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

Client Alert

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.


Valley National Bank/Trulieve Loan: A Big Step Out of the Shadows

In a late December press release, Trulieve announced that it had secured a $71.5 million commercial bank loan. In addition to the amount of the loan, which may be the largest commercial bank loan to date to a cannabis company, the release prominently identified Valley Bank and featured both a quote from Valley’s Senior Vice President, John Myers, and a description of the Bank’s service platform and commitment to the cannabis industry.

The End of Non-Competes? The Impact It Will Have on the Healthcare Industry

On January 5, 2023, the Federal Trade Commission (“FTC”) announced a proposed rule that, if enacted, will ban employers from entering into non-compete clauses with workers (the “Rule”), and the Rule would void existing non-compete agreements. In their Notice, the FTC stated that if the Rule were to go into effect, they estimate the overall earnings of employees in the United States could increase by $250 billion to $296 billion per year. The Rule would also require employers to rescind non-competes that they had already entered into with their workers. For purposes of the Rule, the FTC has defined “worker” to also include any employees, interns, volunteers, and contractors.”

2022 Healthcare Recap and 2023 Healthcare Check-Up

As the country begins to return to a new “normal” following the COVID-19 pandemic, there are many healthcare rules changing on both the federal and state levels as a result. Thus, it is important for healthcare providers and their employers to be aware of these changing rules, and any implications they may have on their practice. Look back on healthcare in 2022 and find a checklist for 2023.

Direct Support Professional Retention Payments

On December 15, the Ohio Senate and House passed House Bill 45, which authorizes the Department of Developmental Disabilities (DODD), in conjunction with the county boards of developmental disabilities, to launch their initiative to issue retention payments to Direct Support Professionals (DSPs). These retention payments will be distributed quarterly to participating home and community-based waiver providers to address the workforce crisis in the direct provider sector. Governor DeWine needs to sign the Bill to begin the payments, but he is expected to do so by the end of 2022.

Real Estate Investors Position for 2023 Opportunities

Real estate investors weathered another year in a post-pandemic world, with the year closing with yet another interest rate increase coupled with both uncertainty and heightened interest carrying into 2023. Just last Wednesday, the Federal Reserve raised its benchmark interest rate 0.50 percentage points, shifting the target range to 4.25% to 4.50%. The new level is the highest the fed funds rate has been since December 2007 and marks the seventh rate hike this year. So what does this mean to investors, brokers, lenders, and others in the real estate world? Read a few perspectives below from stakeholders familiar with our BMD clients and the markets in which they do business.