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Access the 2020 Top 50 Construction Law Firms™ ranking  Download PDF or  View Online

 

The verdict is in. Having the counsel of an experienced legal ally has never been more crucial to business survival than right now.

In just the first four months of 2020, the COVID-19 pandemic wreaked havoc in every sector of the construction industry. Activity at thousands of jobsites came to a virtual standstill as one state after another enacted shelter-in-place orders. Multitudes of new projects were delayed or canceled in response to market uncertainty. While industry groups, including Associated Builders and Contractors, lobbied federal, state and local government officials to declare construction an essential business, Congress raced to enact historic stimulus legislation. But by the end of April, the industry had already shed nearly one million jobs, the steepest plunge in construction payrolls since the Great Depression.

It was during this unprecedented environment that Construction Executive’s survey for the second annual U.S. ranking of the 2020 Top 50 Construction Law Firms™ was in the field. While legions of general contractors and subcontractors were scrambling to review contract documents with their trusted advisors for delay, default and force majeure clauses, CE’s editorial team was reaching out to dozens of attorneys at the nation’s top construction law firms to learn how they were advising their clients in the wake of the novel coronavirus.

SAFETY FIRST

Prior to the outbreak, the most pressing concern was how and where to find skilled workers. Now the concern has shifted to protecting their health and safety.

David Pugh, partner, Bradley Arant Boult Cummings LLP

The first mandate to avoid risk is to ensure the safety of employees. 

“Prior to the outbreak, the most pressing concern was how and where to find skilled workers. Now the concern has shifted to protecting their health and safety,” says David Pugh, partner at Bradley Arant Boult Cummings LLP.

Creating a safe environment in the age of a novel coronavirus is easier said than done. Projects are subject to new EEOC regulatory measures as well as OSHA recommendations that include keeping field workers six feet apart, wiping down tools after use and shortening meetings. 

“There are great risks for onsite performance where it’s often difficult to maintain specified social distances and properly perform,” says Jim Dickson, construction attorney for Adams and Reese, LLP.  

“Safe policies in April 2020 may not be safe policies in July 2020 or thereafter,” says Jeremy Brummond, attorney at Lewis Rice LLC. “Employers need to recognize that information on the coronavirus is changing daily. Policies should be revisited and aligned with generally accepted scientific understanding. Safety measures meant to protect workers from coronavirus must be coordinated with other safety protocols to avoid additional risks being created.”

Safety policies are only as effective as the implementation. Every day, all members on the job need to be forced on enforcement.

Kevin Hudson, partner at Hudson Parrott Walker

“What should you do if a worker shows up sick and works for a day before their symptoms worsen and become obvious?” asks David Peden, partner at Porter Hedges LLP.  “Do you shut the whole job down, just that crew, or only send that laborer home? In safety briefings, emphasize the importance of staying home as soon as you have any symptoms.  Document that you said this in your daily reports.”

General contractors must carefully monitor subcontractor adherence to coronavirus policies or risk potential liability advises Frank Elmore, president of Elmore Goldsmith.  

“Safety policies are only as effective as the implementation,” agrees Kevin Hudson, partner at Hudson Parrott Walker. “Every day, all members on the job need to be forced on enforcement.”

Even with best practices in place, litigation can still arise. Dickson advises contacting insurance carriers now to assess the scope of coverage for potential claims alleging that a firm’s negligence practices led to the spread of the virus.

WORKFORCE WORRIES

Robots may build the projects of the future, but today’s construction projects depend on people and COVID-19 has only magnified construction’s pre-existing condition, its skilled labor shortage. Project managers and craft professionals, the essential workers on construction’s front lines, are understandably concerned about the virus. 

“While most construction projects are continuing to move forward during quarantine, clients are experiencing reductions in force,” says Gina Vitiello, attorney at Chamberlain, Hrdlicka, White, Williams & Aughtry. “Many clients are using labor providers to supplement their own workforce.”

As if the labor shortage wasn’t worrisome enough, employers must now continuously monitor the changing legal landscape and be nimble enough to quickly adapt existing employee policies to comply with newly passed COVID-19 laws, regulations and executive orders across multiple states, counties and cities. 

“Policies related to employee termination, furloughing, sick and family leave, and workplace protections should be evaluated and changed where necessary,” says David Santomauro, leader, construction law & litigation team at Gibbons PC. “Failure to abide by these new laws could expose employers to potential liability.”

The needs of multi-generational workers are another key consideration when reviewing employee policies. “Older skilled crafts workers may wish to shelter at home,” says Dickson. “Termination of such persons runs the risk of age discrimination claims.”

“First and foremost, contractors should focus on the health and safety of their employees,” says Philip Beck, senior partner at Smith, Currie & Hancock LLP.  “A close second objective is to ensure the survival of the company. Owners and contractors need to recognize that a virus that was previously unimaginable is now a reality.” 

CASH IS STILL KING

With economic uncertainty looming large, contractors must gain a firm grip on payment rights and conserve funds to weather the downturn. 

“In the midst of the COVID crisis, our clients are increasingly concerned that project funds remain available to support the cash flow required for all progress and final payments,” says Joshua Levy, partner and co-head of the construction practice at Husch Blackwell, LLP. “We have seen an inordinate number of clients experience delays caused by funding interruption.”  Levy points out that contract documents often lack clauses requiring owners to provide proof of their ability to pay.

“A change that can be negotiated to encourage payment is a provision that allows the accrual of interest plus the recovery of attorneys’ fees,” says David Hammargren, head of the construction and surety practice at Larkin Hoffman. 

Getting paid is also the most pressing concern for Jackie Maloney’s construction clients at REAL Law, LLC. “This involves confirming owner financing, negotiating payment terms, protecting and enforcing lien and bond rights, and providing creative financing solutions to customers,” she says.

Contractors should not be shy about collecting what’s owed to maintain cash flow. When red flags are raised, it’s important to act quickly before the opportunity to recover payment is lost. While some may be hesitant to file a lien against a business they have good relationships with, filing now might prevent a future uncollectible. 

“We had a construction client that was hesitant to pursue liens for millions it was owed despite information that its customer was having financial difficulties,” recalls Brummond. “We pressed the client and it ultimately agreed that we could pursue the liens. Their customer became insolvent, but the client was still able to collect. The key takeaway is if there is any question whether the contractor can collect from its customer, it’s best to file the lien or pursue the bond claim in a timely manner. They can always be released later if economic circumstances change and reasonable customers will understand the business reasons why such payment remedies are pursued.”

“Under normal circumstances, our construction clients are most concerned about completing their projects safely, profitably and in a timely manner while finding their next set of new projects,” says George Pallas, managing partner and CEO of Cohen Seglias. “Given the current work environment, major concerns for both general contractors and subcontractors include payment for work performed, restarting projects and regaining schedule momentum.”

DELAYS, DELAYS, DELAYS

“While its ultimate effects are not yet fully known, COVID-19 will almost certainly impact project costs and schedules in ways that may or may not be compensable under the governing contracts,” says Beck.

We are advising construction clients to give contractual notices of both delay and changed conditions, to seek additional time and extended general conditions.

George Pallas, managing partner, Cohen Seglias

The disruption of the industry’s supply chain has also resulted in project delays. According to Dodge Data and Analytics, the United States imports around 30% of its building materials from China where many manufacturing facilities have closed or slowed operations in an effort to contain the virus there.

“For projects moving forward, the ability to predict the availability of materials and supplies, especially those reliant on international trade, either directly or as a component, is challenged,” says Steven Charney, chairman of Peckar and Abramson, PC.  

“Many clients’ projects have been adversely impacted by delays in the supply chain, labor inefficiencies that have understandably occurred due to illness or other repercussions from the pandemic,” says Hammargren.  

“Contractors are attempting to clarify the clause to allow coverage for delays and impacts relating to pandemics and governmental action,” says Pallas, noting that owners are simultaneously seeking to limit their exposure with “no damage for delay” clauses. “We are advising construction clients to give contractual notices of both delay and changed conditions, to seek additional time and extended general conditions.”

Delays appear unavoidable for the foreseeable future as staggered work shifts and physical distancing result in longer completion times. Negotiating a project in phases and using shared payment clauses may be helpful standards in the future. But no matter how well written a contract is, litigation is always a possibility, and all parties involved in a construction project should be aware of claims that might arise from the current pandemic. Meeting these new issues head-on with clear communication is the key to survival for construction companies that must keep their industry relationships viable.

Notice of Claim

David Peden, partner at Porter Hedges LLP, suggests reading all contracts now. “Look at the clauses for delay, changed conditions and claims. A force majeure event may get you more time, but not money. A changed condition clause might get both.  If you are being impacted, get your Notices of Claim out, tailored to the exact requirements of each contract. Send it to everyone above you to whom notice must be given. In most contracts, you are required to use the word ‘Claim’ in your notice, so do it if you are sending one,” says Peden.

 
 
RESOLVING DISPUTES

Reading the fine print is essential, says David Loseman, partner at Armstrong Teasdale. “Disputes are often resolved through the language of the relevant contracts themselves, so dispute resolution starts early in the process. We craft construction contracts with a view of how such language would impact and assist our client if a dispute arises,” notes Loseman. 

“Owners and general contractors prefer to use a contract form that places almost all of the risk on the downstream party,” says Beck. He advises consulting an attorney to draft, review and negotiate all contract documents rather than waiting until a dispute arises to seek legal assistance. “That is money well spent.”

“Be proactive,” advises Elmore. “The longer an issue remains unresolved, the larger the financial impact it is likely to have on the project and the project schedule.”

INDUSTRY OUTLOOK

“The effects of the pandemic are evolving almost daily,” says Peter Torcicollo, co-chair of commercial and criminal litigation at Gibbons PC.  “Our clients seek regular guidance on these various executive orders. They’re focused on the short-term impacts as well as the long-term implications COVID-19 may have on their projects, their businesses and the industry as a whole.”

Eric Grasberger cautions businesses against focusing too much on damages being incurred today. As leader of the construction and design practice at Stoel Rives LLP, he warns that if construction business owners are too consumed with “shuttered projects, slow supply chains, reduced labor availability and impacted site productivity, they may forget that whenever projects reopen, they’ll face a similar back-end crisis comprised of inadequate sub-trade availability, potential refinancing or supplemental financing challenges, and a construction market where everyone wants to catch up simultaneously.” Grasberger advises planning now “for this eventuality.”

“Questions extend to what businesses will survive and those that cannot, in turn disrupting individual project delivery and the industry as a whole,” says Charney. “To what extent the government may intervene, either locally or nationally, by providing relief or imposing new restrictions remains to be seen. The pace of questions and concerns and the need to adjust has been striking. Amidst the difficulties of working remotely and the impact on so many, it has been gratifying to support our clients in sorting through these unprecedented challenges.”

One thing is certain during these trying times, the construction industry, notorious for its unpredictability, is also known for its resilience.

“The construction industry has overcome tremendous challenges in the past and will, in time, overcome this one as well,” says Beck, adding, “It is both ironic and inspiring that a worldwide crisis which has driven us apart physically has also brought the construction industry and the professionals who serve and care deeply about the industry, closer together.”  

“Construction attorneys have a duty to educate and assist the industry in addressing this crisis,” says Beck, adding, “We are meeting that challenge on a daily basis.”

 

Access the 2020 Top 50 Construction Law Firms™ ranking Download PDF or View Online

 

The Top 50 Construction Law Firms™ logo may not be used in any form whatsoever without the express written permission of Construction Executive. For more information, contact dberry@magazinexperts.com.
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