Changes to Michigan Job Site Regulations & How to Protect your Cash Flow in a COVID Future

Not following job site procedures can cost you valuable time and money! Don’t make easily avoidable, but expensive mistakes during this uncertain time all because you didn’t know. Luckily, one of Michigan’s top construction law firms, Willis Law, is going to share how to best navigate what’s changed since COVID.

Watch this webinar to learn:

  • Job site and contract best practices during the COVID aftermath
  • The cost of social distancing and COVID change orders
  • How to deal with unemployment and employee’s hesitance to go back to work

Webinar Expert

Shaun Willis

Founder, Managing Partner, Construction Lawyer
Willis Law
View Shaun’s Expert Profile

Samuel Gilbertson

Construction Lawyer
Willis Law
View Samuel’s Expert Profile

Michael Willis

Construction Lawyer
Willis Law
View Michael’s Expert Profile

Seth Bloom

Seth Bloom

Senior Director of Attorney Services
Levelset
View Seth’s Expert Profile

Full Transcript

Seth:
My name’s Seth Bloom, I’m senior director of attorney services at Levelset. We work with the attorney network and the expert center. Part of, one of the things we do is host webinars. Today, I’m really excited to have a great firm out of Kalamazoo, Michigan. We have a managing partner, Shaun Willis. In addition to that, we have Sam Gilbertson. Who’s also a partner at the firm. They do a number of things, but a big part of their practice is construction law. So without further ado, I’ll turn it over to Shaun and Shaun can go from there. If anyone has any questions, please post your questions and I will ask Shaun.

Shaun:
All right, thank you, Seth. And welcome contractors and subcontractors to the wild wild West of construction in Michigan, as we know it, post COVID or in the midst of COVID, I should say my name’s Shaun Willis I’m the managing partner of Willis law out of Kalamazoo, Michigan. We have offices in Grand Rapids and Paw Paw Michigan, as well as in Chicago. We do a lot of construction law. I’ve represented as general counsel, the home builders association of Western Michigan for 17 years. And through that I’ve seen, you know, a lot of changes to the construction industry and helped a lot of builders and developers and subcontractors through a lot of the turmoil in 08 and 09. And most recently with the turmoil that’s caused by the COVID. We also offer a lot of estate planning for builders, developers, and subcontractors, and we do a lot of business succession planning. So we help builders and developers pass down their business to their children a lot of times, or to their partners or be bought out. Sam, you want to go ahead and introduce yourself as well?

Sam:
Sure. Thanks Shaun. Sam Gilbertson. I’m a partner at Willis law. Shaun touched on a variety of the topics that we assist our clients with. I specialize in real estate, both residential and commercial, and also from a transactional and litigation side. So we have a lot of cases in which builders get sued by a perfectionist homeowner and we end up representing the builder and, and showing why the homeowner’s expectations aren’t practical for the business industry and for construction standards. So happy to help with any of those types of questions looking forward to this presentation. And I’ll give it back to Shaun.

Shaun:
Thank you, Sam. So most Sam and I will be chiming in on this. There may be some questions posed to us from time to time by the moderators, and we’re happy to answer those and certainly there’ll be Q&A at the end, but basically we’re going to go through the changes to the Michigan job sites the regulations associated with that and how to protect your cash flow, your contracts and your business interests during COVID-19. So we’re going to go through this, these slides job site, best practices, potential contract clauses. You’ll want to add any change orders that should be brought forth as a result of delays, price increases, costs of social distancing waivers and assumption of risk forms for dealing with homeowners and businesses. The unemployment debacle that we’re currently facing any PPP issues and then any questions along the side, there is myself Sam and Seth and there’ll be some contact information at the end, if you need to talk to Sam or I about any current construction real estate or any other legal issues you can go to our website at willis.law or email me at Willis@willis.law. And we will help you to the best we can.

Shaun:
So job site, best practices during the COVID aftermath. We had just talked with did the general membership meeting for home builders association of West Michigan. And this was a pretty hot topic. Mmm. You know, what, what do I do out there with everything going on? And one of the things that we concluded, we talked a lot of, to a lot of senior builders, custom builders that have been building for 30 plus years. And then just folks that build a lot of houses. And one of the things that they’re doing is putting a billboard outline out at the front of the job basically indicating their compliance with these CDC rules. So it’s basically just a kind of almost a social marker if you will. One of the things that we concluded when talking with the builders around West Michigan is that the Facebook police are out and about, and they are on a terror.

Shaun:
And so if, if they catch you not following the rules not only will you hear about it, but, you know, they’re all of their followers on Facebook will know about it and the news might pick it up. So yeah, whether or not you feel a certain way about what’s going on you need to at least show a level of compliance with social distancing measures and whatnot. So this billboard outline would kind of go over the CDC rules and whatnot. It would have the location of masks that people can use on a job site location of wash stations location of the items that you’d use to sanitize your hands either, you know, the, the, the lotion or the wipes or whatever you use. And it would kind of just give a brief outline of the steps you’re taking with social distancing when you can, as well as the rules of the job site for people stopping by and who they need to check into…

Seth:
Real quick. Shaun, I have a question, is there a different in the requirements for COVID safety, between residential and commercial projects, and also is this posting, is that a… Sounds like you have to like…this posting that you’re compliant sounds like you know, when you post your business license, is that a Michigan rule?

Shaun:
No, no rules on any of this, frankly. There, there is a these are just best practices, basically. So as far as commercial jobs, the general contractors on those jobs are going to set the rules that you need to follow, and they might do so through the use of this billboard we’re talking about, but for residential folks, this is something that they would do, one to, avoid the Facebook police, two to keep the homeowners and the neighborhood from, you know, kind of causing any ruckus and then three to protect themselves from the employees, because employee is out there and, and all of a sudden is exposed from somebody else on the job. You know, the contractor can say, Hey, look, I’ve done the best I can do. I’ve posted everything. I provided everything. You know, they went off on their own and broke these rules.

Shaun:
Mmm. And that might include temperature taking. I went to church this weekend. It was a lot of small number of people. And when I got in, a lady put one of those infrared things right on my forehead and took my temperature. And I guess I passed because they let me in. But those are the types of things that you could do to just belt and suspenders type of thing. Keep, keep everything on the up and up. So you’re not accused later of either breaking rules or not being socially conscience or somehow contributing to the spread of COVID. You know, even though you, weren’t trying to you can rest assured that if you, some of these things or most of these things that you’ll have done what you can to protect, uh the employees, the job site and your reputation which is the most important part of that in, in regards to dealing with sick employees, if they take their temperature before they come to work if they’re feeling sick, you, you allow them to stay home. And if, you know, if it looks like they’re taking advantage of you, you have to move on from them. Obviously there is, you know, a lot of issues with sick employees that are sick for the purpose of collecting the additional unemployment. And I’ll get that to that later. But Sam, did you have anything else on this line?

Sam:
Yeah, just briefly. I think as part of the job site billboard outline, you would want to put a statement on there that by entering this job site, you are assuming the risk of coming on. And to some extent, have language like that, you’re wise if you do. But we’ve seen some homeowners use it, or some contractors using this as a deterrent to homeowners, you know, the, the ever present conflict of a homeowner, not listening to the instructions of the contractor and showing up on the job site when you’re not supposed to be there or after hours, et cetera. You know, this is a good excuse if you will, to buffer from that homeowner coming when they’re not supposed to, because you can say that we’ve got some very strict COVID compliance requirements. And here’s our outline illustrating that the people here are only essential personnel and, and that you know, except for, as is already discussed and pre-planned to comply with COVID requirements, you are not to be on, on the job site. So it’s just more ammunition that you can use there.

Shaun:
And you might include building on what Sam just mentioned, include contact numbers for the, the general and, you know, who’s in charge of the job and that like he said, you know, you don’t enter this job site without permission from the general contractor. Here’s the number, a net that can obviously help you out with management of the job in general. But also will help you with compliance from a social perspective. So in regards to your contracts that you use for your your clients businesses, subcontractors, they’re a couple of contract clauses came to light as being very important for future issues. And I’ll let Sam go ahead and cover those.

Sam:
Sure. Yeah. The force majeure clause you may have seen in contracts before that clause basically says that the parties are not obligated to perform if they are prevented from doing so due to reasons beyond their reasonable control historically in Michigan and really across the nation, these clauses have been interpreted very strictly. So if it only lists two or three types of force majeure events, and the incident that happens is not on that specific list, like a riot, flood, act of God, et cetera, then the courts will not expand their view or their interpretation of the contract and allow some, a non-specified event to provide relief for the parties. We’re seeing a change in that philosophy from the courts or, or at least a indicator that they will be changing that philosophy as it relates to COVID because COVID as a pandemic or whatever you would like to define it from a legal sense is not oftentimes listed in these force majeure clauses that we’ve been seeing in that litigants all over the country have been raising.

Sam:
So the issue is, are you exempted from performance due to this force majeure provision? Probably ambiguously says a number of different things that would exempt you from performance, but most likely does not include a specific reference to a pandemic like we have here. So moving forward, you would be wise to include that within the force majeure provision, that a pandemic is expressly a part of that force majeure clause that you are not required to continue performing if, if the pandemic or, or widespread sickness breaks out that prevents you from safely doing so obviously governmental restrictions like we had with the shutdown order, many of the contractors were prohibited from working for a period of time. And so, you know, if it goes to court, you would, you would have a good excuse and, and defense for not performing because you were prohibited by the governmental order. There shouldn’t be an issue there, but better to still have that in your contract and avoid any confusion regarding that.

Shaun:
Thanks Dan, for that, the, you know, one of the things that we always look for in contracts for construction companies is the mechanisms for extensions of timelines and some, some rules surrounding that. So generally you know, extension of the timeline would be done via a change order if it’s done correctly. And when you have a meeting of the minds with a homeowner about that, it can make things go quite a bit easier. The, one of the mechanisms that you can build in is a mediation clause and an arbitration clause. So you’re not hauled into court over these types of things and the mediation clause and requirement to go to mediation prior to arbitration or prior to going to court. It gives you the opportunity to sit down with the client and extend these timelines in a group in agreeable fashion, and to bring in a third party, a moderator if need be a facilitator to bring the parties together. So that’s one of the things that we, we would look for all contractors to add to their contract, if you don’t already have it, but basically specifically to go over the timeline for these types of instances and to extend things.

Sam:
Yeah, I’ll briefly add on that. You will also want to add attorney fee provisions to those contracts. So if you’ve got a homeowner or someone that is suing you frivolously for very minor punch list items that you’ve already fixed, and they’re still disputing, et cetera, if you want to get rid of that lawsuit quickly, or the arbitration dispute quickly best way to do so is to have some ammunition, and that ammunition is to have your attorney fees paid for by the prevailing party. And if you are confident in the fact that you did things right, then there shouldn’t be a deterrent for the homeowner because of the, now they have to consider that they’re paying both their attorney, as well as your attorney,uif, if they do not win. So that’s something we encourage use of in contracts as well.

Shaun:
Correct. The other item mentioned on there as mechanisms for increase in pricing due to government restrictions although not something that you would have thought of before, possibly for sewer assessments and hookup fees and things like that, that weren’t known at the time of contracting, you would have that clause, but obviously for the types of things we’re going through now you know, material prices are going to be up. Labor prices are going to be up and having a clause that indicates that those items will be looked at and may increase due to due to instances out of your control would be important to put into your contract.

Shaun:
So that goes hand in hand with change orders, as a result of delays, price increases, and the cost of social distancing. The contract you have, or you’re in right now is the one that you’re using. And so you, you are going to be hard pressed to change that midstream. However, you are able to execute change orders, obviously that requires a meeting in the minds and signatures between yourself and the homeowner. But some of the items that we’re seeing are increased labor costs because of the social distancing requirement. You’re not as efficient. You can’t do things as fast. You’ve got to space out your, your help. You’ve got to have people staggered on site, in certain instances. All of those things are going to increase labor costs fill out a change order because of that increased material costs. Obviously those material suppliers are having the same inefficiencies as you are.

Shaun:
So the material cost is going to go up. You can bear that burden, or you can pass it on to the, to the customer and that’s up to you and that’s going to be subject to a change order, but it is warranted. If you can show that there’s an actual increase from the time that you know, material increase from the time that you initially contracted and now directly caused by this pandemic. And obviously, you know, because of all of the inefficiencies, there’s going to be increased timelines for completion and setting out a schedule with the homeowner based on those new, newly found inefficiencies is going to help you with communication and overall job management. If you come to terms and put that in writing now the increased cost to comply with CDC guidelines, you’re going to be adding different types of as we talked about in the first slide, different types of personal protection items to the job as well as obviously the cost of inefficiency. And you should go over that with the homeowner in, in honoring safety and come up with a price to increase maybe your profits or the overall overhead based on those inefficiencies.

Seth:
Shawn, have you just to jump in real quick, have you seen, I know none of your clients would do this, but have you seen any kind of industry contractors, subcontractors, contractors out there using COVID as an excuse for change orders or you know slowness, getting projects done or payment issues?

Shaun:
Well, yeah, and absolutely. We have, and it’s not an excuse. I think it’s a warranted excuse right now. I mean, the governor and the state of Michigan shut down construction, these guys couldn’t work for a good long time and it caused a lot of problems. It caused, caused a myriad of problems and now they’re, they’re working so hard trying to keep a dozen people happy where half of them would have been taken care of during the shutdown. So I think it is a good excuse. I think it should be used, obviously you shouldn’t take advantage of that in any way, but to the extent that it fits, you know, where things are at with your business, being honest with the customer and letting them know what’s going on with your business, because of it, I think is, is, is fair. And I think it’ll, it’ll help you if they understand some of the burdens that you have on your shoulders. Sam, do you have anything on that?

Sam:
Yeah, just that with force majeure in mind, like I was just speaking about, if you are trying to hold the homeowner or the client to that job and to performance, you’re saying that no, you still have your obligation to pay me and to comply with our contract, despite this delay, then you need to be very careful about asking for too many concessions based on COVID as well. Because then you’ll be getting the homeowners saying, okay, well, if you need more time to complete this, then I should get a discount because I wanted my home ready three months ago. And yeah, I understand that COVID happened, but if you need more time, I need less money to be contributed towards this. So you do have to be careful like Seth was saying you, we will see this abused I’m sure. And it will be highly litigated between a lot of unhappy homeowners and contractors caught in a difficult position.

Shaun:
Thank you on that. So waivers and assumption of risk forms for homeowners due to COVID. So this homeowner wants the job done as Sam said where they wanted it done three months ago. And why don’t you to throw everything at it? Maybe you’re okay with that. And but as a result or in, in, in lieu of that it’d be important to have the homeowner sign, a waiver and assumption of risk that you’re going to be working on site. You’re going to have several subcontractors and folks there perhaps that, that assumption of risk and waiver form also give some guidance as to what you will do to keep your crew safe, as far as taking temperatures or requiring mask when they get there. Or maybe it says that we’re not going to do any of this, but the homeowner’s fine with it and wants their job done sooner.

Shaun:
Any of those things can be negotiated. And if the, if the homeowner or business owner waives that and says, I know what’s going on, I assume the risk. And I just want my job job done. Get that in writing. Mmm. It gets, fell out distancing rules and protocol or the lack thereof. But if you get it in writing and get it agreed to, then those are the rules of the job, but that will protect you from a later issue of them saying, Hey, your, your, your subcontractor infected my whole family. Well, you know, sir, ma’am, we had this waiver that we had just signed. You knew that that was a possibility you knew what we were going to do to protect against it. We followed the rules we set in place and, you know, you’ve signed this waiver and can’t go after us because of it. Sam, do you have anything on that?

Sam:
Yeah, just to clarify what Shaun’s not saying is you know, here, sign this saying that none of us are going to follow what the is imposed upon us. That’s not what he’s saying there. So obviously you want to comply with any authority above you and, and adhere to that. You would not want to put in writing that you are, you know, we’re going to violate X, Y, and Z, and you agree to this because while that might get you through that job, it would certainly have longterm possibility of, of negative effect upon you and, and your future and your license. So with the, with that exception, yeah. Good point, Shaun.

Shaun:
So there is been a huge issue with employees. Obviously we already had as an industry, a problem with finding skilled employees and employees that want to work 40, 50 hours a week. And that continues to be a problem. And COVID as doubled down on that problem and the unemployment debacle and the employee’s hesitance to work because of a possibility of contracting COVID has made your job even harder. Some of the things that are coming up will make your job a little easier or still going to have the skilled labor problem. Hopefully they start to push that more in high schools and things like that with trade programs and pushing kids in that direction for these great construction and trade jobs they can have. But there’s a sunset on the extra 600 of unemployment on July 31, 2020. Now they’ve been trying really hard to extend this but that has not passed yet. That’s not something that there’s a lot of talk of passing. So those folks that are staying home making 900 plus a week are going to go back to around the three 50 a week, at the end of July and be begging for their jobs back. Seth, you have something on that?

Seth:
I know Shaun, sorry, there’s the add on, add to that. I know down here in new Orleans, we have a big hospitality industry and it’s, you know, this is ravaging. It, you know, it’s having a lot of unintended unintended consequences. Is that generally what the feedback is from your clients and from industry people in the, the Michigan and Illinois area?

Shaun:
Yeah. I mean, it’s not a good thing, especially right now where, where the state is opening back up getting employees to return to the workforce is pretty difficult. When you can get paid for sitting home I can’t say I blame them myself running my own business. If I don’t show up to work, I don’t get paid. And many of you guys are in the same. So I actually have a friend of mine who runs a, a landscaping company in Paw Paw, Michigan. And he put out on Facebook and boosted the post. And he said it was shared 27 times, went to 1900 people asking for someone to come work with him, with his landscape company. He got not a single lead, not a single person with a kid that said, Hey, my kid will come work for you, not a single person, even interested in the job.

Shaun:
So that’s what we’re looking at out there. That’s pretty scary, but I think it changes July 31. So come August, you know, you, you may have an influx of people looking for work. Mmm. And a lot of guys are giving raises to their current employees to keep them on, which is costing them more money, which again is another reason for that change order for purposes of showing the cost increase and get the person’s job done. Mmm. One of the ways. And so some of it’s motivated monetarily, some of it’s motivated because the person might have somebody that’s sick at home. Somebody they might live with their parents who are elderly. They might live with somebody with a copier compromised immunity. In those instances, you need to be able to show that you’re following the CDC guidelines. So you’re safe to come to work. We’ve got the mask, we’ve got the hand sanitizer, we’re working six feet apart.

Shaun:
We can put you on a job where you can work autonomously during the day so that you can avoid other people. But those are the types of things that, that help here at my office, we each have our own individual offices. We have masks and hand sanitizer everywhere. So, and then when our clients come in that need to meet with us we’re, they’re offered masks at the door and hand sanitizer. And, you know, we can, we have conference rooms big enough where we can see sit 12 feet away. So those are the types of things that you, you know, you do to make people feel comfortable and meet them where they’re at in order to get your work done. And the other motivator that you know, I’ve seen a lot of contractors I represent, and boy is, Hey, look if you’re not returning to work, now, I’ll find somebody else. And after the sunset and in July 31, and you want to come back, your job might already be taken. And if you, if you like your job and the people you work with, and you want to keep it, you might want to think about coming back down and stop rolling out the unemployment goal, Sam, anything else on that?

Sam:
I think illustrating flexiibility, giving your workers options, whether like Shaun said, it’s this kind of alternating who was at the job site, any given time, allowing them to come in at hours that they’re comfortable coming in and doing the work. Maybe they want a job and they’re willing to, to work from midnight until three in the morning. And if you’re in a position to be able to allow them to do that, then let them do it. And that way they, they mitigate some of that fear that they’re going to be exposed because they’re the only one on the, on the job site. So when that’s practical, just to make sure to offer that flexibility,

Shaun:
Right? This, this is a been, been a curse and a blessing to a certain extent. If you can look at it that way, this COVID thing as it, it does require you to look at things differently. So for instance, you know, we improved our technology. We’re doing a lot of zoom calls. I’m doing zoom hearings at court. Is it a little bit awful? Absolutely. But is it, does it work? And again, it gets it done. It does. And so you can employ some of this technology right now, attorney Gilbertson, my partner, he’s working from home, you know, that’s totally fine. We can get things done no matter where we’re at. Obviously when you’re building something kind of need to be there. So you guys have got a bigger hurdle overcome than just a, a normal office setting.

Seth:
Sean in the jurisdictions or the areas you practice in geographically, have the courts been pretty receptive have they used technology, you know, in new Orleans here, you know, one parish or County, as we say down here, you know, is up and running. And as a whole lot of functionality where the adjacent parish you know, it was basically, you know, paralyzed, how has it been for you working through them? It sounds like you are able to get some work done, but how have they done that? I think a lot of people are interested in that.

Shaun:
Yeah. So essentially how that works is we do a zoom call just like this and the judges there with his robot and you sit on his bench and he’s got his court reporter six feet away maybe, and I’m asked or not judge, usually doesn’t wear one. And you might be in a conference room with yourself and your client or you know, your client can be on zoom, just like this in another location. I live in Vicksburg, Michigan, and, you know, from my office overlooking my driveway where my kids were playing. Last week I was in a hearing in Detroit, Michigan, and you know what, this time of year with everything going on in Detroit, it was pretty nice not to have to go to Detroit. I could do it from the, from the comfort of my own home from my computer.

Shaun:
And we were able to win the hearing. So, you know, it’s, it’s, it’s it’s pretty nice. The judges seem a little annoyed with it, but we’re you know, our office, Willis Law. We were at the top of our game with technology, and we’re using that as a big advantage. There’s a lot of you know, lawyers that are from an older generation that didn’t grow up with this but we’re able to take full advantage of it and make it seamless. And it’s really helping our clients as a result. Sam, did you have something to add?

Sam:
Yeah, just briefly I represent 253 homeowners against a township that is in our opinion, overstepping its constitutional bounds. And there’s no way I could have had all 253 of those clients in one courtroom for the preliminary injunction hearing that we held just a few weeks ago. Instead they’re able to watch it all live streamed through zoom and YouTube live that the courts are, are employing. So it is a very unique and somewhat beneficial time.

Seth:
Shaun, not to interrupt, but it seems to me after practicing law for 15 plus years, I would hope that some of these that this we’re going to be able to use COVID to kind of accelerate some of the antiquated procedures. I know at least in Louisiana sometimes no, they keep making you come back for kind of perfunctory hearings that seem like they could have been finished on a phone call back in the day or, or a zoom call, some technology like that.

Shaun:
Yeah. I would agree the lesson, knowing parts of it is that it is taking the place of those small hearings that we would go to that were just a matter of course, and we’d spend two or three hours going back and forth to court when we could have done it, you know, logged on 10 minutes talk with the judge, everybody on a zoom call and we’re done. So that has been nice. The federal courts have done quite a nice job over the last, I mean, even 10 years ago, moving everything online. So there’s online filing the, you know, the, the what’s new there is the zoom hearings. But a lot of the state courts have started to adapt the process of law, allowing you the file via email and file via fax and things like that, which is very helpful saves. A lot of paper, saves a lot of headache and just makes the whole process easier.

Seth:
All right. I don’t see any additional questions out there. So if there’s anything that you two have anything else to say in closing Oh, you have another slide or Nope. Yeah, this is a great slide and I’ll just, you know, this is a plug for the Willis Firm. They were so nice to come on and help us with this, so you can contact them directly if you have any questions. If you want to go to our expert center and the attorney network and post the question, we’d love that too, but then you can call the Willis Firm after. And but, but we definitely want to thank them again. I’m the senior director of attorney services at level set. We’re based out of new Orleans with offices in Austin and Cairo. And I’ll just turn it over to you guys, if there’s any final thoughts or any, any additional comments you have.

Shaun:
Well, it looks like our website there at the bottom. It’s actually Willis.Law. So if you type willi.law, I don’t know that you’d find us, but feel free to email me at Willis@willis.law. And that comes to me and I can get it to Sam if he had questions on the real estate on any construction litigation or a state issues you know, certainly feel free to give us a call. We are rated by as one of the best law firms by us news myself top 100 trial lawyers in the nation by national trial lawyers. So you’ll be in good hands if you give us a call.

Seth:
Okay. Well, great. Well, thank you everyone for joining Sam. I’m sorry. Didn’t mean to cut you off, if you’re going to say something.

Sam:
No problem at all. Glad we were able to spend some time talking about what it looks like out there from the litigation standpoint on the construction industry. Happy to help if you have any questions.

Seth:
Thank you two so much. These webinars. I know all our contractors, all our customers out there really enjoy these and we’ll thank the entire Willis law firm. Again everyone stay safe and have a great day. Thank you so much.