Below is an excerpt of an article published in the Q4 2024 edition of the National Organization of Minority Architects Connecticut Chapter (NOMAct) newsletter, which offers insights from Robinson+Cole’s Construction Industry Roundtable.

The construction industry, long viewed as a traditional and labor-intensive sector, is poised to experience a transformational shift with the integration of artificial intelligence (AI). From streamlining architectural design to enhancing safety protocols and project management, AI is reshaping how construction professionals operate. However, the journey to widespread adoption has its hurdles, particularly in areas like cybersecurity and workforce adaptation.

A Construction Industry Roundtable event hosted by Robinson+Cole on September 29, 2024, brought together industry leaders from local and national organizations to explore AI’s opportunities and challenges in construction. These organizations included the National Organization of Minority Architects, Associated General Contractors, Associated Builders and Contractors, Design-Build Institute of America, Connecticut Construction Industries Association, Connecticut Building Congress, Construction Institute and American Arbitration Association. Read the full article.

This post was co-authored by Labor + Employment Group lawyers Natale DiNatale, Abby Warren and Christopher A. Costain.

As most employers in the construction industry know, the Connecticut Legislature passed significant amendments to the Connecticut Paid Sick Leave (PSL) law which are set to go into effect on January 1, 2025, for employers with twenty-five or more employees. The amended PSL law includes a few important exceptions for unionized construction companies. Additionally, just in time, the Connecticut Department of Labor (DOL) has published important guidance (Guidance) regarding these wide-ranging changes that employers in the construction industry may find helpful as they revise policies and procedures to ensure compliance with these significant amendments. Highlighted below are some of the most important parts of the amended PSL law and the DOL’s guidance that may impact employers in the construction industry.

  1. The Construction-Related Union Exceptions

The amended PSL law covers all employees working in the state of Connecticut with the exception of certain unionized construction workers. Specifically, the exception applies to individuals who are members of organized construction worker unions to the extent that the union is a party to a contract with a multiemployer health plan in which more than one employer contributes to such a plan so long as the plan is maintained pursuant to one or more collective bargaining agreements between the union and the employers.

Similarly, an exception appears in the amended law’s definition of “employer,” which excludes employers that participate in multiemployer health plans in which more than one employer is required to contribute to such plan, and the plan is maintained pursuant to one or more collective bargaining agreements between a construction related union and the employer.

2. Existing and Pre-2012 Collective Bargaining Agreements

The amended PSL law does not diminish any rights provided to employees under an existing collective bargaining agreement, and it does not preempt or override the terms of a collective bargaining agreement entered into prior to January 1, 2012. Therefore, as the Guidance has clarified, any collective bargaining agreement entered into or renegotiated after January 1, 2012 must comply with the terms of the amended PSL law, including by not requiring documentation in support of a paid sick leave-related absence or prior notice of a qualifying absence, among the other key requirements of the amended PSL law discussed in our prior Legal Update.

3. Two Different “120-Day” Rules in the Amended Law

The amended PSL law provides that covered employees are entitled to use accrued paid sick leave on or after one hundred twenty calendar days of employment, meaning they have been “on payroll” for three months. The Guidance clarifies that the 120 calendar days begins on the employee’s hire date, and that employees who meet the 120 day threshold as of January 1, 2025, do not need to wait to use accrued paid sick leave. Similarly, employees who began their employment prior to January 1, 2025, but have not yet worked 120 days must wait until their 120th day of employment before using accrued paid sick leave.

Also under the amended law, “seasonal employees” (defined as employees who work 120 or fewer days in a year) are not covered by the new law. The important distinction between the new hire waiting period and the seasonal employee workday threshold is that new hires must wait 120 calendar days before using accrued paid sick leave, whereas seasonal employees are not eligible for paid sick leave until they have worked 121 or more days in a year.

The Guidance clarifies that if a seasonal employee remains employed and works 121 or more days in a year, they will become eligible for the use of accrued paid sick leave. Importantly, in such an instance, a former “seasonal” employee would be entitled to use accrued paid sick leave beginning on workday 121 and thereafter, based on the hours worked in their first 120 days.

4. Documentation and Notice Prohibited

Under the amended PSL law, employers are not permitted to require documentation of paid sick leave use from employees.  Instead, employers are permitted to ask employees only if they are taking time off pursuant to the PSL law, but cannot gather specific details or documentation to support the request. The Guidance states that if an employee refuses to provide enough information for an employer to determine that the absence is covered under the PSL law, the employer should not apply the employee’s accrued paid leave to the absence.

The Guidance also clarifies that if an employee uses paid sick leave concurrently with a law that permits return-to-work or fitness-for-duty certifications, such as the federal or state Family and Medical Leave Act or the Americans with Disabilities Act, an employer may request such documentation. However, if such documentation is requested, it may not be used to deny an employee’s use of paid sick leave.

The Guidance also clarifies that as it relates to notice that employees must provide in advance of use of paid sick leave, employers may require employees to provide notice “as soon as practicable” of the need to use paid sick leave, so long as employees are not disciplined for failing to follow the employer’s requirements regarding the timing of the notice.

5. Ensuring Compliance with Existing PTO Policies

With regard to employers in the construction industry that are not exempted from the amended PSL law and who have a paid time off (PTO) policy, the Guidance clarifies that employees who use all of their accrued PTO by taking a family vacation will be deemed to have exhausted their 40 hours of paid sick leave. For future absences in the same year that would have otherwise qualified as a paid sick leave-related absence, the employer would be permitted to require advance notice and documentation, and the other requirements of the PSL law would not need to be satisfied.

However, the DOL cautions that an employee’s absences related to paid sick leave should not be treated as an “occurrence” under the employer’s attendance policy. That being said, employers may have a policy with regard to use of sick time used above and beyond the 40 hours required by law (and presumably, could discipline for various reasons when time is used above the 40 hour threshold).

6. Carrying Over or Paying Out

The amended PSL law provides that employees may carry over up to forty (40) hours of unused accrued paid sick leave per year unless the employer frontloads the time, in which case carry over is not required. The Guidance further clarifies that an employer may also offer to pay out an employee’s unused accrued paid sick leave in lieu of carrying over to the following year, but only if an employer and employee agree. Employers that do not frontload paid sick leave may want to consider offering employees a payout option in order to better manage workforce and staffing levels at the beginning of the following year, before paid sick leave accruals grow.

There is likely to be additional forthcoming guidance from the DOL as the amended PSL law goes into effect beginning in January. In addition to carefully reviewing the amended PSL law and the DOL’s guidance, employers should consult competent employment counsel.

New York law generally enforces a contractual suit limitation that specifies a “reasonable” period of time (usually shorter than the applicable statute of limitations) within which an action must be commenced. The contractual suit limitation needs to be fair and reasonable, given the circumstances of each particular case. The New York Court of Appeals recently examined this precedent in the context of an insurance policy enforcing an insurance contract’s two-year suit limitation period in Farage v. Associated Insurance Management Corp., 2024 N.Y. Slip Op. 05875 (Nov. 26, 2024).

In Farage, a Staten Island multi-unit apartment building was damaged in a fire. The plaintiff owner filed its full repair claim for damages with its insurer six years after the fire and four years after the expiration of the contractual limitation period. The insurer denied the claim. The plaintiff filed suit for breach of contract and breach of the covenant of good faith fair dealing. The insurer moved to dismiss the action based on the two-year limitation provision in the insurance contract.

The insurance policy provided that an insured “may not bring a legal action” under the policy unless: “(a) There has been full compliance with all of the terms of this insurance; and (b) The action is brought within 2 years after the date on which the direct physical loss or damage occurred.” The policy further provided that the “[Insurer] will not pay on a replacement cost basis for any loss or damage: (i) Until the lost or damaged property is actually repaired or replaced; and (ii) Unless the repairs or replacement are made as soon as reasonably possible after the loss or damage.”

The lower court granted the insurer’s motion to dismiss the complaint in its entirety, and the Court of Appeals affirmed. While the owner relied on an earlier New York precedent, Executive Plaza, LLC v. Peerless Ins. Co., 22 N.Y.3d 511 (2014), which allowed the nullification of a suit limitation provision if a plaintiff demonstrates the damaged property could not be replaced within the limitation period, that authority was distinguished because the owner ultimately failed to allege that it reasonably attempted to repair the property within the two-year limitations period but was unable to do so. Without allegations of specific remedial actions to restore the property within the limitation period showing that such provision was unreasonable under the circumstances, a suit limitation provision will be enforced.

Typically, at least one party to a construction contract will benefit from a suit limitation provision. The statute of limitations for contract actions in New York is six years. Reducing this statutory period down to two years by agreement, which should be fair and reasonable for most construction contracts (other than design contracts), limits uncertainty and potential stale claims long after a project is completed. Such a provision should be relatively easy to enforce in court as well.

In a case of first impression in Massachusetts, Lessard v. R.C. Havens & Sons, Inc., 104 Mass. App. Ct. 572 (2024), the Appellate Court confirmed that construction defects, without more, do not constitute property damage within the meaning of a commercial general liability policy (CGL).

In Lessard, the homeowners filed suit against an insured homebuilder for construction defects in their home. After the homeowners won a jury verdict, the homebuilder’s insurer intervened and sought a declaratory judgment that it owed no duty to indemnify the homebuilder under its CGL policy. The superior court entered a declaratory judgment in favor of the insurer, and the homeowners appealed.

The Appeals Court determined that it needed only to address whether the homeowners’ losses constituted “property damage” within the meaning of the CGL policy to reach its decision. The CGL policy required the insurer to “pay those sums that the insured becomes legally obligated to pay as damages because of … ‘property damage’ … to which this insurance applies.” The policy defined “property damage” to mean “physical injury to tangible property, including all resulting loss of use of that property” or “loss of use of tangible property that is not physically injured.” The court acknowledged and accepted the reasoning from other jurisdictions that CGL policies “define ‘property damage’ as ‘physical injury,’ which suggests the property was not defective at the outset, but rather was initially proper and injured thereafter” as well as the common distinction “between claims for the costs of repairing or removing construction defects, which are not claims for property damage, and claims for the costs of repairing damage caused by construction defects, which are claims for property damage.”

The declaratory judgment was affirmed since the homeowners did not provide any evidence of their repair costs at trial, and the underlying jury verdict only awarded damages for the costs of repairing or removing construction defects.

The construction industry often relies on contract forms drafted by the American Institute of Architects (AIA). These AIA forms include agreements between owners, designers, consultants, contractors, subcontractors, and construction managers. Some prefer to use the forms in the stock form, but others prefer to modify the language to their benefit. These modifications can be made in Microsoft Word and uploaded into AIA’s current web-based system, ACD5, to create redlines against the standard AIA forms (Checked-Drafts) and final clean versions without the “DRAFT” watermarks. Law firms and clients keep repositories of these modified templates for future projects.

A common issue with modifying documents offline in Microsoft Word and passing the documents back-and-forth between different email and document management systems is that the metadata of the forms becomes corrupted. AIA technical support then must reset the metadata, which takes hours or days. This delay can pose challenges to clients when they are up against a deadline.

AIA is creating a new system, Catina, to replace ACD5 and address some of these issues. Catina intends to improve the ACD5 experience by allowing users to input values, modify language, and share the forms within the web application. Catina aims to reduce the risk of document corruption by keeping the documents within the web application and avoiding editing documents offline or sharing them across email and document management systems. However, there are concerns with how Catina will be used in the real world.

First, most businesses are accustomed to editing Microsoft Word documents offline, and disrupting that workflow would be time-consuming. Fortunately, Catina will maintain the functionality of modifying forms offline and then uploading the modified documents to the web application.

Second, because Catina has different document metadata that intends to reduce the risk of corruption, documents previously generated and modified through ACD5 will not be forward-compatible with Catina. The repositories of historically modified templates generated through ACD5 will be less useful because of the lack of compatibility with the new system. Contract language modified and negotiated five years ago in an ACD5-based document may need to be manually transferred to a new Catina-based document. This may have the unintended consequence of increasing the time required to generate a new agreement until firms and clients generate similar repositories with Catina-based documents. Currently, there is a plan to sunset the ACD5 platform at the end of 2025, and any finalized documents in ACD5 will be automatically moved to Catina-based formats. However, draft documents in ACD5 and, more importantly, contracts kept in local repositories will not be automatically moved into Catina-based formats. Catina’s development team states that they are looking into making ACD5 files forward-compatible with Catina, but no commitment has been made at this time.

Clients and firms should be aware of the forthcoming changes to Catina and how it will impact workflows. Please reach out to the AIA team for more information: education@aiacontracts.com.

This post was authored by Jonathan H. Schaefer who is a member of Robinson+Cole’s Environmental, Energy + Telecommunications Group.

On December 11, 2024, the Occupational Safety and Health Administration (OSHA) announced it finalized a revision to the personal protective equipment (PPE) standard for the construction industry. The final rule adds specific language to the existing standard requiring employers to provide properly fitting PPE for construction industry workers. This change aligns the construction industry with the standards in place for the general industry.

According to OSHA, many types of PPE must properly fit workers. Improperly sized PPE can ineffectively protect workers, creating new hazards for them, such as oversized gloves or protective clothing being caught in machinery and discouraging use because of discomfort or poor fit. OSHA stated that the longstanding issue with improperly fitting PPE particularly impacted women, as well as physically smaller or larger workers. 

Starting in January, construction employers will need to give their workers well-fitting safety gear. Among other equipment, this includes gloves, high-visibility vests, goggles, fall protection harnesses, and helmets that “properly fit” the workers. However, the final rule does not provide clear guidance on how employers or workers determine if PPE properly fits. OSHA only provided a limited number of examples of ill-fitting gear, such as long pants legs that could lead to the employee tripping and welding gloves too large for the employee to pick up items.

Publishing this final rule coincides with a post-election push by federal agencies to finalize major agenda items before January. However, the PPE final rule will still be subject to the Congressional Review Act and thus subject to being overturned by the next administration. That being said, the rule has enjoyed support from both industry and labor.

This post is also being shared on our Environmental Law + blog. If you’re interested in getting updates on legal news and perspectives and related issues impacting the environmental industry, we invite you to subscribe to the blog.

Simply including a requirement in a contract to add certain parties as additional insureds under a commercial general liability insurance (CGL) policy may not be enough to ensure such coverage is provided in New York. In New York City Hous. Auth. v. Harleysville Worcester Ins. Co., 226 A.D.3d 804 (2024), the New York Supreme Court Appellate Division – Second Department ruled that the language in an insurance endorsement required privity of contract with the insured party subcontractor to obtain additional insured status and denied coverage to others despite a provision in a subcontract requiring such additional insured coverage.

In this case, an owner entered into a contract with a general contractor for construction services. The general contractor entered into a subcontract with a subcontractor. The subcontractor agreed to procure and maintain a CGL policy naming the owner, the general contractor, and another related party as additional insureds thereunder. An employee of the subcontractor was injured on the project and sued the three additional insureds and several other parties. Subcontractor’s insurance company refused to defend and indemnify any party other than the general contractor. All the parties sued by the subcontractor’s employee brought an action against the subcontractor’s insurance company, seeking coverage for defense and indemnification as additional insureds under the subcontractor’s CGL policy.

The subcontractor’s insurance endorsement at issue is provided in the below relevant part:

Who is an insured is amended to include as an insured any person or organization for whom you are performing operations only as specified under a written contract … that requires that such person or organization be added as an additional insured on your policy.

The court interpreted the prepositional phrase “for whom” to require privity of contract between the named insured subcontractor and the party seeking additional insured status. Since the general contractor was the only party who contracted directly with the subcontractor, only the general contractor qualified for additional insured coverage under the terms of the CGL policy. Even though the subcontractor agreed to add other parties as additional insureds in the subcontract, the language in the endorsement precluded all other parties not in privity with the subcontractor from additional insured coverage. The court also ruled that the language in the subcontract incorporating the terms of the prime contract between the owner and general contractor, which required the general contractor to add the owner as an additional insured under its policy, was insufficient to confer additional insured status on the owner with respect to the subcontractor’s policy.

To ensure additional insured coverage in New York, owners and general contractors should obtain and review copies of all subcontractor insurance policies and endorsements before the commencement of work to ensure a prepositional phrase such as “for whom” or “with whom” relating to privity of contract is not included as a condition of additional insured coverage.

The end of the U.S. Department of Transportation’s (USDOT) Disadvantaged Business Enterprise (DBE) program is getting closer. The DBE program presumes women and minority-owned firms are disadvantaged and sets goals for them to be awarded at least 10% of the value in federal contracts. In a well-reasoned and compelling decision, the U.S. District Court for the Eastern District of Kentucky granted a limited preliminary junction against USDOT’s DBE program in the case Mid-America Milling Co., LLC v. U.S. Department of Transportation, et al., No. 3:23-cv-72-GFVT, 2024 WL 4267183 (E.D. Ky Sept. 23, 2024). The Mid-America court found that the race and gender-based rebuttable presumptions used in the DBE program violate the U.S. Constitution’s guarantee of equal protection under the Fourteenth Amendment.

The plaintiffs in Mid-America challenged the use of the DBE presumption when determining whether a person is socially disadvantaged on the grounds that such a program giving preference to certain companies based on race and gender constitutes unconstitutional racial discrimination. The plaintiffs alleged that the DBA program prevents them from competing on government contracts on equal footing with firms owned by women and certain racial minorities and filed suit seeking a declaratory judgment and preliminary and permanent injunctions enjoining the USDOT from applying the DBE’s race and gender-based classifications.  

The court methodically dismantled the government’s arguments against the plaintiffs’ standing to bring the lawsuit as well as its arguments against the requirements necessary to sustain a preliminary junction. The plaintiffs have standing to bring suit because they sufficiently established an injury resulting from the denial of equal treatment, which is fairly traceable to the DBE program’s race- and gender-based presumption. The plaintiffs also established that their injury resulting from the denial of equal treatment is redressable by a favorable decision by the court.

The court examined the requirements for a preliminary injunction and found all were satisfied. The court held that the plaintiffs would likely win on the merits of their constitutional claims. The government failed to prove that the racial classifications in the DBE program were being employed to further the only applicable compelling government interest of remediating past discrimination. The government offered only broad societal discrimination types of evidence, such as disparity studies, statistical disparity evidence, anecdotal evidence, and expert reports— the court found that such evidence is too broad and insufficient to prove past discrimination against the many groups to whom it grants a preference under the DBE program. The government also failed to prove that the DBE program’s race-based rebuttable presumption was narrowly tailored because it only covers some minority groups and lacks a logical endpoint. The government offered similar societal discrimination evidence to support the DBE program’s gender classifications to remedy past discrimination, which the court also rejected because it failed to prove that the government participated in intentional discrimination within the context of USDOT-funded contracts.

The court also found the plaintiffs would suffer irreparable harm if a preliminary injunction was not issued because contracts with DBE goals would continue to be issued, and when they are, the plaintiffs would be at an automatic disadvantage to certain types of competitors. Lastly, the court concluded that the temporary relief sought would not cause substantial harm to others and would serve the public’s interest.  

While this decision is limited to the contracts the plaintiffs bid on in Kentucky and Indiana, its comprehensive analysis of the applicable law might serve as a guideline for similar actions nationwide and ultimately the U.S. Supreme Court.

Dispute resolution provisions that grant one party the unilateral right to choose either litigation or arbitration to resolve disputes are common in the construction industry. The main difference between the two forums is that courts are more likely to strictly enforce contract terms as written as well as the applicable law, while arbitrators make decisions on more equitable considerations, untethered to the contract terms and—to some degree—the law. The party with the sole discretion to select the dispute resolution procedure can select the process most beneficial to its interests based on the nature of the dispute, regardless of who brings the claims. In Atlas Electrical Construction, Inc. v. Flintco, LLC, 550 P.3d 881 (N.M. Ct. App. 2024), the Court of Appeals of New Mexico recently held that an arbitration provision in a subcontract, under which the contractor retained the exclusive right to choose whether disputes arising under the subcontract were litigated in court or arbitrated was unreasonably one-sided, substantively unconscionable, and unenforceable.

The Atlas Electrical case involved two sophisticated entities with equal bargaining strength to negotiate the terms of a subcontract. The parties agreed to a subcontract provision which provided in the relevant part:

In the event [contractor] and [subcontractor] cannot resolve the dispute through direct discussions or mediation … then the dispute shall, at the sole discretion of [contractor], be decided either by submission to (a) arbitration … or (b) litigation …

The subcontractor filed a lawsuit in court, and the contractor moved the court to compel arbitration. The lower court granted the contractor’s motion, and the subcontractor appealed, claiming the arbitration provision was substantively unconscionable and unenforceable. The Court of Appeals analyzed the arbitration provision under the principles of state contract law, which calls for enforcing the terms of a contract unless there is a claim of fraud, unconscionability, or other grossly inequitable conduct.  

On appeal, the contractor conceded that the arbitration provision was facially one-sided but still fair and reasonable and should be enforced. The contractor argued that both parties were sophisticated parties with equal bargaining power, the subcontract price was over $10.7 million, the subcontractor was able to, and did, in fact, negotiate the subcontract terms and failed to make any changes to the arbitration provision—the court rejected this argument. Since the contractor retained the exclusive right to choose whether disputes arising under the subcontract are litigated or arbitrated and the subcontractor retains no right under the subcontract to choose the forum for dispute resolution for any reason whatsoever, the contractor carved out a choice of forum for its preferred claims while also forcing the subcontractor to submit to contractor’s choice of forum for the subcontractor’s preferred claims. The court held that such an arbitration provision is so unreasonably one-sided and substantively unconscionable that it is unenforceable. The court ordered the arbitration provision to be severed from the subcontract and remanded the case to the lower court for further proceedings.

While this decision is limited to New Mexico, contract law analysis is similar in most other states, and the reasoning in this case may resonate with other state courts as well.

On August 6, 2024, Massachusetts Governor Maura Healey signed the Affordable Homes Act (the Act) into law. The Act aims to counter the rising cost of housing in the commonwealth by implementing new policies and providing funding for the construction of affordable housing. New policies include:

  • A requirement that municipalities permit the construction of accessory dwelling units (ADUs) on the same parcel as a primary dwelling.
  • A requirement that municipalities permit the construction of single-family residences on previously unbuildable lots held in common ownership with an adjacent residential lot.
  • The creation of a commercial property conversion program to support the conversion of commercial space into housing or mixed-use developments.

The Act also unlocks over $5.1 billion in new funding for the renovation of public housing, construction of new affordable housing developments, and various sustainable and green housing initiatives.

The Act amends Massachusetts General Law chapter 40A, § 3, to prevent municipalities from requiring zoning variances for the construction or rental of ADUs on parcels zoned for single-family homes and prevents any requirement that ADUs be owner-occupied. Municipalities may still require that ADUs comply with requirements for site-plan review, bulk and height limits, setbacks, and short-term rental bans. Municipalities are permitted to require an additional parking space for ADUs, except if the ADU is located within a half-mile from any commuter rail station, subway station, ferry terminal, or bus station.

The Act also amends Massachusetts General Law, Chapter 40A, § 6, to allow the construction of single-family homes on residential lots that are held in common ownership with an adjoining residential lot. Under prior law, a municipality was permitted to treat adjoining residential lots held in common ownership as a single lot for zoning purposes. As a result, owners of such lots were prevented from building an additional home on the vacant lot, even if the lot would be buildable if not held in common ownership. The Act now permits the construction of homes on these lots if the lot conformed with certain zoning requirements at the time of recording; the lot is not less than 10,000 square feet and has at least 75 feet of frontage, and the lot is in a single-family zoning district. Homes built on these adjoining lots are limited to 1,850 square feet of heated living area with a minimum of three bedrooms. The Act prohibits these homes from being used as seasonal or short-term rentals.

The Act creates an office conversion program that will support the conversion of certain commercial buildings from commercial-use to residential- or mixed-use developments. The new program will allow developers to apply for a “qualified conversion project” certification. Completed qualified conversion projects will then be eligible to apply for a tax credit of up to 10% of the development cost for the project’s residential portion.

The Act authorizes $5.16 billion in new spending for affordable housing initiatives over the next five years. Included in this new funding is $2 billion for capital improvements to the Commonwealth’s public housing; $800 million for the Affordable Housing Trust Fund, which supports the construction and preservation of housing for people with incomes that do not exceed 110% of the area median income; and $275 million for initiatives that accelerate new housing strategies, support transit-oriented housing, and support the creation of sustainable multi-family housing.

The passage of the Act promises to significantly impact affordable housing construction in coming years. Owners, developers, and contractors are encouraged to review the Act to determine how best to take advantage of the new policies and funding made available under it.