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Practical Advice: COVID-19's Impact on the Construction Industry

As a member of the American Bar Association, Forum on the Construction Industry, BMD participated in a COVID-19 Construction Leadership Roundtable discussion with over 450 other construction attorneys representing nearly every voice in the industry. Here is the top practical advice and key takeaways: 

  1. Safety. Safety is the overriding imperative on all construction projects. Employers should designate and empower a COVID-19 Compliance Coordinator and post on site the CDC guidelines in English and other appropriate languages. The six-foot social distancing requirement, portable handwashing, wearing gloves, prohibiting carpooling to the jobsite, and closing jobsites to the public are now considered best practices and mandatory expectations for all employers. In some states, governmental agencies are spot checking jobsites and removing individuals who are not in compliance with the CDC guidelines. The Occupational Safety and Health Administration has issued guidance for protecting employees against workplace exposures to COVID-19. Employers should also be aware of OSHA standards which may apply to workplace exposures and when a case of COVID-19 is OSHA recordable. Learn more here from BMD’s March 20, 2020 OSHA and COVID-19: Workplace Exposures, Citations and Recording Client Advisory. 
  1. Notice. Give notice early and often! After providing notice, follow up with timely reports, cost information and detailed schedule impact data. Maintain detailed records if you want to preserve any chance of recovering for delay impacts. It is not enough to generally argue that your work has been delayed by COVID-19. It must be written in a way to prevent or discourage escalation, including litigation. Be prepared to demonstrate how and when delay impacts occurred, such as utilization of a measured mile analysis to prove loss of efficiency and productivity. Helping the owner or general contractor understand the unique circumstances which caused the delay will increase your chances to cooperatively resolve the problem. 
  1. Suspension or Termination of Work. Suspension or termination of work remains an option on a case-by-case basis. Work is generally proceeding but is being impacted by CDC guidelines. Each project is unique and requires the owner’s willingness to work with prime contractors, subcontractors, suppliers, and design professionals. It has been rare for attorneys to counsel clients to stop work. There have been some suspensions of work, but often work resumes if employers and workers take appropriate CDC precautions. For example, work is proceeding at the City of Tampa, Florida airport where virtual inspections are being conducted by using affidavits, video or digital images, or in-person inspections per CDC guidelines. Some third-party inspections have been allowed and some government agencies are deferring inspections. Materials onsite are being sanitized. By contrast, due to the large number of coronavirus cases in New York and New Jersey, most private and public construction projects in those areas have been shut down. 
  1. Collaboration. Because the phrase “unchartered waters” does not begin to describe the impact that COVID-19 is having on construction projects, the best advice for prime contractors and subcontractors is to try to row in the same direction. This is no time for battles or disputes between general contractors and subcontractors. Prime contractors should ascertain the cash flow status of their subcontractors to determine whether they will be able to perform under the current revenue-starved environment. A key element for project success is that all parties need to work together to identify risks, loss of productivity, schedule impacts, supply chain issues, safety issues, etc. In fact, it has been perceived that many owners are being more forgiving on product substitutions and developing creative solutions to deal with impacts resulting from coronavirus delays – so take advantage of it while you can by being collaborative! 
  1. Liquidated Damages, Force Majeure, and Excusable Delays. How courts will interpret construction contract delay clauses, force majeure clauses and common law rights with respect to the delay impacts associated with COVID-19 remains to be seen, and it will likely be determined on a case-by-case basis. Because many courts are holding civil disputes in abeyance, immediate relief from the judicial system is unlikely. For this reason, as well as solid business judgment, it makes good sense for the parties to cooperatively engage in direct and timely discussions regarding how to proceed with construction and manage delay impacts in a mutually beneficial way. Issuance of change orders or schedule extensions may relieve some of the time and cost impacts. Prudent owners welcome timely notice because they can attempt to manage these issues and risks. Excellent communication is the key to identify problems. Deliver timely written notice and detailed substantive documentation, offer creative solutions, and try to manage the difficult circumstances together. Rather than pulling the trigger on default clauses, it is generally advisable to push across the project finish line and properly document all cost and time impacts. As we advised in the BMD Client Advisory on March 17th, the extent to which COVID-19 excuses or extends contractual obligation(s) is a fact-specific determination that will depend on the nature of the obligations and the specific language of the contract. 
  1. Project Financing. “Cash is king,” and if the availability of private and public funding is impaired, work may cease and sureties may be required to take over on payment and performance bonded projects. Conduct adequate due diligence before committing to business relationships. On an ongoing basis, be sure to request and receive adequate assurances of financial ability to pay whenever possible. 

Please feel free to reach out to Bob Hager, Justin Alaburda, David Scott, Jeff Miller, Steve Matasich or Brandon Pauley if you have any questions or comments on these issues. This is intended as general advice and should not be interpreted as legal advice. Each situation is unique and requires specific analysis of relevant contracts, facts and legal obligations.

HHS Announces an Additional $20 Billion In Provider Relief Grants

The U.S. Department of Health and Human Services (“HHS”) announced an additional $20 billion in new funding for providers on October 1, 2020. Eligible providers include those that have already received Provider Relief Fund payments as well as previously ineligible providers, such as those who began practicing in 2020, and an expanded group of behavioral health providers confronting the emergence of increased mental health and substance use issues exacerbated by the pandemic. The new Phase 3 General Distribution is designed to balance an equitable payment of 2% of annual revenue from patient care for all applicants plus an add-on payment to account for revenue losses and expenses attributable to COVID-19.

DOL Proposes New Rule Regarding Independent Contractor Status - But How Will the Election Affect Its Future?

On September 22, 2020, the U.S. Department of Labor announced a new proposed rule regarding employee and independent contractor status under the Fair Labor Standards Act. The full text of the proposed rule is available here. The rule's drafters intend to reduce uncertainty and enhance the precision and predictability of the long-standing "economic reality" test, which currently relies on a multifactor balancing test.

Major Change to Franklin County, Ohio Eviction Process: Landlord Testimony Required

Although there is currently a nationwide temporary halt on all residential evictions through December 31, 2020 in place, the eviction process in Franklin County – which processes the highest number of evictions in the State of Ohio at approximately 18,000 a year – recently changed significantly.

UPDATE: Governor Dewine Signs HB 606 Granting Short Window of Immunity from COVID-19 Personal Injury Lawsuits

The Ohio General Assembly, in Am. Sub. H.B. No. 606, is in the final stages of passing a law that will prohibit lawsuits seeking damages from COVID-19. This includes injury, death, or loss to person or property if the lawsuits are based, in whole or in part, on the exposure to, or the transmission or contraction of the coronavirus, unless the defendant in the lawsuit acted intentionally or recklessly. In circumstances where this immunity does not apply, H.B. 606 prohibits such claims being aggregated and brought as a class action.

Revised Department of Labor FFCRA Guidance, Effective September 16, 2020

In response to attacks on the legality of the Department of Labor’s (“DOL”) Final Rule regarding the Families First Coronavirus Act (“FFCRA” or the “Act”), which took effect in April 2020, the Department of Labor issued new guidance on Friday, September 11th to formally address ongoing questions and concerns related to the COVID-19 legislation.