Updated Client Alert – Guidance for Construction Companies and Contractors in Light of COVID-19
In order to limit the spread of COVID-19 in New Jersey, on April 8, 2020, Governor Murphy issued Executive Order 122, which, among other things, ceased all non-essential construction projects effective April 10, 2020. As discussed more fully below, the Executive Order provides contractors with guidance on what type of projects are considered “essential construction projects” and permitted to operate, and it outlines safety policies surrounding workers exposed to COVID-19. On May 2, 2020, Governor Murphy and State Police Superintendent Patrick Callahan announced Administrative Order 2020-11, which permits construction of religious facilities and deems these projects “essential construction projects” within the meaning of Executive Order 122.
Executive Order 122 defines “essential construction projects” to include the following:
- Projects necessary for the delivery of health care services, including but not limited to hospitals, other health care facilities, and pharmaceutical manufacturing facilities.
- Transportation projects, including roads, bridges, and mass transit facilities or physical infrastructure, including work done at airports or seaports.
- Utility projects, including those necessary for energy and electricity production and transmission, and any decommissioning of facilities used for electricity generation.
- Residential projects that are exclusively designated as affordable housing.
- Projects involving pre-K-12 schools, including but not limited to projects in Schools Development Authority districts, and projects involving higher education facilities.
- Projects already underway involving individual single-family homes, or an individual apartment unit where an individual already resides, with a construction crew of 5 or fewer individuals. This includes additions to single-family homes such as solar panels.
- Projects already underway involving a residential unit for which a tenant or buyer has already entered into a legally binding agreement to occupy the unit by a certain date, and construction is necessary to ensure the unit’s availability by that date.
- Projects involving facilities at which any one or more of the following takes place: the manufacture, distribution, storage, or servicing of goods or products that are sold by online retail businesses or essential retail businesses, as defined by Executive Order 107 (2020) and subsequent Administrative Orders adopted pursuant to that Order.
- Projects involving data centers or facilities that are critical to a business’s ability to function.
- Projects necessary for the delivery of essential social services, including homeless shelters.
- Any project necessary to support law enforcement agencies or first responder units in their response to the COVID-19 emergency.
- Any project that is ordered or contracted for by Federal, State, county, or municipal government, or any project that must be completed to meet a deadline established by the Federal government.
- Any work on a non-essential construction project that is required to physically secure the site of the project, ensure the structural integrity of any buildings on the site, abate any hazards that would exist on the site if the construction were to remain in its current condition, remediate a site, or otherwise ensure that the site and any buildings therein are appropriately protected and safe during the suspension of the project.
- Any emergency repairs necessary to ensure the health and safety of residents.
To protect workers, Executive Order 122 mandates that contractors on essential construction projects adopt policies surrounding workers exposed to COVID-19, and that they also abide with numerous requirements, including, among other things:
- Prohibiting non-essential visitors from entering the worksite;
- Limiting worksite meetings, inductions, and workgroups to groups of fewer than ten individuals;
- Requiring individuals to maintain six feet or more distance between them wherever possible;
- Staggering work start and stop times where practicable;
- Staggering lunch breaks and work times where practicable;
- Restricting the number of individuals who can access common areas, such as restrooms and breakrooms, concurrently;
- Requiring workers and visitors to wear cloth face coverings, in accordance with CDC recommendations,
- Requiring infection control practices;
- Limiting sharing of tools, equipment, and machinery;
- Providing sanitization materials; and
- Requiring frequent sanitization of high-touch areas like restrooms, breakrooms, equipment, and machinery.
Previously, Governor Murphy issued Executive Order 107, which allowed for work to continue at job sites but directs construction contractors “to reduce staff on site to the minimal number necessary to ensure that essential operations can continue.” COVID-19 and the extraordinary actions taken by authorities to contain its spread will pose great challenges to contractors. Some measures that contractors can take to mitigate any financial losses include:
- Review your contracts to determine if they permit adjustments to schedule milestone dates or delivery schedules due to causes beyond your control. While construction contracts do not typically entitle contractors to additional compensation, force majeure type clauses which excuse performance are common.
- If specialty materials required by project specifications are not available in light of COVID-19 shutdowns, submit a request for a time extension. To mitigate any potential schedule impact, inquire about obtaining approval for a material substitution.
- If your business is interrupted, review your insurance policies for potential coverage. Time matters, and your policy may have a deadline for reporting claims. Standard property insurance policies usually include two types of coverage for disruptions like COVID-19: (1) business interruption coverage typically insures against losses when the policyholder’s operations are directly affected, and (2) contingent business interruption coverage insures against indirect losses such as when suppliers or customers are affected. Keep track of your costs as documentation will be required to substantiate any business losses.
For more information regarding contractor rights and remedies during this unprecedented time, please contact Thomas J. O’Leary, at [email protected] or (973) 757-1045.
Walsh Pizzi O’Reilly Falanga LLP has prepared the content of this alert for general informational purposes. The content should not be considered advice, recommendations, or an offer to perform services. You should not act upon any information provided in this alert without seeking professional legal counsel from an attorney licensed to practice law in your jurisdiction. No representations are being made as to the completeness or accuracy of the information contained herein.