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Advice

The government supports construction sites staying open (for now, at least) provided they are operated in accordance with Public Health England…

This is a review of the latest government advice and the impact of COVID-19 on construction sites; the measures that contractors and employers have (or should) put in place to reduce the public health risks arising from COVID-19; and legal issues if you are considering closing sites or suspending works now despite the fact that the government is yet to use any statutory powers to force construction sites to shut down (The Health Protection (Coronavirus) Regulation 2020).

Latest government advice

On Monday 23 March 2020 evening the Prime Minister made an announcement that has no comparison in our recent history, instructing everyone in the country (other than previously listed ‘key workers’) to stay home to save lives; contain the accelerating spread of the COVID-19 outbreak; and to enable the NHS to cope with the pandemic. These wider shutdown measures mean that people should only leave their homes for very limited purposes, including (say the Government) only travelling to work if absolutely necessary (“essential”) and only if your work cannot be done at home. However, the announcement has sparked confusion for the construction industry. A key question now is whether construction sites should be closed down. Since the announcement by Boris Johnson on Monday evening, Government MPs and ministers have sought to confirm that construction work can continue (for now, at least):

  • “if you are working on site, you can continue to do so. But follow Public Health England guidance on social distancing…” (Robert Jenrick);
  • “It’s important to recognise we need to work with the sectors to ensure the work is done and enhance our infrastructure to maintain the economic health of the nation without compromising the public health.” (Michael Gove); and
  • There is a need "to keep the country running". (Matt Hancock)

The decision to keep construction sites open in England is not welcomed by everyone and the Government has been accused of prioritising economics over public health (Andy Burnham).   In contrast to Westminster, the Scottish Government has confirmed that it is now advising construction sites to close (Nicola Sturgeon). In the face of such criticism, Robert Jenrick reiterated on the morning of Wednesday 25 March 2020 that work on construction sites can continue provided that the sites are being operated safety in adherence to Public Health England guidance (including, he said, the on-going need for removal of unsafe cladding from buildings (in the wake of the Grenfell Tower fire)).       

Construction site operations

In light of the COVID-19 outbreak, many contractors who are continuing to work on site have already implemented necessary new measures to comply with social distancing and other guidance. We have listed below some of those measures. However, in the wake of Monday’s Government announcement, some contractors and employers have now made the difficult decision to close sites (Taylor Wimpey) and suspend works temporarily (Transport for London – e.g. Crossrail and other sites (“unless they need to continue for operational safety reasons”)).   More contractors and employers may follow suit as they continue to grapple with a myriad of issues: moral responsibilities; evolving government guidance; and contractual risks and obligations (see ‘Contractual issues’ section below).

Practical measures for construction sites 

  1.  Workers to remain at least two metres apart from each other at all times (social distancing) – i.e. spread out and reduce the number of people working together in one area of the site.
  2. Introduce a temperature validation system.
  3. Workers to cycle or drive to site where possible rather than use public transport; (so far, social distancing is not working on the London underground during rush hours).
  4. Re-usable PPE should be thoroughly cleaned after use and not shared between workers. Single use PPE should be disposed of so that it cannot be reused. Note – there has been HSE guidance on the correct fitting/use of PPE and masks in particular.
  5. Close site canteens/food preparation and eating areas (avoid gatherings) – workers to bring their own prepared lunch to site and eat alone e.g. in their van, car, or in an open space.
  6. Introduce enhanced cleaning procedures across the site and touch points e.g. office equipment, plant and machinery controls, taps/toilet/washing facilities, handrails.
  7. Disable fingerprint scanners and other security systems that require touching, or clean them thoroughly after every use.
  8. Stagger start times on site to avoid congestion in entrance areas.
  9. Reduce the number of people on site inductions at any one time and hold them outdoors if possible.
  10. Stop workers moving across various sites (potential for cross contamination).

In addition to the 10 items listed above, ‘Employers’ within the meaning of the Health and Safety at Work etc. Act 1974 (“Health and Safety at Work Act”) and ‘Clients’ and ‘Principal Contractors’ within the meaning of the Construction (Design & Management) Regulations 2015 (“CDM Regulations”) must comply with their respective obligations.

Health and Safety at Work Act

It is the duty of every employer to ensure the health safety and welfare of its employees and others that might be affected by the employer’s operations. In relation to COVID-19, employers need to assess the risk in order to ensure that they are not exposing others to harm. That assessment would need to be “dynamic” and take into account the location, nature of the work activity and crucially, the COVID-19 advice from Government which continues to emerge.

CDM Regulations

CDM Regulations, which we reported on last week.  Click here to view Richard Vaughan's update.  The Principal Contractor may be taking all the right steps to ensure the health and safety of its workers on site, however, he must also ensure the compliance of all other contractors and sub-contractors on site. The Principal Contractor should assess the behaviours of the other contractors/sub-contractors on site and the impact that they may be having on the overall safety of the project and the Principal Contractor’s own site employees. For example, if a contractor/sub-contractor is not following social distancing guidance and is, therefore, placing the Principal Contractor’s own employees at increased risk of contracting COVID-19, then the Principal Contractor should take necessary action. In any event, the Principal Contractor should seek reassurances from all other contractors / sub-contractors on site that its employees have received suitable guidance and have proper systems in place to safeguard against COVID-19.

With stringent application of the above measures, legislation and regulations, it is hoped that construction sites can remain open for now, without increased risk to the health and safety of construction workers and the public. However, the Government’s position on construction works and the COVID-19 outbreak must remain under close scrutiny.

Employment issues

If you are an employer or contractor and you elect to close construction sites and/or or the Government does at some point invoke statutory powers to force construction site closures, you need to consider the effect upon your employees i.e. those employees who are unable to work from home but who are still fit to work. Broadly speaking, there are three options for the employer: lay-off, redundancy and the newly introduced “furlough leave”. These options will not be available for the self-employed, they will be able to claim Employment and Support Allowance and/or Universal Credit.

On 20 March 2020, the Chancellor announced a package of support for businesses affected by the coronavirus crisis, including grants available under the Coronavirus Job Retention Scheme. The scheme is intended to support employers to continue paying employees who would otherwise be made redundant or put on an unpaid period of lay-off. It is open to all employers with a PAYE scheme, including public-sector employers and charities. Under the scheme, if a worker is designated as a "furloughed worker", a grant will be available from HMRC to reimburse the employer for 80% of the wage costs relating to the worker, up to a maximum of £2,500 per month. Payments can be backdated to 1 March 2020. The worker should not perform any work for the employer while on "furlough leave". Unless the employer has a contractual right to lay off workers, it will need to obtain the worker's agreement to be placed on furlough leave. This is unlikely to present an issue in most situations, if the worker is aware that the alternative is redundancy or lay off.

If an employee is self-isolating in accordance with Government guidance, there are various sick pay scenarios that arise. We have a specialist employment team which has received an unprecedented number of enquiries from the construction industry over the last few weeks and they are here to help you, please contact Adele Shortman at Adele.shortman@weightmans.com.

Contractual issues

Work together

Given the unprecedented circumstances we face because of the COVID-19 outbreak, it is now more important than ever that parties work collaboratively on construction projects to find commercial and contractual solutions to enable projects to get back on track as quickly as possible.

Impact of Suspension of Works

If the parties are minded to suspend works due to the COVID-19 impact and Government guidance, the terms of the suspension should be clear and the parties should collaborate to find a workable commercial solution that will enable the project to resume as soon as possible (time period to be subject to COVID-19 developments).

In particular, whilst employers may want to avoid issuing formal instructions under the building contract to suspend works as this could shift the time and/or cost risk from the contractor to the employer (for example, under the JCT standard form suite of contracts), contractors will want to ensure there is a pause on liquidated and ascertained damages and termination provisions. 

Impact on Cash Flow - Interim Payment Regime

If the progress of work on construction sites is being affected because of implementation of the government health and safety measures, this will lead to reduced valuations and, potentially, cash flow issues for contractors. This could be a major problem if employers maintain strict adherence to contractual payment mechanisms. Contractors need to secure cash flow in the short term, therefore, for the sake of the liquidity of the construction industry going forward, parties could seek to agree an alternative payment regime for a set period (and subject to review) to take into account the COVID-19 impact.       

Indeed, in relation to Government construction projects, the Government has issued advice to public authorities (Cabinet Office Procurement Policy Note PPN 02/20 (the “PPN”) https://www.gov.uk/government/publications/procurement-policy-note-0220-supplier-relief-due-to-covid-19 to ensure that they pay the supply chain quickly so that any projects on suspension or working at reduced capacity can be resumed swiftly once the COVID-19 outbreak is over/or adequately contained. The PPN advocates extreme measures in critical situations including, contracting authorities to consider: accelerating payment practices; allowing advance payments up to a cap of 25% of the contract sum; and considering paying disputed invoices without admission of liability and with a view to reconciling at a later date.

It is important to point out that the PPN contains guidance only and is not strictly mandatory.  However, in critical situations the advice contained within the PPN is worth considering in the context of both public and private sector projects. A pragmatic approach will be required in order to manage contractual relationships and achieve project completions.

Conclusions

The Government recognises the need to work with the construction industry to ensure that projects are completed “…in order to enhance our infrastructure to maintain the economic health of the nation without compromising the public health.” (Michael Gove). We cannot achieve that by long drawn out legal battles. If the shared objective is progress and/or resumption of construction projects once COVID-19 measures have taken effect, parties should work together now to find a commercial and contractual solutions to unprecedented circumstances.

Our construction team has been working with clients to amend construction contracts to deal with the COVID-19 impacts including amendments to suspension, payment and force majeure type clauses.  

If you wish to discuss amendments to your existing construction contracts or contracts currently being negotiated, please contact us.  Contact Ian Hardman, Partner at Ian.hardman@weightmans.com or call 0161 214 0668 and Colette Morgan-Ford at Colette.morgan-ford@weightmans.com or call 0161 214 0558.  WE are here to help you. 

 

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