The COVID-19 pandemic has brought uncertainty and upheaval to communities and businesses across the country. There is particular confusion in the New York construction industry about which types of construction activities are considered “essential” and therefore exempt from Governor Cuomo’s stay-at-home order. Although the rules are changing daily, we have summarized some of the current construction-related guidelines.
Executive Orders and Related Guidance
On March 17, 2020, Governor Cuomo signed Executive Order 202.6, which requires non-essential businesses to keep at least half of their workforces at home. Over the following days, this directive was revised to require non-essential businesses to keep 100% of their workforces at home.
The Governor directed the Empire State Development Corporation (ESDC) to develop guidance as to which businesses are essential. Initially, ESDC designated “construction,” generally, as an essential business, without any specifics. Thereafter, ESDC issued additional guidance which stated that “skilled trades such as electricians, plumbers” and “other related construction firms and professionals for essential infrastructure or for emergency repair and safety purposes” were considered essential services.
After a question was asked at one of the Governor’s daily press briefings concerning the type and manner of construction continuing in various parts of New York City, the following clarification was issued by the ESDC with respect to essential construction activities:
• All non-essential construction must shut down, except emergency construction, (e.g., a project necessary to protect health and safety of the occupants, or to continue a project if it would be unsafe to allow to remain undone until it is safe to shut the site).
• Essential construction may continue and includes roads, bridges, transit facilities, utilities, hospitals or health care facilities, affordable housing, and homeless shelters. At every site, if essential or emergency non-essential construction continues, existing recommendations must be followed as to maintaining social distance, including for purposes of elevators/meals/entry and exit. Sites that cannot maintain distance and safety best practices must close and enforcement will be provided by the state in coordination with the city/local governments. This will include fines of up to $10,000 per violation.
• These restrictions on construction work do not apply to a single worker, who is the sole employee/worker on a job site.
On March 30, 2020, the New York City Department of Buildings (DOB) issued its own “Guidance to owners and contractors regarding enforcement of Essential vs. Nonessential construction in accordance with NYS Governor’s Executive Order 202.6 and subsequent orders, and the Guidance on Executive Order 202.6 published by NYS ESDC Item 9” (DOB Guidance). This Guidance expands upon the clarifications issued by ESDC and discusses which activities are considered “emergency construction” and “essential construction”.
These clarifications and guidance(s) establish certain criteria for “emergency” and “essential” construction, such as a project necessary to protect the health and safety of the occupants; continuing a project to make it safe to shut down; and certain categories of essential “infrastructure” type activities. The clarifications and guidance(s) also make it clear that work that violates the criteria may subject the violator to a $10,000 fine for each such violation.
The DOB Guidance also provides that work being performed on “affordable housing” is an essential construction activity. With respect to affordable housing, the DOB provides the following guidance:
Construction work on public housing, or a private or multiple dwelling or real property that is a new building (NB) or that is 100% vacant; or is work on unoccupied public housing units for the designation as housing for specific populations (i.e. shelter set aside, domestic violence referrals), or work on the exterior to address emergency conditions requiring immediate corrective action, set forth in Section 1(a)(iii) or within public housing, correction of critical systems for seasonal preparedness for the 2020-2021 heating season of an existing public housing building. Construction work on a private or multiple dwelling or real property that is a new building (NB) or that is 100% vacant that is now used or will be converted to such use: (i) For the provision of affordable inclusionary housing or mandatory inclusionary housing pursuant to the New York city zoning resolution; or (ii) Where no less than 30% of the residential units are subject to a regulatory agreement, restrictive declaration, or similar instrument with a local, state, or federal governmental entity or a local housing authority in a city with a population of one million or more.
Based upon ESDC’s guidance and the DOB’s guidance, electricians, plumbers and other contractors who are restoring essential services such as “heat, hot water, cold water, gas, electricity, or other utility services” or are performing work that “severely affects life, health, safety, property, or significant number of persons,” are permitted to perform such work because it is essential.
Unanswered Questions
Notwithstanding these clarifications, there are numerous questions that remain. For example:
1. New York City Local Law 11, which requires the regular inspection and maintenance of certain categories of masonry structures, is a “safety” law, enacted to address deaths and injuries that occurred as a result of falling masonry from unmaintained buildings. Can this work continue – and on every project? Local Law 11 work is done on “cycles”, based on the length of time allowed between applicable inspections and maintenance. Building owners are often given extensions of time to perform the required maintenance based on the nature and severity of the identified work to be done. However, certain work is often designated as “emergency” in nature and the DOB will often issue violations that identify work of an “emergency” nature. Work that has been identified as “emergency” in nature can likely continue but can the work that could be done in an extension period be performed?
2. The “infrastructure” categories include “hospitals or health care facilities”. Clearly constructing something like a temporary or field hospital is covered. However, what about a landlord who has hired a contractor to do a “landlord’s buildout” for a new tenant who is a doctor. The doctor’s office is unrelated to the current health emergency and will likely not open until the health emergency passes. Is this “essential” construction? Can the landlord demand that the contractor continue working, claiming it is “essential” construction and that the contractor’s failure to continue will be a breach of the parties’ contract? What should the contractor do if it believes that continuing work will be a violation of the law?
3. With respect to the guidance relating to “affordable housing”, what if part of the project is affordable housing? Does the 30% rule apply, i.e., if 30% of the project is affordable per an agreement or declaration, can all the work continue? If so, do the social distancing rules apply to this type of project?
4. As to the $10,000 fine, who is the “violator,” the project owner or the contractor? If the owner demands that the contractor continue work, whether or not the contractor disagrees, can the contractor pass the fine on to the owner if the contractor is given the violation? Furthermore, will violations relate solely to the “social distancing” requirement in the sentence that precedes the establishment of the fine, or to the very act of performing non-essential construction itself?
There are also likely to be other questions that arise. The safest practice would be to apply to ESDC for designation as an essential business.
Other Considerations
There are other practical issues which must be addressed as a result of the limitation on construction activities. For example, the current circumstances may make it impossible to meet contractual deadlines for the completion of work and expose contractors to liability for liquidated damages. These issues should be addressed directly between the contractor and owners and may require amendments to existing contracts to ensure that, once the limitations on construction have been lifted, projects can continue and be completed in a timely manner.
We have also learned that, at least in Nassau County, the Clerk will be accepting the filing of Mechanic’s Liens and Mechanic’s Lien Discharges, even though most filings are currently suspended, as the Clerk is treating them as “emergency” in nature. There is logic behind this practice. A Mechanic’s Lien is notice to the public that there is a claim against the property. The purpose of a Mechanic’s Lien is to protect the lienor’s interest in the property, as allowed by the Lien Law. If the Clerk did not accept the Lien, even if the time to file a lien were extended, the property owner could sell the property (which is currently allowed) before a lien could be filed and the lienor’s rights would be lost. Allowing the filing of the Lien protects the lienor’s rights. Similarly, allowing the discharge of the lien protects the property owner’s rights and allows the property to be sold, even as the lienor’s rights are protected.
Conclusion
The rapidly changing nature of the restrictions on the construction industry has caused serious confusing. We will continue to post real-time updates in our COVID-19 Resource Center. If you need assistance, contact Chris Vatter at (516) 393-8227 or cvatter@jaspanllp.com or Charlie Segal at (516) 393-8234 or csegal@jaspanllp.com.