Updated March 25, 2020
The COVID-19 (Coronavirus) has resulted in a declaration of a state of emergency and closures in various cities, particularly related to large gatherings of people. Construction projects surely will be impacted either by shutdowns, worker illnesses, or employees who are unable to report due to other impacts such as a sick family member or school closure.
Contract and Jobsite Action Items:
- Submit Payment Applications immediately to help ensure cash flow in the event projects are shutdown.
- Examine all subcontracts for the applicable Force Majeure provision, give appropriate notice, and request time extensions. Look for a clause like this:
§ 8.3.3 Any failure or omission by Owner or Contractor in performance of its obligation shall not be deemed a breach or create any liability for damages or other relief (other than additional time) if it arises from any cause beyond the reasonable control of such party, including, without limitation, acts of God, floods, fire, explosions, storms, earthquakes, acts of public enemy, war, terrorism, rebellion, insurrection, riot, sabotage, invasion, epidemic, quarantine, strikes, lockouts, labor disputes or other industrial disturbances, or any order or action by any governmental agency, or causes of similar nature.
- Provide notice and request for a time extension, as well as associated costs. Notice should be provided in accordance with the subcontract provisions. Remember to check the timing of notice (e.g., within 5 days of occurrence of the event) and the method of notice (e.g., in writing delivered by certified mail return receipt requested). See Bulletin No. 2 for more details. If your contract does not contain specific requirements of what must be included in the notice, the following Example notice language may be used:
At this time, ______________(“Steel Fabricator”) is being delayed by the Coronavirus pandemic, which is outside of Steel Fabricator’s control and constitutes a force majeure event. While the information from the CDC, World Health Organization and Federal, State and local government authorities is changing almost hourly, Steel Fabricator has been impacted by the present COVID-19 health emergency. Among other impacts, we continue to face impacts to our labor force and disruptions to the delivery of material and detailing services.
It is impossible to notify you of the full impact that the COVID-19 will have on the costs and schedule; however, we hereby request a day-for-day extension while the National Emergency for Coronavirus is in effect and notify you that Steel Fabricator will submit its costs associated with this impact upon the conclusion of this national emergency along with documentation of the schedule impacts. Steel Fabricator reserves all rights that it has under the Subcontract and applicable law to an extension of time for any delay and costs that result from this force majeure event.
- Check all contracts for clauses relating to compensation in the event of a shutdown or delay. Is there a No Damages for Delay Clause? Look for a clause like this:
No claim for damages. . .other than for an extension of time shall be made or asserted against the owner for any reason whatsoever. The contractor shall not be entitled to an increase in the contract sum or payment or compensation of any kind from the owner for direct, indirect, consequential, impact or other costs, expenses or damages, including but not limited to costs of acceleration or inefficiency, arising because of delay, disruption, interference from any cause whatsoever.
If you have an enforceable No Damages for Delay Clause, begin considering mitigation options that will reduce your job site overhead and General Conditions, such as the ability to return rented equipment during any project suspension.
- Check all contracts for an Escalation Clause, which will compensate you in the event there are increases in raw material or equipment costs. Look for a clause like this:
Subcontractor’s material prices, including construction materials, are based on current prices at the time of the Proposal. Any significant price increases (meaning a price increase exceeding (10%) in materials necessary to perform the work, that occur during the period of time between the date of this Proposal and Substantial Completion of the Project, shall cause the Subcontract price to be equitably adjusted by an amount reasonably necessary to cover any increase. Further, if material or equipment, which the Subcontractor is required to supply are not available due to shortage or unavailability or if the price to procure such material or equipment increases a set forth in this provision, then an acceptable substitute shall be found and an adjustment in the contract price shall be made accordingly. Subcontractor shall be entitled to an extension of time for any delay in obtaining delivery of the item necessary for completion of the Work.
- Provide proper notice to all subcontractors as required by your subcontracts regarding any termination or project suspensions. Require and confirm that all subcontractors provide proper notice to their subs.
- Provide notice of withholding if payment is withheld due to project shutdown or delays. Require and confirm that all subcontractors provide proper notice to their subs.
- Comply with OSHA requirements – OSHA has issued a directive making COVID-19 a recordable illness when a worker is infected on the job site.
- Comply with state workers’ compensation requirements for reporting illnesses.
- Keep meticulous records of all damages arising from any delay and increased expenses and provide supporting documentation as required to obtain payment.
Employment Concerns:
Due to the highly contagious nature of COVID-19 and physical symptoms that can seem as benign as the common cold, employers should take proactive measures to ensure they are maintaining a safe workplace. Require employees who have been potentially exposed or those that have symptoms associated COVID-19 to stay home and remain home for at least 14 days. This will require communication and work-place rule flexibility.
- Payment to Non-Working Employees
- FLSA does not require employers to pay employees who are not working. Minimum wage and overtime only attach to hours worked in a work week by an employee.
- Exempt employees, “white collar”, are required to be paid on a salary basis.
- Potential for smaller workforce-watch out for overtime and missed work breaks.
- You must follow a contract with the employee, collective bargaining agreement, or an organization policy and practice, as well as state or local law.
- Legal Issues if Employees Work from Home
- Notify employees working from home that their hours are to be maintained at current levels unless written approval is given to work more than current level.
- Require employees to keep detailed track of their time which must be turned in to supervisor/HR. Explain what is meant by keep track of time (.10 hour increments).
- Employers may not require employees who are covered by the FLSA to pay or reimburse the employer for items associated with telecommuting, if such items that are business expenses of the employer reduces the employee’s earnings below the required minimum wage or overtime compensation.
- This means that when a covered employee is required to provide the tools and equipment (e.g., computer, internet connection, facsimile machine, etc.) needed for telework, the cost of providing the tools and equipment may not reduce the employee’s pay below that required by the FLSA.
- Child Care for Employees
- Plan now for how you will operate if employee absenteeism spikes.
- Be flexible with employees and think outside the box. Large child care groups should be avoided. Potential alternatives include:
- Create a WhatsApp or other online group, where employees can exchange information about nannies, babysitters or available spouses who can help. Asking elderly relatives or grandparents for help should be questioned at this time.
- Give your employees vouchers for babysitting services like Bsit, Care.com, Urban sitter, or others.
- Contact a babysitting or nanny agency and hire a pool of nannies for employees.
- Some small companies even allow their employees to take turns watching each other’s kids.
- Also, utilize high school and college students in your neighborhood or in your family that are now home as potential babysitters.
In addition to the foregoing, in order to further protect the public health at large and guard against the spread of the virus, we continue to encourage that everyone observe proper hygiene, appropriate social distancing, and similar measures for everyone’s collective benefit. Additionally, those with capabilities to and who routinely work offsite may do so when possible and feasible. On that note, to the extent you utilize a laptop or other essential equipment/hard documents necessary to conduct business you may wish to take them with you each night in case you are unable to return to the office the following day.
Please also visit the Gordon &Rees COVID-19 Hub in which we will be posting the latest related updates.
Active Litigation Concerns:
COVID-19 likely will impact any cases that currently are pending in courts around the country as many courts have or will close or limit business for civil cases. It is possible cases currently scheduled for arbitration may be impacted due to travel concerns and other issues.
Gordon Rees Scully Mansukhani will continue to actively litigate and arbitrate your cases in the most efficient and cost-effective manner during this time period, but continuances should be anticipated.