Updated Guidance for Construction Projects in Los Angeles County

In the two months since Governor Gavin Newsom’s Stay at Home Order was enacted across the state, construction has largely continued in Los Angeles County despite guidelines and protocols enacted by local officials seeking to make job sites safe during the ongoing pandemic. We previously covered impacts and developments from the Coronavirus in Los Angeles County on April 8, 2020.

The City of Los Angeles has been led by Mayor Eric Garcetti in focusing efforts to enable essential business, including many construction projects, to continue with safety precautions. Mayor Garcetti established a Stage 2 process to begin on May 8, 2020, to allow additional businesses to operate on a careful and phased basis. The Los Angeles Department of Building and Safety has produced Guidelines for Inspections by City Personnel, as well as Safety Guidelines that all construction projects must comply with.

To obtain the City of Los Angeles’s COVID-19 Safety Guidelines for Construction Sites, please click here. To obtain the City of Los Angeles’s City Inspections COVID-19 Guidelines, please click here. The City of Los Angeles also requires the completion of a Social Distancing Protocol, which must be posted near worksite entrances and distributed to all employees. A copy of the blank protocol form can be obtained here.

In addition to the City, the County of Los Angeles Department of Public Works developed its own Guidelines for Construction Sites during the COVID-19 Pandemic. The County of Los Angeles’s recommendations are based on the recent guidelines published by the CDC and Cal/OSHA. To obtain the County of Los Angeles’s COVID-19 Construction Guidelines, please click here. The County has also developed modified procedures for submittal and pick-up of Construction Plans that can be viewed here.

While construction has largely continued in and around Los Angeles, recent media reports have raised issues with worksite contamination, non-compliance issues, and delays resulting from social distancing and other mandated policies. If these or other issues are affecting your construction project or worksite in and around Los Angeles, please contact a construction attorney who can assist you with your specific issues.

Visit our COVID-19 Hub for ongoing updates.

Essential Construction Projects In California: Can You Keep Working And How?

Despite the COVID-19 pandemic and its severe impact on the construction industry, work on Essential Projects is permitted in certain instances, depending on the location and the type of the project. The question of what work is “essential” is key. Not surprisingly, the designation of Essential Construction is evolving and different requirements now exist at the state and local level which has led to confusion.

The following provides an overview of the current orders and local regulations affecting major metropolitan areas of California as well as the trends as a result of these orders. Those with additional questions beyond the information presented in this article are recommended to consult with a licensed attorney with construction law experience to achieve your compliance and workplace safety goals.

The Federal Guideline

The Department of Homeland Security for the Federal Government produced Guidelines identifying 16 sectors deemed “Essential” Businesses. These Guidelines are only recommendations – it is up to the individual local jurisdictions to draft their own ordinances.

Under the Guidelines, several areas are clearly covered as “essential” including infrastructure construction and restoration (fiber optic cables, wireless facilities, and other communications-related areas); work supporting the manufacture, distribution and provision and construction of computing-related services); business infrastructure; financial transactions/services; web-based services; and critical manufacturing.

For more information on the federal guidelines, please visit our prior article on this issue.

California State Guideline

On March 19, 2020, Governor Newsom’s Office issued Executive Order N-33-20 ordering all residents to “Stay at Home,” except as needed to maintain continuity of essential critical infrastructure sectors, including those designed by the State Public Health Officer. On March 22, 2020, the State Public Health Officer designated a list of “Essential Critical Infrastructure Workers” to help state, local, tribal, and industry partners as they work to protect communities, while ensuring continuity of functions critical to public health and safety, as well as economic and national security. The State Public Health Officer’s list of designated “essential” workers includes but is not limited to:

  • Construction workers who support the construction, operation, inspection, and maintenance of construction sites and construction projects (including housing construction)
  • Workers such as plumbers, electricians, exterminators, and other service providers who provide services that are necessary to maintaining the safety, sanitation, construction material sources, and essential operation of construction sites and construction projects (including those that support such projects to ensure the availability of needed facilities, transportation, energy and communications; and support to ensure the effective removal, storage, and disposal of solid waste and hazardous waste)

San Francisco County and Bay Area (Marin, Alameda, Santa Clara, Contra Costa)

The San Francisco County and City ordinance is instructive as the counties in the Bay Area have worked together and been on the forefront of developing the definitions of Essential Projects. The same standards apply to Marin, Alameda, Contra Costa, and Santa Clara Counties.

The Order provides that only certain, limited types of construction are permitted to continue, including the following:

  • healthcare projects directly related to addressing the COVID-19 pandemic
  • housing and mixed use projects that includes at least 10% affordable housing
  • projects that provide services to vulnerable populations projects required to maintain safety, sanitation, and habitability of residences and commercial buildings
  • construction necessary to secure an existing construction site that must shut down

The Health Officer may issue guidance requiring construction site-specific health and safety plans. The Order also provides for San Francisco to limit public works construction to essential public works projects as determined by the City Administrator in consultation with the Health Officer.

All other construction is prohibited. Essential projects are further defined as:

  • Projects immediately necessary to the maintenance, operation, or repair of Essential Infrastructure;
  • Projects associated with Healthcare Operations, including creating or expanding Healthcare Operations, provided that such construction is directly related to the COVID-19 response;
  • Affordable housing that is or will be income-restricted, including multi-unit or mixed-use developments containing at least 10% income-restricted units;
  • Public works projects if specifically designated as an Essential Governmental Function by the City Administrator in consultation with the Health Officer;
  • Shelters and temporary housing, but not including hotels or motels;
  • Projects immediately necessary to provide critical noncommercial services to individuals experiencing homelessness, elderly persons, persons who are economically disadvantaged, and persons with special needs;
  • Construction necessary to ensure that existing construction sites that must be shut down under this Order are left in a safe and secure manner, but only to the extent necessary to do so;
  • and Construction or repair necessary to ensure that residences and building containing Essential Businesses are safe, sanitary, or habitable to the extent such construction or repair cannot reasonably be delayed.

San Francisco also recently developed guidance for construction “Best Practices” and “Field Safety Guidelines” for COVID-19 job site safety, including submission of Site-Specific Health and Safety Plans that conform to the guidelines. These guidelines are likely to be adopted by the Bay Area counties and beyond. Contractors and construction professionals should consult with an attorney on how to comply and submit the necessary plans to safely resume operations.

Los Angeles County

While the County of Los Angeles has not provided specific construction-related guidance, the City of Los Angeles has developed protocols for COVID-19 Safety for Construction Sites. The City’s plan requires a comprehensive COVID-19 exposure control plan, which includes control measures such as social distancing; symptom checking; hygiene; decontamination procedures, and training. Failure to comply with this guidance shall be deemed as creating unsafe conditions and may result in withheld inspections or shutting down the construction site until corrected.

Unlike the San Francisco ordinance, the City of Los Angeles’s guidance does not distinguish between different types of essential construction and instead relies upon the state and federal guidance principles. However, the protocols for construction sites includes directives to maintain a minimum 6-foot distance from other workers at all times, provide personal protective equipment (PPE) such as gloves, goggles, face shields and face masks, and stagger the trades as necessary to reduce density and maintain minimum 6-foot separation. These types of workplace conditions will continue to affect job sites throughout Los Angeles. Notably, some cities in Los Angeles County are looking at their own, more stringent regulations on construction projects.

San Diego, Orange, Riverside County

San Diego, Riverside, and Orange Counties presently do not have independent guidance or reporting requirements beyond those provided by the State and Federal Guidelines. We continue to monitor for additional updates, but expect these Counties to adopt some standard protocols, reporting requirements, and construction site and job guidance like those from San Francisco or Los Angeles.

Sacramento County

San Diego, Riverside, and Orange Counties presently do not have independent guidance or reporting requirements beyond those provided by the State and Federal Guidelines. We continue to monitor for additional updates, but expect these Counties to adopt some standard protocols, reporting requirements, and construction site and job guidance like those from San Francisco or Los Angeles.

Key Take Away: Keep Up To Date And Monitor Your Projects

Clearly, a high premium has been placed on housing. Originally San Francisco was in line with the Federal Guidelines and was allowing all housing construction to go forward. However, as it has begun tightening up on permissible activities, San Francisco now requires an affordable component to allow the construction to go forward. It will be interesting to watch as other areas make decisions on this issue whether the trend will be towards being more restrictive in allowing residential construction and how “affordable” is defined.

The Federal Guidelines are more developed with respect to Public Works and Infrastructure work. However, the document is meant to give guidance to the local agencies who may choose to follow San Francisco’s lead and specifically designate what projects can go forward rather than leave it open for interpretation.

It is important for the Construction Industry to pay close attention to what work is permissible during this crisis and what work must be delayed. Unfortunately, we anticipate that the trend will continue to be more restrictive until a better comfort level is achieved with the future of the virus. This means close attention should be paid to each project and to carefully evaluate if notices of potential delays should be issued and to evaluate if the contractor can obtain any relief for affirmative extended general conditions, efficiency claims, or other additional compensation or remedies.

Los Angeles Construction Site Safety Guidance, (March 31, 2020)
Orange County Amended Health Order and Guidance, (March 18, 2020)
Sacramento County Stay At Home and Essential Services Order, (March 19, 2020)
Santa Clara County Order of the Health Officer, (March 31, 2020)
Alameda County Order of the Health Officer, (March 31, 2020)
Contra Costa County Order of the Health Officer, (March 31, 2020)
Marin County Order of the Health Officer, (March 31, 2020)
Riverside Essential and Criticial Services Guidance, (March 22, 2020)
San Diego Social Distancing and Sanitation Protocol, (April 2, 2020)
San Francisco Guidance for Construction Related Essential Business, (March 31, 2020)

Six Northern California Counties Have Issued New Shelter-in-Place Orders Impacting Construction Industry

Effective 11:59 p.m. on March 30, 2020, Alameda, Contra Costa, Marin, Santa Clara, San Francisco and San Mateo Counties shelter-in-place rules will be more detailed and restrictive. The construction industry will be significantly impacted. The order only allows the following kinds of construction projects to go forward:

  • Projects immediately necessary to the maintenance, operation, or repair of Essential Infrastructure
  • Projects associated with Healthcare Operations, including creating or expanding Healthcare Operations, provided that such construction is directly related to the COVID-19 response
  • Affordable housing that is or will be income-restricted, including multi-unit or mixed-use developments containing at least 10% income-restricted units
  • Public works projects if specifically designated as an Essential Governmental Function by the lead governmental agency
  • Shelters and temporary housing, but not including hotels or motels
  • Projects immediately necessary to provide critical non-commercial services to individuals experiencing homelessness, elderly persons, persons who are economically disadvantaged, and persons with special needs
  • Construction strictly necessary to ensure that existing construction sites that must be shut down under this Order are left in a safe and secure manner, but only to the extent necessary to do so
  • Construction or repair necessary to ensure that residences and buildings containing Essential Businesses are safe, sanitary, or habitable to the extent such construction or repair cannot reasonably be delayed

A significant amount of construction that is currently ongoing will now have to stop. It will be much more difficult to argue that certain projects should go forward due to ambiguity in the order.

Construction companies should be sure to carefully review the orders and work with counsel to evaluate their options and potential needs to issue notices of delays in order to protect claims for additional time and damages.

Visit our COVID-19 Hub for ongoing updates.

COVID-19 Construction Jobsite Considerations & Safety Suggestions

In light of the CISA update that includes Construction as part of the country’s essential infrastructure activities, contractors must be wary and ensure that they are implementing all necessary safety measures on their construction jobsites.

Given that construction projects around the United States are continuing and most contractors and construction workers are exempted from “shelter-in-place” and “stay-at-home” orders, all parties involved in the construction process should continue to be vigilant and do their best to prevent the spread of the COVID-19. The following are some recommendations and tips that should be employed to assist in the effort to ensuring safety on the construction jobsite.

Overall Project Planning and Management

  • Implement and communicate your safety and jobsite management plan.
  • Minimize project staffing to the extent possible.
  • Require all personnel displaying flu-like or who have come in contact with someone who has COVID-19 to stay home.
  • Ensure that proper social distancing measures are implemented and post appropriate signage with instructions. For example, it may be appropriate to limit elevator occupancy to two (or fewer) individuals depending on the square footage.
  • Require all personnel to wear appropriate PPE (protective personnel equipment), such as gloves and masks.
  • Set-up additional hand washing stations on project sites.
  • Encourage all personnel to wash hands with soap and hot water frequently for a minimum of 20 seconds each time.
  • Perform daily environmental cleaning, such as sanitizing common surfaces, including workstations, countertops and doorknobs, provide disposable wipes.
  • Perform daily sanitization of small, handheld tools.
  • Avoid having any outside lunch vendors on the jobsite.
  • When required to travel in vehicles, if more than one person is required, try to keep to only one passenger and sit in the back seat on passenger side.
  • Implement a Daily Crew Assessment that includes checking on health to ensure ill workers are not reporting to work.
  • Use shoe sanitation (non-bleach sanitizer solution) prior to entering the jobsite if possible.
  • Do not use a common water cooler.
  • Encourage workers to bring their own water.
  • Identify specific locations and practices for daily trash including for paper, towels, food, boxes, containers, etc.
  • If possible, utilize disposable gloves; wash hands after removing.

Personal Responsibility

  • Stay Home When You Are Sick
    • It is important that if you are experiencing any of the symptoms of COVID-19 – fever, cough, shortness of breath or difficulty breathing, as well as tiredness, aches, runny nose, sore throat — that you notify your supervisor immediately.
  • If any employee or worker appears to be sick, he or she should be reported to management immediately. That individual should be asked to remain home until they are symptom-free and/or released by a doctor.
  • Workers should also stay at home of they have been exposed to someone with COVID-19. If you notice that a fellow worker is experience these symptoms – report it!
  • Wash Your Hands
    • Be sure to wash your hands frequently, especially after using the restroom, before and after eating, and after blowing your nose, coughing, or sneezing.
    • Be sure to use soap and water for at least 20 seconds and use disposable towels to dry your hands.
    • If hand washing with soap and water is not feasible, use an alcohol-based hand sanitizer that contains at least 60-95% alcohol.

On the Jobsite

  • Practice Staged Working
  • For tailgate meetings:
    • Meet outdoors/in large, open areas
    • Avoid clipboards or pens for check-in; each worker to use his or her own pen.
    • Implement an app/web-based system if possible.
  • Perform meetings in shifts when possible, keeping the same group of workers together to limit exposures.
  • If on site, maintain a minimum of 6 feet distance between other people.
  • Do not eat lunch or take breaks indoors with other people – try to remain outdoors and maintain a 6 foot distance from others.
  • Cover your cough and sneeze with a Kleenex or on the inside of your elbow.
  • No hand-shaking, fist bumping, or other physical social greetings.
  • Use walkie-talkies or other communication tools to facilitate remote engagement.
  • Keep the Jobsite Clean
    • Ensure you are properly using PPE. Do not share PPE if possible. Sanitize any reusable PPE.
    • Wipe down common areas including office desks, tools, and doorknobs.
    • Sanitize all tools and equipment.
  • DO NOT SHARE
    • Tools
    • Water coolers or water bottles
    • Hand towels at hand washing stations
    • Food/Lunches
    • Personal Protection Equipment (PPE)

After the Jobsite

  • When you leave the jobsite, be mindful of tracking pathogens into the home.
    • Remove shoes and handle clothing carefully.
    • Do not shake out work clothes.
    • Wash work clothes separately in warm water with a sanitizing detergent.

Of course, decisions involving the jobsite are not always black and white, if you have further questions about how to handle a particular situation involving COVID-19, please contact Gordon & Rees’ COVID-19 Task Force. We are closely monitoring daily developments involving the construction industry and stand ready to assist clients with their questions and concerns.

Visit our COVID-19 Hub for ongoing updates.

CISA Clarifies – Construction is Part of Critical Infrastructure Activities

After ongoing confusion by many over whether construction should be considered part of the “essential business,” during the COVID-19 pandemic, the Cybersecurity and Infrastructure Security Agency (CISA) issued an updated Coronavirus Guidance for America on March 28, 2020 to clarify construction’s critical role in supporting essential infrastructure. CISA’s initial advisory list referenced construction in regard to some areas such as energy and wastewater treatment, but it was unclear as to the whole of the construction industry. CISA’s update clarified that construction activities are included in its list of essential critical infrastructure workers. This new federal guidance should remove the ambiguity that led to varying responses by state and local officials halting some construction. The guidance clarifies that construction and related activities – including the manufacture and supply/delivery of supplies and equipment, permitting, safety, and inspections of projects – are covered as part of the critical infrastructure and economic activities.

The ongoing challenge will be for construction activities to proceed in a way that protects workers and the general public from the spread of coronavirus. However, contractors are always resourceful and have been implementing safety measures effectively on projects with an unwavering commitment to safety and are ready to meet this challenge. In addition to following the guidance from the CDC, we recommend that contractors implement a comprehensive safety program for their employees as well as for all parties that come onto the jobsite. It is critical that contractors have clear a clear plan for communications with their teams to ensure compliance with the CDC recommendations. This should include what has recently become standard protocol or social distancing, not hosting large group meetings and conducting meetings online or via conference call, maintaining a six-foot distance between people, discouraging hand-shaking or other contact, not sharing tools, and sanitizing reusable PPE. Contractors also should also be sure to place safety posters about “How to Protect Yourself” where they can be readily seen and encourage staying home when sick, cough and sneeze etiquette, and hand hygiene at the entrance of a jobsite. We also recommend heightened site security including interviewing anyone coming to the jobsite.

Contractors will also need to adjust on-site scheduling to avoid stacking trades, to manage their sites in a way that limits the number of people on a jobsite, and to allow non-essential personnel to work remotely.

Please contact our Construction COVID-19 Task Force for assistance in developing your safety protocols or in any regard to assist in responding to the COVID-19 challenges on your existing projects or preparing your upcoming contracts and projects.

Visit our COVID-19 Hub for ongoing updates.

COVID-19: Where is Construction an “Essential Business”?

With states and municipalities taking additional measures to limit the spread of COVID-19, including “shelter in place” and “stay-at-home” orders, which require non-essential businesses to close physical locations and limit operations to telecommuting the question for construction is, Are you an “essential business”? The answer will differ based on location and may change as states and cities continue to work in this fluid situation. It is important to verify before you proceed.

Essential Business

Some guidelines are available to assist businesses making this determination. First, the Cybersecurity and Infrastructure Security Agency (CISA) released a guidance document to assist state and local governments as well as businesses to determine which sectors’ workers should be considered essential, critical infrastructure workers. CISA has identified 16 sectors:

  • Healthcare / Public Health
  • Transportation and Logistics
  • Information Technology
  • Water and Wastewater
  • Food and Agriculture
  • Nuclear Reactor, Materials & Waste
  • Energy
  • Government Facilities
  • Defense Industrial Base
  • Emergency Services (Law Enforcement, Public Safety, First Responders)
  • Financial Services
  • Communications
  • Critical Manufacturing
  • Dams
  • Chemical
  • Commercial Facilities

The CISA Guide is a recommendation and ultimately is optional for states and location governments to use when adopting their own stay-at-home or workforce reduction orders. It is notable that, currently, there are six states that are following CISA guidance on the “essential business” definitions, nine CISA-modified, and eight with their own state-issued guides; the remaining states have not (yet) issued a stay-at-home order.

One of the most comprehensive assessments of the application of the CISA guidelines for an “essential” business has been compiled by MultiState Associates in its COVID-19 Policy Tracker. MultiState Associates’ Summary is a quick, ready-reference guide that also drills down in many instances to the local level.

However, there is still confusion as to whether and what types of construction projects fall under the “Essential Business” categorization.

A few states have made it very clear, but each local county and city may have their own regulations and restrictions. For example, in California, Governor Newsom’s Executive Order has clarified that construction (including residential construction) is an essential business, but the State has confirmed that the local governments may impose more restrictive measures. Each county and local jurisdiction is handling construction in its own way and therefore it is imperative to check before you proceed with your projects. On the other hand, New York has been more specific and limited the approved construction to include: skilled trades such as electricians, plumbers; and other related construction firms and professionals for essential infrastructure or for-emergency repair and safety purposes.

Gordon & Rees’ COVID-19 Task Force has been closely following each of the states’ and many key local jurisdictions’ guidance and stands ready to assist clients with compliance with the orders and determining where and what type of construction projects can continue.

Visit our COVID-19 Hub for ongoing updates.

COVID-19 Resources for the Construction Industry

The Gordon & Rees Construction team has been closely watching all of the developments with COVID-19 and the impacts on our construction clients. We have compiled various resources that may be useful for you and will continue to update our COVID-19 Hub with information as it is released.

General Resources:

California Resources:

Please contact our Construction COVID-19 Task Force for assistance in regard to interpreting your force majeure clauses, ensuring that you are getting out the proper Notice letters of potential delays, and in negotiating your new contracts to ensure that you are protected.

Force Majeure and COVID-19 in Construction Contracts – What You Need to Know

“Force Majeure” – While most construction contracts contain these provisions, they are often not understood  in relation to the implications they may have on construction projects. With the onset of the COVID-19 pandemic, we are all taking a closer look at many portions of our contracts.  The following is a brief primer on how to understand your construction contract and its potential implications on your business in this season of change.

What is a Force Majeure?

Construction contracts usually take into consideration that the parties want to agree at the outset on who bears the risk of unforeseen incidents that may affect the project’s progression.  These issues are generally handled in a “force majeure” clause.  Force majeure, according to Mariam Webster’s Dictionary is a “superior or irresistible force; or an event or effect that cannot be reasonably anticipated or controlled.”  To be deemed a force majeure, generally the circumstances must be outside of a party’s control which makes performance impossible, inadvisable, commercially impractical, or illegal. In addition to being unforeseeable, the circumstances must have external causation, and be unavoidable.  However, the key to understanding if COVID-19 will be deemed a condition that will excuse a contractor’s performance is the specific language in the provision.

Generally force majeure events are unavoidable events such as “acts of God,” most notably weather conditions including hurricanes, tornadoes, floods, earthquakes, landslides, and wildfires, as well as certain man-made events like riots, wars, terrorism, explosions, labor strikes, and scarcity of energy supplies.  However, there is not much case law or specifics on conditions similar to COVID-19.

What are the Key Aspects of a Force Majeure Clause?

While force majeure is a recognized concept in most legal systems, it usually does not have a precise legal definition. As a result, parties must generally look to the specific language used in the contract. Most contracts include a definition of force majeure and often include a non-exhaustive list of both illustrative force majeure events and events that do not constitute force majeure.  The contract interpretation will often turn on how the event of force majeure is characterized.

First, to be classified as a force majeure event, the event must be beyond the control of the contracting parties, it cannot be anticipated, foreseeable, or expected, and the event must be unavoidable.  The circumstances must also be found to be externally caused, unforeseeable, and unavoidable.  The specifics that you are looking to call the force majeure are important — what is the claimed impediment to performance?  Is the circumstance the outbreak of the disease, an order by the government trying to contain the spread of the disease, or lack of materials or manpower.  Once the event is determined and the specific force majeure is clarified, there must be found to be a sufficient causal link between the alleged force majeure and the claiming party’s non-performance. Finally, even if the declaration of force majeure is validly given, the amount of time that performance should be excused and the time at which the force majeure has ceased to exist will need to be addressed.

Can I trigger my Force Majeure Clause due to impacts from COVID-19?

The most secure means of ensuring that you can trigger your force majeure clause to excuse performance, or extend time for performance, is if your provision specifically calls out a pandemic or other similar serious disease, epidemic, or public health issue. However, most contract provisions do not contain that level of specificity.  The next step would be to see if the terms in your contract include sufficient examples that can be found to be analogous to a public health crisis such as we are currently experiencing. In many instances, the risk will rest on the contractor and not the owner for increased costs for material shortages and/or price increases unless another provision (such as price escalation clauses) apply.

The best course of action is to ensure that you negotiate as specific and clear language as possible to define the scope and effect of a force majeure clause to protect against unexpected liabilities. The following elements should be addressed in a force majeure clause:

  • What events are considered force majeure?
  • Who is responsible for suspending performance?
  • Who is allowed to invoke the clause?
  • Which contractual obligations are covered by the clause?
  • How should the parties determine whether the event creates an inability to perform?
  • What happens if the force majeure event continues for more than a specified period of time?

If you already have force majeure clauses in your standard contracts, we recommend a review of those provisions to ensure the terms provide clear, comprehensive, and adequate protections for the company and consider whether terms such as “widespread epidemic,” “pandemic,” and/or “public health emergency” should be added.  We have seen courts loathe to extend the interpretation of force majeure clauses beyond what is specifically listed in the contract.  While the impact of the COVID-19 pandemic is likely to be found to be unforeseen and externally caused, the key issue will likely be whether the impact was unavoidable.

You also should review the terms of your existing force majeure clauses in preparation for potentially needing to invoke them for COVID-19-related issues. In the event you are unable to assert a force majeure clause when faced with such events, the doctrine of impossibility and impracticability may be your next best bets. The common law doctrine of impossibility “allows a party to suspend or avoid performance when a supervening event beyond its control makes performance of the contract no longer capable of being performed.” (17A Am. Jur. 2d Contracts § 655 (2010).)  For example, where unforeseeable severe material shortages or an embargo render the materials necessary to complete a construction contract completely unavailable, impossibility is probably a viable defense. However, the more likely effect of an embargo or a material shortage is that it will significantly increase the cost of completing a contract, but not render it impossible. In such a scenario, a party’s best defense may be the doctrine of commercial impracticability. However, the terms of the contract must be carefully consulted to determine whether any waiver or assumption of these risks were included.

Many courts have moved beyond the requirement of “absolute impossibility” and recognize the doctrine of commercial impracticability, which allows a party to be excused from performance where, although performance of the party’s contractual obligations is technically possible, changed circumstances have rendered performance commercially unreasonable.  The doctrine of commercial impracticability is codified in the Uniform Commercial Code § 2-615 “Excuse by Failure of Presupposed Conditions” (however, the U.C.C. only applies to commercial goods). When deciding U.C.C. cases involving commercial impracticability, in addition to U.C.C. § 2-615, courts often also expressly discuss the Restatement of Contracts (Second) § 261, which sets forth the common law application of the doctrine of commercial impracticability.  Thus, the holdings of these U.C.C. cases should be generally applicable to non-U.C.C. construction contracts involving the provision of services.  (15 J.L. & Com. 213, 214-15 (1995).)

Generally, in order to prevail on a defense of commercial impracticability, a party must show the following: “(i) a supervening event, either an ‘act of God’ or an act of a third party, made performance impracticable, (ii) the non-occurrence of the event was a basic assumption upon which the contract was based; (iii) the occurrence of the event was not the party’s fault; and (iv) the party did not assume the risk of the event’s occurrence.”  (L.W. Matteson, Inc. v. U.S., 61 Fed. Cl. 296, 320 (2004).)   Whether non-occurrence of a particular event “was a basic assumption” generally depends upon the foreseeability of the event. (15 J.L. & Com. 213, 214-15 (1995).)   “If a disruptive event was foreseeable and the promisor failed to protect himself by means of an express provision in the contract (a force majeure clause), then the promisor will be deemed to have assumed the risk of the disruptive event.” (Id.)

However, “a severe shortage of raw materials or of supplies due to a contingency such as a war, embargo, local crop failure, unforeseen shutdown of major sources of supply or the like, which either causes a marked increase in cost” or prevents performance altogether is likely sufficient for an impracticability defense under the U.C.C. (See U.C.C. § 2-615.)  The Restatement’s comments echo those of the U.C.C. and provide that such circumstances would also probably be sufficient for an impracticability defense in a contract for services.  (See RESTATEMENT (SECOND) OF CONTRACTS § 261 (1981).)   Accordingly, it appears that the doctrine of impracticability can relieve a party from its contractual duties when faced with price increases caused by severe material shortages or an embargo, or even arguably when faced with a health pandemic affecting global commerce.

In conclusion, there may be steps you can take now to protect yourself and to negotiate an agreement with your contracting partners as to how to weather this storm as well as to ensure that you comply with any notice requirements or mitigation efforts required. At a minimum, consult with an experienced construction lawyer to evaluate your risk and determine what risk management and mitigation steps you should be taking while this situation unfolds.

Visit our COVID-19 Hub for ongoing updates.

California’s Skilled and Trained Workforce Requirements: Public Works and AB 3018, What You Need to Know

Do you have the proper skilled and trained workforce for your construction projects? If you take on public works projects in California, you may not be in compliance with the new changes in the law. To avoid civil penalties or nonpayment and potentially being precluded from future bids on public works contracts, you must critically review your team and proposal prior to accepting an award. Once awarded a public contact requiring a skilled and trained workforce, diligent reporting practices and oversight are required to maintain compliance.

Compliance with California’s skilled and trained workforce requirements for contractors, engineers, architects, design professionals, and suppliers competing for public works construction projects in California is mandated through enforcement with the enactment of AB 3018. Signed by Governor Brown in his last legislative session, AB 3018 dramatically increased the penalties for non-compliance with the existing skilled and trained workforce requirements in California. The new penalties include civil fines by the Labor Commissioner up to $10,000 per month per non-compliant contractor, disqualification from bidding on future public works contract, and withholding of payment for delinquent contractors. This update provides information on California’s skilled and trained workforce requirements, identifies key issues on compliance to avoid penalties, and discusses the impact of enforcement on construction professionals’ business practices.

Who Needs to Comply with California’s Skilled and Trained Workforce Requirements?

Fast Facts

  • Not every public works contract in California is required to have skilled and trained workforce requirements.
  • If you are required to be listed as a contractor in the proposal or bid, you likely need to comply. If you are not listed as a contractor in the proposal or bid and your contract price does not exceed 0.5% of the prime contract, then you are not required to comply.

Existing California law (Public Contracts Code section 2600, et seq.) authorizes a public entity to require a bidder, contractor, or other entity to use a skilled and trained workforce to complete a contract or project, and requires that the commitment to use a skilled and trained workforce be made in an enforceable agreement that meets specified requirements discussed below.

Existing law requires all public works contracts “relating to school facilities” and “design-build contracts” to comply with the aforementioned trained and skilled workforce requirements.

For other types of public works contracts requiring skilled and trained workforce requirements, if a public works contracting party is not listed on the bid as a contractor or subcontractor and its total contract price is less than or equal to 0.5% of the prime contract, then it is not required to comply with the skilled workforce percentages.

If the contract price exceeds 0.5% of the prime contract, and the contracting party is not required to be listed on the bid or proposal, Labor Code section 1722.1 defines who is treated as a “contractor” and “subcontractor” as “a contractor, subcontractor, licensee, officer, agent, or representative thereof, acting in that capacity, when working on public works pursuant to this article and Article 2.” Article 2 generally requires certain subcontractors who work on public works projects to register with the Labor Commissioner.

Finally, if the contract price exceeds 0.5% of the prime contract and is required to be listed on the bid or proposal, then existing law generally requires these entities to comply with the skilled and trained workforce requirements above. In addition, the contractor or subcontractor need not meet the requirements if, during the calendar month, the contractor or subcontractor employs skilled journeypersons to perform fewer than 10 hours of work on the contract or project. There is not likely to be further clarification on which entities will be treated as “contractors” and “subcontractors” for the skilled and trained workforce requirements until the Labor Commissioner provides additional clarification.

What are the Criteria to Determine whether a Skilled or Trained Workforce Requirement is Met?

Fast Facts

  • Contracts that require skilled and trained workforces can be satisfied by either: (1) employing the requisite percentage of apprenticeship graduates on a qualifying project; or (2) staffing apprenticeship graduates to meet the requisite percentage of hours on a qualifying project.
  • If a contractor is required to be listed on the proposal or bid for a public works contract requiring a skilled and trained workforce, then the contractor must comply with the skilled and trained workforce requirements.

California law defines a “skilled and trained workforce” to mean a project workforce that meets certain qualifications, specifically “graduates of an apprenticeship program for the applicable occupation.” The following table provides a breakdown of the increasing apprenticeship graduation requirements for a public works workforce under existing law:

Year Percentage Graduates Required
2017 30%
2018 40%
20191 50%
2020 60%

Alternatively, for the hours of work performed by skilled journeypersons employed by the contractor or subcontractor on the contract or project, the percentage of hours performed by skilled journeypersons who met the graduation requirement is at least equal to the required graduation percentage.

California Labor Code section 3075 provides details on the required apprenticeship programs to satisfy the graduation requirements for a public works workforce. The apprenticeship graduation requirements can be satisfied by a union or merit shop program including those provided by the Associated General Contractors and Associated Builders & Contractors. These programs can be used by journeyman who have not graduated from an approved apprenticeship program in order to test up or out of a traditional apprenticeship program, but still require the journeyman to participate in, at minimum, a six-month apprenticeship program in order to receive certification for the trade. An apprenticeship program can be administered by a joint apprenticeship committee, unilateral management or labor apprenticeship committee, or an individual employer. A new apprenticeship program can be approved for circumstances where any of the following conditions are met:

(1) There is no existing apprenticeship program approved under this chapter serving the same craft or trade and geographic area;

(2) Existing apprenticeship programs approved under this chapter that serve the same craft or trade and geographic area do not have the capacity, or neglect or refuse, to dispatch sufficient apprentices to qualified employers at a public works site who have requested apprentices and are willing to abide by the applicable apprenticeship standards, as shown by a sustained pattern of unfilled requests; or

(3) Existing apprenticeship programs approved under this chapter that serve the same trade and geographic area have been identified by the California Apprenticeship Council as deficient in meeting their obligations under this chapter.

How do you Demonstrate Compliance with California’s Skilled or Trained Workforce Requirements?

Fast Facts

  • Contractors subject to the skilled and trained workforce requirements are required to submit monthly reports demonstrating compliance with the graduation requirements that are subject to audit and investigation by the Labor Commissioner.

Existing California law requires a successful bidder subject to the skilled and trained workforce requirements to provide monthly reports demonstrating compliance with the aforementioned skilled and trained workforce requirements to the public agency or other awarding body.

Effective January 1, 2019, AB 3018 provides that the public agency or other awarding body must forward a copy of the monthly report to the Labor Commissioner for issuance of a civil wage and penalty assessment and a copy of the plan, if any, to achieve substantial compliance with skilled and trained workforce requirements and the response to that plan, as prescribed, if the monthly report does not demonstrate compliance with skilled and trained workforce requirements.

AB 3018 also amended Public Contract Code sections 2601 and 2602, and added new section 2603, shifting some responsibility for skilled and trained workforce compliance to subcontractors. If the prime contractor fails to comply with the monthly reporting requirements as a result of one noncompliant subcontractor, the public entity or awarding body is required withhold 150% of the value of the monthly billing for that subcontractor until that subcontractor demonstrates a plan to achieve substantial compliance, or until the subcontractor is substituted out in accordance with applicable law. The prime contractor is permitted (but not required) to withhold payment from the subcontractor. The public entity will be permitted to pay the prime contractor for the other work on the project performed by the prime contractor or by other compliant subcontractors.

What are the Penalties for Non-Compliance with California’s Skilled or Trained Workforce Requirements?

Fast Facts

  • Non-compliant contractors can be hit with up to $10,000 in fines per month, disqualification for future public works contracts, withholding of payment for non-compliant service rendered, and subject to additional reporting requirements.

AB 3018 empowers the Labor Commissioner with authority to investigate suspected violations of the skilled and trained workforce requirements and impose civil penalties up to $10,000 per month per non-compliant contractor. In situations where the Labor Commissioner finds that violations of the skilled and trained workforce requirements are willful, the contractor or subcontractor may be temporarily disqualified from bidding on public works projects. Prior to AB 3018, enforcement of the skilled and trained workforce requirements was left to the awarding bodies with no specified penalties.

AB 3018 also empowers the public agency or awarding body and prime contractor to withhold up to 150% of the value of the monthly billing for a non-compliant subcontractor who fails to timely submit the required information or does not demonstrate compliance. Non-compliant prime contractors and subcontractors are subject to additional and onerous reporting requirements to the Labor Commissioner, including declarations as to the accuracy of the information provided under penalty of perjury.

The Labor Commissioner shall publish on its website a list of contractors who are ineligible to bid on or be awarded public works contract, or to perform work as a subcontractor on a public works project pursuant to this section.

What can California Contractors, Engineers, Architects, Design Professionals, and Suppliers Competing for Public Works Projects do to Comply with AB 3018?

Fast Facts

  • Maintaining compliance with the skilled and trained workforce requirements will likely result in increased labor costs for contractors bidding on public works contracts.
  • Increased penalties and enforcement for non-compliance will require additional investment into reporting and compliance work.
  • Staffing and hiring decisions for public works contracts requiring skilled and trained workforces should be made at the time bids and proposals are submitted.

The increased penalties and investigation provided for under AB 3018 turned California’s skilled and trained workforce requirements from an aspirational goal to a present-day reality for contractors working on public works contracts. Given the limited number of apprenticeship graduates in the journeyman workforce, competition for those candidates with the required experience is expected to increase, putting additional upward pressure on labor costs. This is in addition to the already-limited number of qualified workers in the construction industry.

Indeed, in certain locales with public contracts requiring a skilled and trained workforce, apprenticeship graduates may need to be sourced from other locations in order to meet the skilled and trained workforce requirements. In the alternative, employers may need to start their own apprenticeship program.

In addition to increased labor costs, the severity of the penalties for non-compliance will also result in additional compliance-related expenses to ensure that the required information is accurately reported and supported with the Labor Commissioner. This includes costs associated with retaining an attorney familiar with California’s skilled and trained workforce requirements prior to an investigation or enforcement action by the Labor Commissioner to ensure compliance. Thus, contractors bidding for public works contracts subject to trained and skilled workforce requirements will likely be forced to pass these additional costs along to public agencies seeking affected Requests for Proposals which may further winnow out the contractors who are able to earn awarded bids.

Contractors submitting bids and proposals on public works contracts in California requiring skilled and trained workforce requirements should invest additional resources into staffing and hiring decisions before bids or proposals are submitted after California’s passage of AB 3018. Additional preparation well prior to submission of bids, including retaining qualified legal counsel in advance of preparing the bid, should ensure that contractors can maintain compliance throughout the life of a project without being subject to the penalties and fines discussed above.

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Gordon & Rees’ Construction Group consists of more than 150 lawyers across the United States who focus their practice on the comprehensive range of legal service required by all participants in the construction industry.

Brenda Radmacher is an experienced Partner at Gordon & Rees, and noted expert in construction law in California. She is called on as a counselor, litigator, and noted speaker in regard to issues involving land owners, general contractors, developers, and builders, including public works contracts. She has a varied practice with significant experience in representing companies to address risk management issues, handling their litigation, and drafting critical documents and procedures. Nicholas Krebs is an associate in the Los Angeles office and member of the Construction Group. Please contact Ms. Radmacher for all inquiries regarding California’s AB 3018.

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1 AB 3018’s penalties and enforcement become effective January 1, 2019.
The materials presented in this article are intended for informational purposes only. These materials should not be used as legal advice applicable to the reader’s specific situation. In addition, the provision of this information to the reader in does not constitute nor form an attorney-client relationship. No action should be taken on information provided within this website without retaining counsel from a professional attorney. The request or receipt of any information from this website or resulting communications does not constitute an acceptance to represent the recipient of this information. This information is subject to change without notice and should not be relied upon for accuracy and pertinence to the reader’s specific circumstances. This article may constitute attorney advertising.

SB 721 – California Multi-Family Buildings New Require Inspections of “EEEs”

Many in the construction industry and multi-family development field have been closely following Senate Bill 721, or the “Balcony Bill,” regarding new requirements for building owners associated with decks and balconies. After almost a dozen amendments, the “Balcony Bill” finally passed in the state legislature with an overwhelming majority and was signed into law September 17th, 2018, by Governor Jerry Brown.

Balconies and decks, called “Exterior Elevated Elements” (“EEE”) in the statute, are common features in most multi-family buildings in California – where better to enjoy the California sun? However, many of the structures have proven to be problematic at best due to complex intersections of construction trades and design issues as well as limited understanding and effectuation of maintenance. Indeed, the “Balcony Bill” arose largely out of an outcry following the 2015 balcony collapse in Berkeley in 2015, which left six young people dead and another seven injured.

Since the average age of apartments in California is over 40 years, a large segment of the real estate rental market will be affected.

What Buildings Must Comply?

Buildings containing three or more multi-family dwelling units are covered by the Balcony Bill. However, due to significant push back from the common interest development community, condominiums are generally excluded. However, condominium conversions sold after January 1, 2019, must comply with the new inspection requirements.

What are the Inspection Requirements?

The bill covers not just “balconies” or “decks” and their associated supports and railings, but all “exterior elevated elements” – which is notably broadly defined to include “balconies, decks, porches, stairways, walkways, and entry structures that extend beyond exterior walls of the building and which have a walking surface that is elevated more than 6 feet above ground level, are design for human occupancy or use, and rely in whole or in substantial part on wood or wood-based products for structural support or stability of the exterior elevated element – and “all associated waterproofing elements.” The new statute applies to multifamily units with 3 or more units.

The owner of an affected building must ensure that the first inspection is completed before January 1, 2025, and subsequent inspections are required every 6 years after January 1, 2025, or by or before January 1, 2031. The inspections must also include any testing needed to evaluate the conditions. Additionally, condominium conversions sold after January 1, 2019 will need the EEE inspection conducted before the first close of escrow of a separate interest/unit.

However, if a project has submitted for permit after January 1, 2019, the inspection must occur no later than 6 years from the date of certificate of occupancy. Thereafter, the inspection must be performed by Jan 1st every six years. If the property was inspected within 3 years prior to January 1, 2019, and a report was issued stating the EEE were in proper working conditions and do not pose a threat to the public health and safety, no further inspection is required until January 1, 2025. If any immediate threat to health and safety are found, the report must identify that and advise if occupants should be kept out of the buildings, if emergency repairs are recommended, or if shoring is needed. If repairs are recommended, the inspector must prepare a report within 45 days and issue it to the owner and the local law enforcement within 15 days of the report’s publication. If emergency repairs are called for, the Owner is obligated to perform preventive measures including preventing occupant access to the EEE until the emergency repairs are completed.

The inspector’s report must include photos, a narrative, and any test results. In addition, the report must include the repair and replacement work to be performed by a licensed and qualified licensed professional per Health & Safety Code section 17922. Notably, the inspection must include a sampling of at least 15% of each type of EEE.

The report must contain:

  • identification of each type of EEE that does not meet the load requirements
  • assessment of the load-bearing components and associated water proofing elements of the EEE using methods that allow for direct visual observation or comparable means for evaluation of their performance
  • the current condition of the EEE
  • expectations of future performance and projected service life
  • recommendations for further inspections needed

In addition, the repair recommendations are to include work to be done in compliance with the recommendations of the licensed professional providing the report, the applicable manufacturer’s specifications, the California Building Standards Code (consistent with Health & Safety Code §17922(d)), and all local jurisdictional requirements.

What has to be done once an inspection occurs?

The inspector must issue a report with the findings and repair recommendations, if any. If repairs are recommended and there is no emergency situation, the owner has 120 days to apply for a permit and once approved, have another 120 days to complete the repairs, they must be completed within 120 days.

Failure to make repairs timely can be costly as well. If the repairs are not done within 180 days, the inspector (who had been hired by the Owner) has to report the Owner to the local enforcement agency and notify the owner. If within 30 days of this notice, the repairs are not completed, the Owner faces mandatory civil penalties based on a fee schedule set by the local authorities (min. $100/day and max $500/day) until the repairs are completed unless the Owner procures an extension of time from the local agency. Moreover, if the fines are assessed, the local agency can record a building safety lien. If the lien is discharged, released, or satisfied, the notice of discharge must be recorded by the local agency and include the amount of the lien, the name of the agency, the street address, the legal description and assessor’s parcel number, and the name and address of the building Owner.

Who can perform the EEE Inspection?

The requirements for an inspector are fairly broad. A licensed architect, civil and structural engineer, a contractor holding an A, B or C-5 licenses for over five years and with experience constructing multi-story wood-frame buildings are all authorized. Additionally, local jurisdictions can allow specific certified building inspectors from recognized state, national or international associations (e.g., International Code Council). However, a contractor who conducts the inspection cannot perform the repairs called out in his or her report.

Owners of multifamily buildings (and likely mixed use where multifamily is included in the project) with balconies, decks or other exterior elevated elements must pay close attention to their buildings and the requirements for testing and inspections, as well as performing timely repairs to avoid liability under this new law. Real estate developers and landowners of common interest developments (i.e., condos) have a sigh of relief, for now, as there is an explicit provision exempting common interest developments from this law. The idea behind the exemption was due to the fact that the Owner would not have as much control when the project is either a condominium or converted to a condominium, if any such “Owner” could be identified. Due to the nature of all new laws, taking time up front to ensure your actions are going to put you in the best position to comply is highly recommended. Be sure to act early to review your properties and retain legal counsel familiar with construction and this new law as well as a qualified consultant to assist in evaluation of the buildings you own.