Covid-19 Briefing Paper: A Look Ahead
Category | Briefing Papers
Elise is a member of the firm’s Construction Law Department. She can be reached at 612.359.7670 or eradaj@fwhtlaw.com.
As we turn a corner into 2021, one word has been at the forefront of the industry’s thoughts throughout the last year: COVID-19. With a recent surge of COVID cases, questions have arisen about what the coming months will look like for many people and industries and what new policies may be implemented under President Elect Biden. This Briefing Paper discusses any legal relief that might be available should additional shutdowns occur in the coming months, the best practices to follow if shutdowns occur, and whether employees can be required to take a COVID-19 vaccine if and when it becomes available to the general public.
I. Recent Legal Decisions of Force Majeure
a. Litigation may arise out of project delays caused by COVID-19, via claims that COVID-19 triggered a contract’s force majeure provision.
b. Concept of Force Majeure
i. Force majeure clauses excuse performance in the event an unforeseen circumstance occurs.
ii. Whether and to what extent performance is excused will depend on the specific language of the force majeure clause.
iii. The burden to establish that the force majeure clause applies is on the party seeking relief.
iv. Establishing a causal connection between the impact and COVID-19 is necessary.
c. Force Majeure Decisions
i. Various courts have addressed force majeure clauses since the COVID-19 pandemic began in the following decisions:
1. Palm Springs Mile Associates, Ltd. v. Kirkland’s Stores, Inc., No. 20-21724, 2020 WL 5411353 (S.D. Fla. Sept. 9, 2020).
a. Business tenant argued business restrictions put in place because of COVID-19 constituted force majeure events, and therefore obligation to pay rent was suspended.
b. Court declined to apply force majeure to the case to excuse rental obligations.
2. In re: Hitz Restaurant Group, 616 B.R. 374 (N.D. Ill. 2020).
a. Debtor argued its obligation to pay rent post-filing of bankruptcy petition was excused by lease’s force majeure clause and governor’s executive order on business restrictions used to address COVID-19.
b. Court concluded force majeure clause applied, in part, to rental payments due following the governor’s executive order.
3. Future Street Limited v. Big Belly Solar, LLC, No. 20-cv-11020, 2020 WL 4431764 (D. Mass. July 31, 2020).
a. Court rejected argument that COVID-19 pandemic was a force majeure event that caused solar panel distributor to not perform its contractual obligations.
4. Studio 417, Inc. v. The Cincinnati Insurance Company, No. 20-cv-03127, 2020 WL 4692385 (W.D. Mo. Aug. 12, 2020).
a. Businesses’ case against insurance company alleging coverage under all-risk property insurance policies for losses caused by COVID-19 survived insurer’s motion to dismiss.
ii. It is still unclear how courts will address force majeure in a construction context. This will depend on various factors, including state law on interpretation of force majeure provisions and an ability to establish causation between COVID-19 and the claimed delay.
1. Negotiate future contracts with these considerations top of mind.
II. Potential Shutdown Actions and Responses
a. Suspension and Termination
i. Contractors should evaluate whether their contract allows a suspension or termination for convenience,and what notice must be given upstream and downstream if an owner exercises that option.
b. Acceleration and Construction Acceleration
i. Owners may expressly accelerate a contractor’s performance leading up to potential shutdowns over the winter months or coming out of a COVID-19 impacted time period.
1. Ensure that compensation terms for any acceleration effort are negotiated and agreed upon in writing before the acceleration begins.
ii. A claim for constructive or implied acceleration may be possible if Owners do not provide schedule relief to which contractors are entitled.
c. Notice
i. Timing –Read and understand your contract’s notice provisions and give timely notice.
ii. Contents –Be as detailed as required by the contract or as is possible.
iii. Mitigation –Explore ways to minimize both parties’ potential damages, which makes proper notice so important.
d. Documenting Claims if a COVID-19 shutdown or slowdown occurs.
i. Document the condition of construction at the site to avoid disputes over the percentage of construction complete when the shutdown or slowdown occurred.
1. Photograph the status of the site
ii. Keep accurate, contemporaneous records of the status of the schedule and the impact caused to various line items by the shutdown.
iii. Establish separate cost codes for the line items of work impacted so specific damages caused by a shutdown or slowdown can be established.
iv. Ensure compliance with specified scheduling requirements.
1. Address any potential concurrent delays.You may not be able to show a critical path delay if you would have been late even without the impacts from COVID-19 or COVID-19 related orders or shutdowns.
e. Schedule Extension and Contract Price Adjustment.
i. Include language specifically entitling you to an extension of time, an equitable adjustment of the contract price, or both,in any change orders or contracts to account for impacts resulting from COVID-19.
f. Protecting Statutory Payment Rights.
i. Includes statutory lien, bond, and prompt payment rights.
ii. Contractors need to provide all necessary notices, and determine where claims need to be filed in the event payment is delayed.
1. Proper notice includes providing a pre-lien notice (as required by the laws of the state in which you are performing work), and serving and filing mechanic’s lien or bond statements within the required statutory time frame.
g. Ways to Make Transitioning Back to Work after a Shutdown More Seamless.
i. Winterize and button up site.
1. Protect the site from damage to the extent practical before demobilizing.
2. Consider guards on site for security reasons.
3. If it can be used elsewhere, consider moving large equipment off site if not in use for months-long periods.
a. Keep track of demob and remob costs.
ii. Attempt to keep project workers engaged during shutdown months so they are more likely to return when work resumes.
1. Encourage participating in weekly meetings even if laborers are not on site.
2. Ask owner to keep its project team together so it is ready to remobilize on site when the work can restart.
iii. Consider ordering materials during shutdown, even if not needed promptly upon return to the site.
1. Mitigate any future supply chain interruptions.
2. Mitigate any future spike in material costs.
3. Complete and obtain approval for any remaining submittals.
iv. Evaluate ways to improve project work upon return to the site and offer acceleration or other mitigation options and pricing to the owner for its consideration.
III. COVID-19 Vaccine
a. Status
i. Pfizer-BioNTechand Moderna have recently announced promising results from the latest round of vaccine trials.
ii. Pfizer-BioNTechand Moderna submitted their respective vaccines to the Food and Drug Administration (FDA) for emergency use authorization (EUA).
1. EUA authorization indicates the vaccine is approved for emergency use and may be effective in treating COVID-19.
2. EUA authorization is different than approval by the FDA under a Biologics License Application (BLA), which is the standard method of approval and indicates a vaccine is effective.
iii. Pfizer-BioNTech’s vaccine received approval from the FDA on December 11, 2020, and is recommended for use by the Centers for Disease Control
1. Vaccinations began on December 14, 2020.
iv. Moderna’s vaccine received approval from the FDA on December 18, 2020, and is recommended for use by the Centers for Disease Control.
1. Vaccinations began on December 22, 2020.
v. Vaccines are anticipated to be available to the general public in Spring 2021.
b. Vaccine Requirement for Employees
i. Employers can very likely require employees to take a COVID-19 vaccine, with exceptions.
ii. Federal Guidance
1. The Equal Employment Opportunity Commission (EEOC) published guidance on December 16, 2020 regarding COVID-19, including guidance on Vaccinations.
a. Guidance presumes that employers can require employees to get the vaccine, with certain exceptions.
b. EEOC previously acknowledged that COVID-19 meets the “direct threat standard” in the Americans with Disabilities Act (ADA).
c. 2009 guidance on pandemic preparedness from the EEOC stated that employers could require employees to get the flu vaccine, as long as certain accommodations required by the ADA and Title VII of the Civil Rights Act were made.
i. This guidance was updated in March 2020 to assist with guidance on COVID-19.
2. No guidance yet from OSHA regarding a COVID-19 vaccine
a. OSHA has not required employee vaccinations, but the general duty clause requires employers to furnish workers with a place of employment that is free from recognized hazards or are likely to cause death or serious physical harm.
3. National Labor Relations Board
a. For union employees, requiring vaccine is likely a mandatory bargaining topic.
iii. Exemptions
1. Any employers requiring vaccination need to comply with:
a. The ADA, which provides for exemptions for an employee’s disability or medical condition, and
b. Title VII of the Civil Rights Act which provides for exemptions for an employee’s sincerely held religious beliefs.
iv. Practical Considerations
1. May be less controversial to recommend, rather than require, that employees to get COVID-19 vaccine.
a. Offering employees payment incentives to encourage them to get vaccinated rather than mandating vaccination may be a more effective approach.
2. Requiring COVID-19 vaccine could give rise to worker’s compensation claims if an employee is harmed as a result of the vaccine.
c. Further resources on COVID-19 are available at:
i. Centers for Disease Control and Prevention
ii. Minnesota Department of Health
iii. Center for Infectious Disease Research and Policy (University of MN)
IV. Conclusion
We all hope that the number of COVID-19 cases this winter will not increase as severely as some have predicted, and that the recently approved vaccines will be quickly distributed and further control the virus’s spread.However, if your particular project could be or actually is affected by a COVID-19 related shutdown or delay, this Briefing Paper should help you engage in some contingency planning to minimize your damages. Stay safe and well.
This discussion is generalized in nature and should not be considered a substitute for professional advice. © 2021 FWH&T