Industry News

I’ve been getting a lot of questions lately via the Levelset Expert Center, a Q&A platform where lawyers and other industry experts answer construction businesses’ payment questions.

The construction industry is getting particularly challenging right now, so I try my best to help guide them through this crisis as much as I can on topics that I have some expertise in.

Here are three recent questions from construction companies in Texas that I thought others might have and answers provided by various attorneys (including myself) that I suspect fols might appreciate having answers for. If you have a different problem with construction payment, you can visit the Expert Center to ask a question for free.

1. Do construction businesses have to maintain payroll for employees who choose not to work for Coronavirus safety reasons?

A Texas construction company who choses not to shut down or furlough their workforce thus far has one employee who is understandably fearful about being around others amidst Covid-19. How they handle this is important as other employees may request the same treatment. The business owner asked: Am I required to keep an employee’s position open if they refuse to work during the Covid-19 pandemic?

This actually moves more into the territory of employment law than construction law, but it’s a very real conundrum that most if not all construction companies are going to face very soon. For that reason, I first recommend regularly consulting a lawyer who specializes in employment law. The answers today may be very different as lawmakers work overtime to implement solutions to businesses’ sudden issues.

It’s worth checking closely whether or not you are liable if an employee catches coronavirus on the job, too. Regardless, if they still refuse to work, they would be subject to laws surrounding quitting, and you would not need to keep a job open for them when they deem it safe to work again. Again, I highly recommend asking a lawyer if this is still true as of the time you are making a decision.

2. What types of construction are considered essential?

A commercial insulation contractor was asked to continue work, but wasn’t sure if they were allowed to based on the state’s legal definition of “essential” work. Their question was: Is commercial insulation work considered essential?

Everyone wants to know if their job counts as essential, whether it’s because they want to work, qualify for compensation, or stay home safely without losing their job. The rules about whether construction is considered an essential business vary from state-to-state, and even city-to-city.

If you’re in Travis County for example, the city of Austin issued a list of what construction types are essential. They include:

• Public works construction projects

• Affordable housing projects

• Construction of facilities for individuals experiencing homelessness

• Construction of facilities that provide social services

• Construction of facilities that are defined in the Order as Essential Businesses, Essential Government Functions, or Critical Infrastructure

• Construction of facilities specifically required by the City in response to the current COVID-19 emergency

A house inspector had a similar question about whether home inspections were allowed in Dallas. The city can answer this question directly by calling 2-1-1. For Houston, like this general contractor in Harris County, you can email the county at stayhome@cjo.hctx.net to find out if it fits their guidelines. Theirs particularly emphasizes work being necessary and time-sensitive.

3. Am I technically the general contractor or subcontractor?

A very interesting question came in from a contractor who exclusively works on the foundations and driveways for new homes that are sold by a real estate company. Since they don’t know if the homes are sold yet, it’s unclear if the titles is held by the prime contractor/homebuilder, a bank/real estate company or the new occupants. In either case, they asked: How do I determine if I should list myself as the general contractor or subcontractor when sending documents?

Let’s first unpack the difference between whether or not the house has been sold at the time of the project. If the prime contractor is who hired you, you are a subcontractor and you would file as such even if the property had been sold to a new owner before work began. You would only be listed as a general contractor if the new occupant directly entered a contract with you.

Unfortunately, I can only guess which case this contractor falls under based on the minimal information they provided, but a safe fallback in terms of sending out notices correctly would be to send it out to both, or really all potential parties. Especially any parties that may fall under the categories of general contractors or owners. It does no harm and only serves to cover a contractor’s bases regarding payment rights down the road. The better practice is to hire an attorney on the front end that can guide you through these types of issues as Texas lien law is extremely intricate.