COVID-19 and Impacts on Construction

An excerpt from NUCA Member Oles Morrison:

COVID-19 and Impacts On Construction

While it has been a month since the Department of Health and Human Services declared a public health emergency due to the continued spread of the Coronavirus (COVID-19), concern in Seattle has spread exponentially in the past week and the Seattle construction scene is already starting to see the impacts. Factors such as worker unavailability and supply chain interruptions could potentially impact project operations, contractual obligations, and your bottom line.
General contractors, subcontractors, and owners have related, but ultimately unique, concerns in the face of COVID-19. During this very fluid time, this article lays out practical advice for navigating the uncertainty.
The “Force Majeure” Clause
First, a word on force majeure clauses. Your contract likely has one, and this clause should be the first point of analysis in determining your rights and obligations in the face of COVID-19.
Although force majeure clauses vary by contract, they typically provide a “safety valve” if an unforeseen or unavoidable event (think 9/11 or the nationalization of oil companies) materially impacts performance. These safety valves usually come in the form of a modification to the contract, suspension of party obligations, or even the right to terminate the contract altogether.
Although force majeure clauses are typically synonymous with events labeled “acts of God,” the actual application of the clause may have a wide or narrow scope, depending on your contract’s specific wording. If an event does trigger a force majeure clause, parties may get relief from strict contractual performance, but other requirements such as notice provisions and mitigation of losses may also be triggered.
In Washington, there is no one-size-fits all definition of “force majeure.” Instead, courts typically defer to how a particular contract defines a force majeure event. However, at least one court (in Citoli v. City of Seattle) spoke permissively of a force majeure clause inclusive of “epidemic[s],” and a Washington regulation defines force majeure as “… acts of war or civil unrest when an emergency has been declared by appropriate governmental officials; acts of civil or military authority; embargoes; epidemics; terrorist acts; riots; insurrections; explosions; and nuclear incidents” (emphasis added). These definitions, coupled with the World Health Organization’s designation of the Coronavirus as a “public health emergency of international concern,” Governor Inslee’s state of emergency proclamation, and Seattle Mayor Jenny Durkan’s civil emergency proclamation, may tip the scales in finding that COVID-19 qualifies as a force majeure if your contract is otherwise silent on whether something like the Coronavirus is a triggering event.
Even if your contract does not contain a force majeure clause, the “frustration” doctrine may potentially provide relief. Under this doctrine, an event that renders the principal purpose of the contract “frustrated” can potentially discharge a party’s duty to perform if that event was reasonably unforeseeable. Parties beware, however, that doctrine is only available in limited circumstances, and may not apply in every case where COVID-19 impacts your project.
Concerns and Practical Implications for General Contractors, Subcontractors, and Owners
General contractors, subcontractors, and owners have unique concerns where COVID-19 is involved. Everyone is impacted if a project is delayed or halted due to COVID-19, but each player has different considerations in such a scenario. General contractors, for example, are most exposed if they’re overseeing an idle construction site because their subcontractors cannot muster enough workers, and materials, supplies and equipment are delayed in getting to the jobsite. In this scenario, the general contractor not only has to cover its own extended general conditions and related costs, but may also be liable for liquidated damages or other delay / performance penalties written into contract documents, or otherwise applicable under relevant law. At the end of the day, time is money, and if a general contractor isn’t working, it’s not billing, but may still be incurring costs.
Below is an official press release outlining the state resources available to businesses impacted by COVID-19 including but not limited to: layoff assistance, expansion of the unemployment insurance program, delayed tax filing relief, and links for further explanation of programs available

Inslee announces support for workers and businesses
impacted by COVID-19

Gov. Jay Inslee announced the expansion of state policies today to support workers and businesses financially impacted by COVID-19.
The governor and Suzi LeVine, commissioner of the Washington Employment Security Department (ESD), rolled out new rules to help alleviate the economic impact felt by businesses and workers.
These expanded policies complement the leadership large companies have shown to ensure their hourly employees and supporting businesses weather this difficult period.
Inslee also announced today that all state employees impacted by COVID-19 will receive additional leave and telework options.
“Through careful planning and by working together, we can mitigate the economic hardships this situation is going to cause,” Inslee said. “Whether it’s businesses expanding their paid leave and telework options, support for state workers, unemployment insurance or Paid Family and Medical Leave, we can help provide individuals with additional security while they care for themselves and their families. I am also directing the state to look at ways to minimize impact for those impacted by self quarantine. We can also ensure employers retain their workers even if they need to slow down their business operations. On top of all that, we are expanding the ability of employers to retain their workers even if they need to slow business operations.”
ESD adopts emergency rules to strengthen programs
As a result of Inslee’s emergency proclamation, ESD developed rules to go into effect today. These rules enhance the flexibility of the unemployment insurance program. The rules will help relieve the burden of temporary layoffs, isolation and quarantine by ensuring unemployment benefits are available to individuals whose employment has been impacted directly by COVID-19.
  • Workers will be able to receive unemployment benefits and employers will get relief of benefit charges if an employer needs to curtail or shut down operations temporarily because a worker becomes sick and other workers need to be isolated or quarantined as a result of COVID-19.
  • A worker that follows guidance issued by a medical or public health official to isolate or quarantine themselves as a result of exposure to COVID-19 and is not receiving paid sick leave from their employer, may be eligible to receive unemployment benefits.
  • If a worker falls seriously ill and is forced to quit, they may qualify for Paid Family Medical Leave while ill under the existing program. Once recovered and available for work, they may apply for unemployment benefits.
  • It removes the full-time requirement and expands standby ability to part time/less than full-time workers who are isolated.
“The first and best option for workers who need to miss work due to illness or quarantine is to use their employer-provided paid time off,” LeVine said. “When that is not an option, an ESD program may be able to help. Accessing unemployment benefits, which provide a partial wage replacement, to address these situations is not the first choice but it is a last resort that is available for many. The last thing people need to worry about when dealing with a health crisis is how they’re going to put food on the table. These new rules build on our state’s already strong foundation of support services.”
Providing leniency for those impacted by isolation or quarantine as a result of COVID-19
For workers: The new rules allow current unemployment claimants who are in isolation or quarantine as a result of COVID-19 more leniency about many unemployment insurance deadlines and mandatory appointments. This includes deadlines for applying for training programs or mandatory re-employment service appointments.
For employers: The rules also waive financial penalties for employers who file their tax reports late, pay their taxes late, or do not respond information requests in a timely fashion as a result of COVID-19.
ESD has created a new COVID-19 information page on its website that provides an overview of programs. These include unemployment benefits for workers whose companies close or experience a slowdown due to the outbreak; layoff assistance for businesses; and Paid Family and Medical Leave benefits for workers who get sick or need to care for a sick family member. The web page will be updated with new information as it becomes available.
Leave and telework options for state employees
Inslee also announced steps today that will help those who work for the state and are impacted by COVID-19, including leave expansion and telework options to all state employees. The governor was joined by Franklin Plaistowe, assistant director of State Human Resources.
“State employees are the backbone of our government and we need to do everything we can to ensure they are able to take care of themselves and their families,” Inslee said. “Those who work for the state of Washington support all of us and we need to support them.”
In a letter to state employees today, Inslee laid out these additional options:
  • Leave expansion: State employees impacted by COVID-19 will have additional leave available to them, which will means they won’t be required to take existing sick, vacation or family leave.
  • Guidance around staying home and self-isolating: If an employee has symptoms of fever and cough or shortness of breath, and has not experienced any known exposure to COVID-19 or tested positive for COVID-19, the employee is to stay home for 72 hours after their fever is gone and symptoms have improved.
  • Telework: State organizations will explore all possible options to expand telework for employees impacted by COVID-19.
Inslee also announced new rules around nursing homes and assisted living facilities.