Construction Law Alert: Impact of COVID-19 and New Rules for the Construction Industry

While COVID-19 is having far reaching impacts on all of us, conditions are changing daily and the overall impact is not yet known. Here’s a short list of things for construction contractors and subcontractors to consider:

1) Be aware of the current safety guidelines: These websites are worth following:

New York State Government Activities:

Centers for Disease Control and Prevention (CDC):

Check your Trade Association websites as well.

2) Review and comply with your contractual notice requirements:

Contractors, subcontractors and suppliers might incur substantially increased costs in order to safely complete their contractual obligations. You should identify the notice requirements in each of your contracts and follow them strictly.

The COVID-19 pandemic may possibly be considered a force majeure event that would justify recovery of certain unforeseen costs. Generally, this requires timely notice of any event that may give rise to a claim for additional time or money. Even though the Coronavirus is affecting all of us, failure to adhere to these notice requirements might preclude your ability to otherwise recover resulting costs.

Follow up such notices with information that tracks and justifies those costs directly caused by the pandemic. Your accounting should follow the procedures that are applicable to a proposed change order.

Review your progress payment related paperwork to avoid inadvertently waiving claims because you failed to exclude them from lien waiver/release forms.

You are generally obligated to take steps to reasonably minimize and properly manage such costs and time requirements. Be sure to control and track your costs and your time related to the pandemic.

3) Follow the changing PAUSE requirements and “Essential Business” exceptions:

Here’s the NYS Executive Order 202.6 Guidance website regarding what constitutes an Essential Businesses:

It is possible that classification may vary from project to project. We are working to stay abreast of these developments and encourage you to continue to check the website.

Update: A 3/27/20 update to the Guidance addressed Construction with the following language:

“9. Construction
All non-essential construction must shut down except emergency construction, (e.g. a project necessary to protect health and safety of the occupants, or to continue a project if it would be unsafe to allow to remain undone until it is safe to shut the site).

Essential construction may continue and includes roads, bridges, transit facilities, utilities, hospitals or health care facilities, affordable housing, and homeless shelters. At every site, if essential or emergency non-essential construction, this includes maintaining social distance, including for purposes of elevators/meals/entry and exit. Sites that cannot maintain distance and safety best practices must close and enforcement will be provided by the state in coordination with the city/local governments. This will include fines of up to $10,000 per violation.

For purposes of this section, construction work does not include a single worker, who is the sole employee/worker on a job site.”

Based upon the above language, projects that are not being shut down include:

  • Emergency construction (a project necessary to protect health and safety of the occupants);
  • Projects where it would be unsafe if left undone, but only until it is safe shut down the site; and,
  • Essential Construction which includes roads, bridges, transit facilities, utilities, hospitals or health care facilities, affordable housing, and homeless shelters.
  • Projects where there is only one employee or worker on the job site.

At every site that is permitted to operate, workers must maintain social distancing at all times, including use of elevators, meals and entry and exit.

All sites that cannot maintain adequate social distances and safety best practices must close.

Enforcement will be provided by the State in coordination with local governments. Violations can be punished by fines of up to $10,000 per violation.

4) If Your Project Is Shutting Down:  

Communicate with the Owner’s Designated Representative to establish an orderly shutdown process. Endeavor to minimize your costs. Provide timely notification to the owner and document your costs as discussed above.

Since the duration of the shutdown is unclear you may incur additional costs that you might avoid if the shutdown duration was precisely known.

Owners should to engage in meaningful communications endeavoring to agree upon a reasonable and efficient framework for addressing additional costs.

Force Majeure and/or change order provisions will be relevant to such discussions.

5) Proactively manage your project schedule and coordination responsibilities:

The risk of project delay and disruption is greatly increased in the current environment. General construction contractors and following trades must pay close attention to the impacts of the pandemic, as greater cooperation and coordination will be required.

Understand your contractual requirements with respect to written project schedules and participation in coordination meetings. Close attention to coordination and scheduling issues now will prove extremely valuable should litigation result. Adherence to procedures that might be overlooked when things are running smoothly is now essential.

6) Talk to your insurance advisor:  

Traditional coverages may have exceptions and carveouts that are not normally on your radar. In addition, you should review your health insurance, liability insurance and worker’s compensation coverage.

7) Review changing human resources requirements:

Our Labor Department is providing COVID-19 alerts addressing human resources requirements, which are available on our Hancock Estabrook website.

8) Special attention is required for contracts not yet signed:

One month ago, a reasonably competent contractor would likely not have been able to anticipate the impact of the pandemic. Going forward, however, care should be taken with respect to new contracts that are negotiated and executed. Entering into a contract at this time, knowing at least to some extent the widespread effects of COVID-19, may substantially affect how the contract is interpreted in the future.

Our Firm’s construction attorneys are available to assist you in addressing your specific needs and questions.


This communication is for informational purposes and is not intended as legal advice.