Coronavirus Disease (COVID-19) in Construction: Liability, recordability, and financial implications

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Coronavirus Disease 2019 Rotator Graphic for af.mil. (U.S. Air Force Graphic by Rosario "Charo" Gutierrez)

Over the past few weeks, it’s become clear that the world is facing a remarkable health crisis. The coronavirus pandemic has now been detected in most countries worldwide, creating personal, practical, and legal implications for those in the construction industry. To address business considerations of the COVID-19 threat, employers should consider multiple categories of concern:

  • Recordability, EMR, and Insurance Costs
  • Legal Considerations
  • Financial Considerations

Recordability, EMR, and insurance costs

A recent publication from the Occupational Safety and Health Administration (OSHA) has confirmed that COVID-19 is a recordable event; this means that employees who contract the virus while at work must be recorded on an employer’s OSHA300 Log. These cases may be compensable under Worker’s Compensation if it can be proven that the virus was contracted on the job (which is fairly simple to uphold if multiple employees become infected at the same time). In other states, it has already been decided that Worker’s Compensation will be extended to workers exposed to COVID-19 on the job and will be inclusive of time in quarantine, medical testing, medical expenses, and indemnity payments while out of work.

Considering the long incubation and recovery periods associated with COVID-19, these recordable events are likely to have high levels of “Days Away From Work” and “Restricted Duty”; furthermore, due to the contagious nature of the virus, there is significant potential for multiple cases within a company after the first case appears. An employer’s Experience Modification Rate (EMR) is calculated based upon both of these figures (number of claims and severity of claims). This means that a COVID-19 situation in the workplace has the potential to make a company’s EMR, as well as the corresponding insurance premiums, skyrocket. These figures are kept on a company’s record for a total of three years, thus impacting the ability to bid and receive work long term.

LEGAL CONSIDERATIONS
When thinking about the legal implications of COVID-19, employers should consider the regulatory requirements outlined by various parties. A few of the regulatory agencies most pertinent to the construction industry, as well as the standards which apply to the COVID-19 pandemic, are outlined below:
Occupational Safety and Health Administration (OSHA)
  • Protective Equipment (PPE) Standard (29 CFR 1910, subpart I): Requires using gloves, eye, and face protection when necessary to protect workers.
  • Respiratory Protection Standard (29 CFR 1910.134): Requires the implementation of a full respiratory protection program (including medical fit testing) when respirator usage is mandated by the employer. N-95 “dust masks” are classified as respirators per this standard.
  • General Duty Clause (29 USC 654(a)(1)): Requires employers to furnish to each worker an environment “free from recognized hazards that are causing or are likely to cause death or serious physical harm.”

Americans with Disabilities Act (ADA)

  • Under the EEOC’s Pandemic Response Guidelines, you may ask your employees about their potential exposure to COVID-19 (including travel history and symptoms). Nevertheless, you cannot legally ask about their family’s exposure under the Genetic Information Nondiscrimination Act (GINA).
  • If you decide to offer remote work options for your team, you must make all reasonable accommodations for those team members as per ADA guidelines. For example, if you provide a screen-reader on an employee’s office computer to assist with their poor vision, you must make that same software available on their home computer during remote work operations.
  • Forcing an employee to take their temperature while at work is a medical examination under the ADA. Certain restrictions apply regarding when this is acceptable in the workplace.

Health Insurance Portability and Accountability Act (HIPAA)

Do not disclose any employee’s COVID-19 status – positive or negative – to any other person.

Family Medical Leave Act (FMLA)

Under the FMLA, employers must provide leave for an employee to care for a serious health condition or the serious health condition of a family member. At this time, it appears that COVID-19 meets the bar of a “serious health condition”, meaning employees may utilize FMLA to protect their jobs for up to twelve weeks (unpaid) while out of work.

FINANCIAL CONSIDERATIONS

Due to COVID-19’s impact on global supply chains, it is likely that the spread of the virus will result in delays and cost overruns in the construction industry. China, one of the world’s largest exporters of building materials, is currently experiencing a 17.2% decline in exports. The party that bears the risk and the losses resulting from construction delays and increased costs associated with materials shortages will be dictated by contract.

Contractors would be wise to review contracts currently underway and consider making revisions to contracts soon approaching.

  • Construction supply houses will likely be one of the first to feel the strain of supply shortages, followed shortly thereafter by contractors unable to find the materials and equipment required to complete projects on time and at costs. In these situations, a contractor’s best option could be to locate more expensive replacement materials, and depending on the contractual terms, the contractor might be required to bear the increased expense associated with replacement materials.
  • The party who bears responsibility for the increased materials costs likely depends on whether or not a price escalation provision was negotiated. Escalation provisions allow a party to request additional funds to cover increased materials costs associated with upward price fluctuations.
  • Contractors can reasonably expect that the virus will impact labor availability, compounding the labor shortage problem well known in the construction industry. Contractors should anticipate progress on construction projects slowing as subcontractors struggle to keep their workforces healthy and mobilized.
  • Contract language dealing with delay damages varies. Some contracts provide for liquidated damages, which provide for a set amount of damages per day/month of delay. Others bar damages for delay through “no damages for delay” provisions. Regardless, it’s possible that the contract provides the contractor with a mechanism by which to seek additional time to perform.

LOOKING AHEAD

The data surrounding coronavirus spread in the United States is staggering, and the Centers for Disease Control and Prevention (CDC) as well as the World Health Organization (WHO) are encouraging continued adjustments and accommodations in the work setting. As business leaders, it is important to consider all categories noted above while navigating this chaotic period. The importance of emergency action planning, business continuity, and remote work/alternate revenue sources cannot be over stressed.

Written by: Julia Kunlo, Certified Safety Professional (CSP), Vice President of Evolution Safety Resources; Ashley L. Felton, Senior Counsel, Michael Best & Friedrich LLP; and Adam P. Banks, Senior Counsel, Michael Best & Friedrich LLP. All three individuals are based in Raleigh, N.C.

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