COVID-19 is now a global threat. It has had a dramatic impact on the health and livelihood of millions. It is also taking its toll on the economy. With so many factors of business and trade affected, the roofing industry needs to be ready. Prevention is the best defense at this time. As the virus spreads, employers need to take preventative measures. As the number of cases in America increases, contractors need to protect their employees and customers. Employers must have procedures in place for their workers to maintain health and well-being. Unfortunately, there is not much case law to use for guidance, as dealing with pandemics like COVID-19.
Impact of the Coronavirus on the Roofing Industry
OSHA now reminds employers of their existing standards, focusing on their Personal Protective Equipment standards. The Bloodborne Pathogens standard does not apply to COVID-19 as it has a different transmission method. This standard can serve as a helpful framework to put standards into place. There is also an OSHA webpage that provides employers with all current information on the virus. This is to help them establish guidelines and procedures for their workplace. The Equal Employment Opportunity Commission’s advisory is also a valuable resource at this time. The “Pandemic Preparedness” guide for employers allows a broader scope for questioning their employees on health issues. This has been prohibited but in light of recent events, employers can request information about travel or when employees are showing flu-like symptoms. They can also request for employees to have their temperature taken and can send them home at their discretion.
These measures can only be taken however when an employer feels that the employee is a direct threat. There has to be a risk of substantial harm to the health of the individual, others in the workplace, or consumers. Employers have to tread carefully so as not to violate employee rights and guidelines are in place to help them. Any information gained cannot be shared and adverse actions such as termination as a result of any information collected is not allowed.
Supply Chain is Affected
The impact of the virus in China is impacting the world when it comes to production. Global markets and supply chains are negatively impacted each day and this is expected to continue. Mass quarantines, curfews, and travel restrictions are crippling the Chinese economy, workforce, and production. These changes have reached the roofing industry too. Specifically, the most drastic effects can be seen in the supply of solar roofing. Production has almost come to a stop as China is responsible for 70% of the worlds’ photovoltaic panel production.
Aluminum, plastic, timber, and rubber production have all declined too. The lack of workforce to produce these goods is the main issue. Currently, manufacturing plants in China are believed to only be operating at 30%. This will continue to hit the roofing industry until the situation improves. U.S. roofing companies are going to feel higher costs and price fluctuations, material shortages, logistics breakdowns, canceled orders, and extended delays in product fulfillment. Projects will be slowed which impacts the suppliers and project managers. Roofers need to expect these problems and prepare accordingly. They need to evaluate their own supply chains from end to end to identify any vulnerabilities. Identifying potential alternative supply sources, preparing for costs to increase, and installing provisions to protect against increased costs and supply delays are all very important.
Force Majeure Clauses
These clauses need to be included in all contracts. This allocates the risk of performance if performance is delayed indefinitely or stopped because of situations outside of the party’s control. It also advises of the types of events that would cause a project to be suspended or that would excuse performance such as COVID-19 and the resulting changes to the supply chain. The party impacted will be protected by temporarily suspending or terminating the contract due to unexpected events. The event can’t be anticipated, foreseeable, or expected, and the event must be unavoidable. At this time, the coronavirus pandemic and its widespread economical impact are considered an event to be fully covered under this clause. 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 is the inability to perform determined?
- What happens if the event continues for an extended time period?
If you already have this clause in place, you should still review it to make sure that these provisions are clear. Include specific terms in the contract such as “widespread epidemic,” “pandemic,” and “public health emergency”. The court will interpret the clause based on the wording used so it is imperative that these phrases or terms be included.
Price Acceleration Provisions
Protection from labor and material price increases should also be added to contracts. A price acceleration provision allows the roofing contractor to adjust the contract price in any way to reflect changes to labor and material pricing. The price acceleration clause is limited to increases in materials over the course of a single project only. The contractor must provide the prime contractor or owner with evidence that supports the claim and the need for higher charges. Price acceleration clauses can also include a termination for convenience provision. This will enable the contractor to escape a contract if the cost of materials has increased too much, without penalty.
A roofing contractor may find it difficult to include a price acceleration clause in its contract with a prime contractor because both the owner and the prime contractor are looking for fixed prices initially. In this situation, the roofing contractor should consider buying and storing materials prior to construction to avoid any potential increases later on. Requesting a deposit to purchase the requested materials is also a good idea. The subcontractor should consider requesting that the prime contractor also add a similar provision in its contract. This way the prime contractor can seek additional funds from the owner for any labor or price acceleration that occurs throughout the project.
Practice Conscientious Bidding
Roofing contractors need to be especially cautious at this time when providing bids on projects. Especially, if they will not begin construction for a few months. There is no way to know how labor, materials, and supplies are going to change over the coming months. The contractor faces additional exposure for any increases in the costs of labor and materials caused by the COVID-19 pandemic. Estimating these jobs conservatively can potentially make or break a roofing contractor. Especially since the extent of the repercussions of the coronavirus on the market is not yet known. Providing pricing that is lower than the eventual cost of a project can leave contractors in the hole.
There is no current vaccine for COVID-19 and the number of infected individuals increases across the world. There is no way to know when the economy will return to normal. Roofing contractors need to take the appropriate steps to mitigate risks to their company and their employees. As the pandemic continues, there will be impacts on the U.S. construction industry and the roofing industry as the country feels the effects of the damage done to the Chinese supply lines.