope that you understand and respect the difficult choices we’ve had to make throughout this process.”