Business and Legal Insights

As the Novel-Coronavirus (“COVID-19”) continues to cause disruption to every aspect of society, the business world and the economy-at-large, nearly every country, state and county has issued unique lockdown, “shelter-in-place,” and similar types of orders restricting the way all of us interact with each other and perform work. As a result, some construction project owners have begun issuing Stop Work Orders and closing projects down during an uncertain time period. Inconsistencies in treatment and messaging, however, are leaving many people and businesses confused about how to respond.

The attorneys at Shutts & Bowen continue to closely monitor the rapid developments taking place in connection to the current crisis. Our attorneys offer guidance to clients in these uncertain times on all areas impacted by the COVID-19 global pandemic, from construction and development related issues, such as force majeure, to nuanced issues involving government, government contracting and loan programs; federal and state tax-related questions; significant labor and employment questions and concerns; all aspects of financial services and real estate matters; and health care. This blogpost is part one in a series of two, focusing specifically on time-sensitive construction industry issues related to Stop Work Orders, Construction Project Site Abandonment, and what you – whether you are an owner, contractor, designer, trade, insurer or finance-provider – need to do to protect yourself and others.

First, what is a Stop Work Order? It is a contractual legal device used in the construction industry to suspend work until a decision or an agreement between the contracted parties is able to be reached. Stop Work Orders can be issued for a myriad of reasons and by various parties, including, governmental agencies, inspectors, project owner representatives, developers, and contractors. Stop Work Orders can be issued for anything from legal noncompliance, such as failure to comply with workers compensation law, violations of the Occupational Safety and Health Act, or unlicensed contracting, to hazardous conditions affecting the project and continued work to payment disputes.

The overarching purpose of Stop Work Orders is typically to minimize the risk of a breach of contract, particularly involving payment disputes, to avoid the possibility of immediate injury or bodily harm, or to deal with an unanticipated condition related to the project site, such as the presence of hazardous materials. Stop Work Orders will typically provide the following information:

• A description of the specific activities being suspended and why.
• Clear instructions or directions for the party being ordered to stop work regarding pending material orders, deliveries, permits and inspections, interruption of services and work, etc.
• Direction on how to manage work flow-down, including communications to trades, material suppliers, and other subcontractors, and related to concerns such as overhead and general condition costs, de-mobilization, re-mobilization (if known), and site security.

Once issued, a Stop Work Order requires the receiver to immediately halt all work-related operations. And no matter the reason for the Order or the existence of valid disputes or countervailing arguments – or whether the cause is something like what everyone is going through right now in response to COVID-19 – it is imperative that all parties involved in an active construction project take immediate action to avoid exposure to significant liability by causing an unsafe condition or hazard. If you are the recipient of a Stop Work Order, you should contact a construction attorney immediately to ensure you don’t run the risk of breaching any portion of your agreement OR being in danger of civil fines or even in some cases criminal penalties.

If you are issued a Stop Work Order, your immediate next steps matter. It is recommended that the affected party take the following actions to comply with the order while preserving your rights:

• Contact your construction attorney, to determine whether you must stop all work activities immediately, and especially if you believe that the Stop Work Order has been improperly issued.
• Take action to avoid creating an unsafe condition or hazard (for more information on how to do this, see part 2 of this blog series)
• Proactively discuss the scope, intent, and logistics of the Stop Work Order with the issuing party.
• Consider whether contract termination will be required or is appropriate.
• Work through the de-mobilization logistics, particularly with a workable plan for re-mobilization, if and when that should become available.
• Make certain all parties agree (or acknowledge) when and for how long the Stop Work Order applies, how it is to be extended (if need be) and how it will be lifted (e.g., by expiration of certain time, written notice, or some other occurrence or event).
• And finally, be sure to document all efforts and responses related to the Stop Work Order.

It is critically important to have a paper trail that serves as evidence of all decisions made and actions taken in response to and compliance with a Stop Work Order. This applies as well to written documentation and proactive communications to all sub-trades, suppliers, and other service providers. Be sure to track all related expenses and to be able to document and source every impact (financial or otherwise) related to compliance with the Stop Work Order.

Whether the basis for a Stop Work Order arises from a payment dispute, unsafe working conditions, imminent hazards like COVID-19, or something else entirely, it is imperative that you take action quickly to protect yourself, your employees, and others.