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Covid-19 Construction Bans Depend on Where, How You Build

March 27, 2020, 10:01 AM

At midnight Tuesday, when Harris County placed Houston under a stay-at-home order, construction work was largely exempted from the local mandate because it was declared an essential industry.

But about 160 miles to the west, in Austin, Texas, most construction stopped Wednesday after the city and Travis County officials announced the industry wasn’t essential.

The differing restrictions between the two eastern Texas markets highlight the changing landscape construction companies face across the country as state and local jurisdictions establish shelter-in-place orders to check the novel coronavirus’ rapid spread.

“It is really market by market,” Gordon Lansford, president and CEO of national commercial contractor JE Dunn Construction Group in Kansas City, Mo., told Bloomberg Law. JE Dunn has about 4,000 employees and $4.5 billion in annual revenue.

Casey W. Morgan, executive vice president of the 1,625-member Greater Houston Builders Association, said local home builders were fortunate that Houston and surrounding jurisdictions allowed construction to be considered essential, with a few minor differences.

In other parts of the country, like in Travis County, construction companies have been forced to stand down indefinitely, creating payroll pressures for small and large companies alike. Union and non-union construction groups are lobbying state and local officials to exempt the industry from coronavirus-response orders or to provide uniformity across jurisdictions—part of a trend playing out across business sectors nationwide.

“Governments are reacting at the state level and federal level so differently that people are trying to do their best to comply, and at the same time think outside of the box to create solutions for these problems that they’ve never had to think about before,” said Cheryl Sabnis, an employment attorney with King & Spalding LLP in San Francisco.

That city’s shelter-in-place order, for instance, allowed cannabis dispensaries to be considered an essential service, as long as businesses follow guidelines about social distancing and limiting public gatherings.

Morgan noted that while construction can continue in the Houston area, builders still need to make adjustments. Many have had to close their offices or model-home showrooms because of limits on how many people can be inside a finished building.

Federal Guidance

The Department of Homeland Security issues guidance on essential industries, but it’s non-binding on state and local governments.

The agency released new guidance March 19 listing sectors and jobs that should be considered essential to providing infrastructure critical to public health and economic security, including industries such as telecommunications, emergency services, energy, and defense. Construction workers were included in the guidance, in addition to a mention of workers involved in “construction of critical or strategic infrastructure.”

The DHS update came a day after the U.S. Chamber of Commerce called on the White House in a letter to issue guidance clarifying which industries qualify as “essential infrastructure” and “essential businesses and services.”

The new federal guidance is a “very good step forward,” said John Drake, the chamber’s executive director for supply-chain policy. “It gives everyone something to point to.”

But states and local governments still have to establish their own restrictions, a process that requires tough decisions but also gives companies and trade groups an opportunity to lobby for their interests.

Policies on which businesses can stay open sometimes differ across state, city, or even county lines—and that’s adding to the uncertainty businesses in numerous industries are facing, according to interviews with several business owners and representatives from employer groups and industry associations.

“We are hearing from small businesses that are just confused, and they feel like they are getting it from all different sides,” said Karen Harned, executive director of the National Federation of Independent Business Small Business Legal Center.

Businesses and trade groups argue that requiring businesses such as certain retail stores or construction companies to shutter operations while allowing massage parlors or golf courses to continue doing business could financially devastate some companies and potentially undermine the public-health goals that mandatory closures serve.

New York Changes

A stay-at-home order that took effect in New York this week didn’t specify, when it was first unveiled, whether the construction industry would be allowed to continue operations. Gov. Andrew Cuomo (D) then announced March 18 that the order was amended to expand the list of essential businesses, including construction.

Brian Sampson, president of Associated Builders and Contractors, Empire State Chapter, said union and non-union construction organizations were “very active in speaking to the governor’s office and the state assembly to argue the case for why construction is essential.” He said maintaining working roads and infrastructure was a central part of the industry’s pitch.

Sampson’s group, which is a non-union organization, is pushing local officials outside of New York to provide a unified approach to determining essential services. Sampson said all 69 ABC chapters have worked together to ensure construction is exempted from mandatory closures. States, including New Jersey, Connecticut, Utah, and New Mexico, have followed New York’s example in categorizing the construction industry as essential, with some regional differences, he said.

“The patchwork approach is always going to be more problematic,” Sampson said. “I think the federal government has a role to provide good guidance to the states, but at the end of the day, state’s rights will rule out, and they will be the ones to make those decisions.”

Social Construction

Keeping construction going in areas where it has been deemed an essential industry could depend on companies showing they can operate without endangering workers. “Nobody is required to come to work,” Lansford, the JE Dunn executive, said.

If an older worker or someone with health concerns decides to stay home to protect themselves, the decision isn’t questioned, Lansford said. He estimated about 10% of the company’s workers have chosen that option.

As for compensation for time away from work, Lansford said that would depend on several factors, such as state and local requirements, union contracts, and recent and future changes to federal law under coronavirus-relief legislation (H.R. 6201) (H.R. 748).

Builders also are looking for Congress and the White House to provide financial relief for some projects that have been halted or postponed.

Stephen Sandherr, CEO of Associated General Contractors, said in a March 26 statement that while the $2 trillion relief bill passed by the Senate late Wednesday will help some construction firms address immediate cash-flow problems, Congress must provide financial compensation for losses incurred on federally funded projects because of Covid-19-related delays and cancellations.

Morgan and Lansford both said keeping workers at least six feet apart isn’t a problem at most building sites. And most workers already wear eye protection and gloves.

JE Dunn’s specific measures for large projects include having crews work in shifts to reduce the number of workers on a site at any time, splitting up break times, and installing more places for workers to wash their hands.

A hidden danger is workers becoming distracted by coronavirus concerns to the point where they don’t pay attention to their physical safety.

“Safety always comes before productivity,” Lansford said.

—With assistance from Tiffany Stecker

To contact the reporters on this story: Jaclyn Diaz in Washington at jdiaz@bloomberglaw.com; Bruce Rolfsen in Washington at BRolfsen@bloomberglaw.com

To contact the editor responsible for this story: John Lauinger at jlauinger@bloomberglaw.com

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