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UPDATE: COVID-19 Considerations for the Construction Industry

Client Alert
March 26, 2020

The implications of COVID-19 for the construction industry are significant and rapidly evolving, since Governor Mike DeWine instructed Ohioans to “stay at home” via Order (the “Order”) effective March 23, 2020.  Following are key takeaways for contractors:

May construction continue while the Order is in effect?

Yes.  Under Section 9, “Essential Infrastructure” includes “construction,” which is further defined to include, but not be limited to, an expansive list of types of construction. The Order further identifies “Essential Businesses” to include “Critical Trades,” defined at section 12(k), as “Building and Construction Tradesmen and Tradeswomen, and other trades including but not limited to plumbers, electricians … operating engineers, HVAC, painting … and other service providers who provide services that are necessary to maintaining the safety, sanitation, and essential operation of residences, Essential Activities, and Essential Businesses and Operations.”

Reading Sections 9 and 12 together, one may reasonably conclude that construction may continue in Ohio under the Order.

Must construction industry members perform existing obligations?

It depends. The answer to this question is most likely subject to the terms of the relevant contract, evaluated in the context of the Order. The Order arguably makes it more difficult to prove that the COVID-19 outbreak triggers force majeure clauses or other impossibility/impracticability provisions, because the Order permits construction to continue.   Construction industry members who seek to avoid contractual obligations as a result of COVID-19 do so at their own risk.

Must Owners still perform?

Not necessarily. Owners have discretion to defer or shut down a project. ODOT, for example, deferred two projects until 2021, after a worker in Cleveland tested positive and the site was shut down to sanitize. At the risk of stating the obvious, Owners will have a powerful argument that considerations of human health and welfare predominate over construction schedules.

Is it business as usual for contractors?

To a great extent, yes.  Be mindful of social distancing, as much as reasonably possible.  The Order requires Essential Businesses “at all times and as much as reasonably possible comply with Social Distancing Requirements.” The “Social Distancing Requirements” are as follows:

  • Required measures. Essential Businesses and Operations and businesses engaged in Minimum Basic Operations must take proactive measures to ensure compliance with Social Distancing Requirements, including where possible:
    • Designate six-foot distances. Designating with signage, tape, or by other means six-foot spacing for employees and customers in line to maintain appropriate distance;
    • Hand sanitizer and sanitizing products. Having hand sanitizer and sanitizing products readily available for employees and customers;
    • Separate operating hours for vulnerable populations. Implementing separate operating hours for elderly and vulnerable customers; and
    • Online and remote access. Posting online whether a facility is open and how best to reach the facility and continue services by phone or remotely.

 Other best practices?

  • Post the ‘Social Distancing Requirements’ at your physical office, on the job site and ensure each employee receive a copy.
  • Provide hand sanitizer and sanitizing products at key locations at your office and on job sites. Such locations may be areas with heavy traffic such as points of entry/exit, restrooms, equipment with multiple users, etc…
  • Though not part of the Order, it is recommended to require employee temperatures daily. Temporal thermometers provide a non-invasive option.  The State recommend anyone with a temperature above 100.4 degrees stay home.
  • Continue to consult BMD’s Triage Checklist to ensure your business is prepared for this ever-changing environment.

COVID-19 and Your Construction Business- A Triage Checklist:

Many business operations are shutting down at an alarming pace.  The coronavirus (“COVID-19”) pandemic is already impacting the construction industry and creating uncertainty for the progress of current and future projects.  Small/mid-size businesses may not be in financial position to sustain prolonged economic revenue declines.  Navigating the next few months will be vital in preserving existing business relationships and planning for future business when the conditions improve.  BMD offers some practical advice to manage risks and take reasonable precautions during this pandemic.  The following checklist is designed to help you identify prudent actions so you can successfully navigate the unknown future:

Prioritize the Health and Welfare of Your Employees and Clients:

  • Make sure your employees, contractors, suppliers and facilities are safe and smart - Forced quarantine will result in labor shortages and shutdowns
  • Over-communicate about best safety practices with employees and clients
  • Assess current projects and enforce heightened safety obligations
    • Ongoing projects in medical facilities? Nursing homes? Schools?
    • Mandatory temperature testing prior to entering healthcare facilities
    • Daily questionnaires regarding potential safety basics
    • Anything from washing hands to properly shielding coughs
  • Consult the CDC and/or State departments of health for guidance. Ex: https://www.cdc.gov/coronavirus/2019-ncov/downloads/workplace-school-and-home-guidance.pdf

Run Your Business:

  • Create and enforce an effective company policy approved by your employment attorney
  • Internal communications are vitally important
    • Promote safe practices in the workplace
    • Identify essential staff and functions
    • Prepare, equip and train staff to work remotely, if possible or if deemed mandatory
  • Review Employment Policies and enact emergency policies, if necessary
    • Sick leave
    • Family medical leave
    • Performance expectations
    • Protocol for working remotely

Evaluate Current Projects:

  • Prioritize clients and proper allocation of resources for projects
  • Evaluate availability of workforce, now and in the future when workers become ill
  • Evaluate supply chain impact on materials and supplies
    • Inventory and ration materials where possible

Review Your Contracts:

  • Review current contracts
  • Do not assume you have an ‘out’
    • Not all construction contracts have ‘force majeure’ provisions
    • Consult §8.3.1 of the AIA A201 regarding circumstances that may be commonly described or accepted as ‘force majeure’ events
  • Consider negotiating a modification of existing contracts and key terms
    • Consult §1.1.1, 1.1.2, 2.5, 3.11, 4.1.2, 4.2.1, 5.2.3, 7, 8.3.1, 9.7, 10.3.2 of the AIA A201 regarding modification
      • Contract duration
      • The goods/services involved in the contract
        • Adding or subtracting goods/services covered in the contract
      • The payment terms
      • The delivery terms
    • Determine notification requirements if performance is impossible or impractical and you are seeking to delay or excuse performance
      • 15.1.6 and §15.1.3 of the AIA A201 provides guidance on claims for delay
    • Do not ‘Self Help’ or bury your head in the sand
      • Communication and transparency are vital
      • Be pro-active and reasonable

Review Your Insurance Policy:

  • Coverage for the treatment of infected employees
  • Coverage for lawsuits filed by employees or other parties relating to COVID-19 exposure
  • Coverage for loss of revenue associated with epidemics, pandemics, and viruses such as COVID-19, governmental shutdown, or limitation of access to an insured’s business
  • Loss of earnings caused by delays or government (foreign or domestic) actions
  • Provide proper written notice of claims to avoid waiver of rights

For questions, please contact your primary attorney, or any member of BMD's Construction Law practice group.

COVID-19Construction LawBMD's Construction Law Groupconstruction industrystay at home order
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