“This is the worst-case scenario to prepare for,” said Kristan Lund, a meteorologist with the National Weather Service, when talking about the recent wildfires in Los Angeles and the subsequent heavy rainfall.

The aftermath of debris, mudslides and flooding has left a path of devastation, destroying both commercial and residential properties, displacing thousands of residents, and making the reconstruction efforts challenging. The process of disaster recovery extends beyond immediate relief efforts; it involves the intricate planning, permitting, and execution of reconstruction projects.

Insurance Challenges and Coverage Issues

One of the primary concerns for affected property owners is whether their insurance policies cover post-fire mudslides and flooding. Typically, standard homeowners’ insurance and commercial property policies exclude coverage for floods and earth movement. However, under California’s “efficient proximate cause” doctrine, policyholders may still have a valid claim if the primary cause of the flooding or mudslide is determined to be the wildfire.

While Insurers are required to assess whether a wildfire was the efficient proximate cause of the subsequent damage, proving this connection can be complicated and may require expert assessments.

Debris Removal and Rebuilding Obstacles

In addition to navigating insurance claims, property owners must also address debris removal—a critical step before rebuilding can begin. For example, the Los Angeles County Debris Removal Program offers assistance at no cost to homeowners, ensuring that insurance benefits remain available for rebuilding rather than being exhausted on cleanup expenses. However, property owners who opt for private debris removal risk having these costs deducted from their insurance payout, reducing the funds available for reconstruction.

The challenges of rebuilding extend beyond debris removal. Material shortages, supply chain disruptions, and increased labor costs—compounded by potential new tariffs by the Trump Administration—may significantly drive up the price of reconstruction. Property owners may also need to adhere to updated building codes, which can add further costs. Understanding potential insurance benefits related to building code upgrades is crucial.

10 Steps to Maximize Insurance Recovery

To improve the likelihood of a full recovery, property owners should take the following steps:

  1. Review Your Policy Coverage – Understand what your homeowner or commercial propertyinsurance covers, particularly regarding post-wildfire flood and mudslide damage.
  2. File Claims Promptly – Insurance policies often have strict deadlines for claim filing. Report losses as soon as possible and document all communications.
  3. Request Advance Payments – Under California law, policyholders are entitled to advance payments for additional living expenses (ALE) and personal property without itemized lists.
  4. Assess Damage Thoroughly – Consider hiring a licensed public adjuster to assist in the preparation of your claim, particularly if you think your insurer’s appointed adjuster has undervalued your claim.
  5. Utilize City and County Debris Removal Programs – Enrolling in these type of programs may prevent debris removal costs from depleting insurance funds designated for rebuilding.
  6. Document Everything – Take photos and videos of all damage, keep receipts for temporary housing, and maintain detailed records of all interactions with insurers.
  7. Check for State and Federal Assistance – FEMA and state programs may offer additional financial aid for uninsured losses.
  8. Understand the Efficient Proximate Cause Doctrine – Work with legal and insurance professionals to consider whether wildfire may be the primary cause of later damage.
  9. Beware of Scams – In the aftermath of disasters, fraudulent contractors and adjusters prey on victims. Verify credentials before signing contracts.
  10. Consider Legal Assistance – If an insurer denies coverage or offers inadequate compensation, consulting a lawyer with experience in construction and insurance disputes may be necessary.

Recovering from the LA wildfires and subsequent mudslides presents a multi-faceted challenge for property owners. From navigating complex insurance claims to addressing debris removal and escalating construction costs, the road to rebuilding is filled with obstacles. By understanding their rights, taking proactive steps, and utilizing available resources, property owners can improve their chances of maximizing insurance recovery and restoring their properties.

*This post is co-authored with my law partner, Heather Wright, who specializes in insurance coverage matters, helping policyholders maximize insurance recovery under a variety of commercial insurance policies, including property, general liability, and professional liability.

I am sure that my kiddos would understand that title, so shoot me an email if you get it!

In a major win for open competition in federal contracting, the United States Court of Federal Claims ruled against the government’s mandate requiring Project Labor Agreements (PLAs) on large-scale federal construction projects. The decision, issued in MVL USA, Inc. et al. v. United States, (January 21, 2025) (pdf), found that the Biden Administration’s executive order forcing contractors to sign PLAs with labor unions violated the statutory principles of full and open competition under the Competition in Contracting Act (CICA).

Background: The PLA Mandate

PLAs have long been a contentious issue in federal construction. Over the last 30 years, executive orders have swung between prohibiting, encouraging, and now mandating their use on federal projects. President Biden’s Executive Order 14063 implemented in 2022 marked an unprecedented shift, requiring PLAs on all federal construction projects exceeding $35 million. This mandate was formally implemented in 2024 by the Federal Acquisition Regulation (FAR) Council, which directed agencies to include PLA requirements in all relevant solicitations—regardless of whether market research supported their use.

The Legal Challenge

A coalition of twelve major construction firms challenged the legality of the PLA mandate, arguing that it stifled competition, increased costs, and lacked statutory authorization. The plaintiffs cited multiple instances where agencies’ own market research had determined that PLAs would be counterproductive—leading to higher prices and reduced contractor interest—yet agencies were still forced to include the PLA requirement due solely to the executive order.

For example:

  • In one project solicitation, initial research found that a PLA would deter contractor participation due to a local skilled labor shortage. Despite this, the agency reversed course and mandated a PLA.
  • In another case, an agency acknowledged that including a PLA requirement would increase project costs, yet moved forward with the requirement anyway.
  • Most strikingly, an agency deleted prior market research concluding that a PLA would reduce competition and inserted a PLA requirement simply because “the policy judgment [that] project labor agreements are generally good” had been made by the administration.

The Court’s Ruling: A Blow to PLA Mandates

The court ruled in favor of the contractors, declaring that the PLA mandate violated the requirement for “full and open competition” under CICA. Judge Holte found that federal agencies had arbitrarily and capriciously imposed PLAs, disregarding their own market analysis in favor of a blanket executive order policy.

So What? Here are some key takeaways from the decision:

  1. Agencies cannot ignore market realities. The decision reaffirmed that procurement regulations require agencies to promote competition and justify any limitations on bidding. The government failed to provide statutory justification for overriding market research that found PLAs would be harmful.
  2. Presidential policy cannot substitute for statutory authority. The ruling emphasized that the President’s executive order alone is not sufficient authority to override competitive bidding laws. If Congress had intended for PLAs to be required, it would have explicitly authorized them in procurement statutes.
  3. The FAR Council’s implementation of the mandate was arbitrary and capricious. By mandating PLAs in all large-scale projects without regard to actual procurement conditions, the government violated administrative law principles.

Implications for Federal Contractors

This decision is a significant victory for general contractors, subcontractors, and open-shop firms that would have been excluded from federal projects due to their unwillingness or inability to enter into union PLAs. It reinforces the importance of open competition and prevents agencies from using executive orders as a blanket justification for anti-competitive procurement policies.

The ruling could lead to further legal challenges against similar executive orders and procurement regulations that limit competition without clear statutory authority. For now, federal agencies will have to reconsider their approach to PLAs. And, as my kids would say, “No cap! … It is likely that we will see further litigation or legislative efforts on this issue.”

On January 21, 2025, President Trump signed an executive order titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” This sweeping action revoked Executive Order 11246, a policy that had guided federal contractors on affirmative action and anti-discrimination measures since 1965. The new directive eliminates requirements for federal contractors to maintain affirmative action programs, reshaping the landscape for companies working with the federal government.

The changes bring both challenges and opportunities, requiring contractors to act swiftly to remain compliant. There are actionable steps for federal contractors to take now and over the next 90 days, which can easily be understood by looking at the change in policy.

What Has Changed?

Under Executive Order 11246, federal contractors were required to: (1) prohibit discrimination based on race, color, religion, sex, sexual orientation, gender identity, or national origin; (2) implement affirmative action plans to address underrepresentation and promote workplace diversity; and (3) comply with audits conducted by the Office of Federal Contract Compliance Programs (OFCCP).

President Trump’s order eliminates these obligations and prohibits federal contractors from maintaining diversity, equity, and inclusion (DEI) programs that may be seen as violating anti-discrimination laws. Moving forward, federal contractors must:

  1. Certify compliance with all federal anti-discrimination laws.
  2. Remove DEI-related programs from their contracts and operations.
  3. Cease any efforts to balance workforce representation based on protected characteristics.

The changes will officially take effect on April 21, 2025, providing contractors a 90-day window to adjust their policies and practices.

Immediate Steps for Federal Contractors

Federal contractors need to act now to ensure compliance with the new regulations. Here’s a roadmap for navigating this transitional period, which includes a comprehensive policy audit and evalution of workforce roles:

  1. Review Affirmative Action Plans: Assess current affirmative action and DEI programs to identify elements that may violate the new directive.
  2. Update Employment Policies: Ensure hiring, promotion, and pay practices align strictly with anti-discrimination laws without referencing affirmative action goals.
  3. Remove DEI References: Eliminate references to DEI initiatives from internal and external communications, including contracts, employee handbooks, and training materials.
  4. Reassess DEI Roles: If your organization employs diversity officers or teams, redefine their roles to focus on broader compliance rather than DEI-specific objectives.
  5. Train HR and Legal Teams: Ensure HR and legal teams understand the new requirements and are equipped to handle questions or challenges related to the changes.

Tasks to Complete Within 90 Days

As the April 21, 2025 compliance deadline approaches, contractors should focus on these critical tasks:

  1. Impelement Policy Changes: Finalize updates to workplace policies and procedures to eliminate affirmative action-related elements. Communicate changes clearly to employees, ensuring they understand the rationale and new expectations.
  2. Update Contract Documents: Review and revise contracts with federal agencies to certify compliance with the new executive order. Remove clauses related to affirmative action and DEI from active contracts and proposals.
  3. Audit Workforce Data: Conduct a review of workforce demographics and historical affirmative action datae. Ensure no policies inadvertently create the appearance of DEI-related preferences or quotas.

Preparing for the Future of Federal Contracting

The revocation of Executive Order 11246 is a significant policy shift, but it may not be the final word on affirmative action and DEI requirements. Contractors should remain vigilant for potential legal challenges or further policy changes under future administrations. Some states maintain their own affirmative action or DEI requirements. Contractors operating in multiple jurisdictions should monitor state-level policies to avoid conflicts or non-compliance.

Construction contractors often have to deal with classification of employees, particularly those who work in the home office. Today’s guest post by Alexandra Shulman and Leah Lively addresses a recent court decision affecting the wage protection of employees under the the Fair Labor Standards Act (FLSA).

On November 15, 2024, a federal court in Texas vacated a U.S. Department of Labor (DOL) rule (the “2024 Rule”) that increased the minimum salary threshold for employees classified as exempt from overtime and minimum wage protections under the FLSA. The Texas court’s decision nullifies the 2024 Rule nationwide, effective immediately.

Exempt Employee Background
To be exempt from the FLSA minimum wage and overtime requirements an employee must generally meet the following three tests: (1) the salary basis test (the employee is paid a predetermined and fixed amount that is not subject to reduction because of variations in the amount of worked performed); (2) the salary level test (the amount of salary paid to the employee meets a minimum specified amount); and (3) the duties test (the employee must perform executive, administrative, or professional duties).

Under the 2024 Rule, the salary threshold for professional, administrative, and executive exemptions was set to increase from $684 per week ($35,568 annually) to $844 per week ($43,888 annually) on July 1, 2024. A second increase would have raised the salary amount to $1,128 per week ($58,656 annually) on January 1, 2025. Employers were faced with reclassifying exempt employees who did not meet the new minimum salary threshold or increasing their salaries to meet the new threshold.

The 2024 Rule also would increase the salary threshold for highly compensated employees (HCEs) as of July 1, 2024, from $107,432 (with at least $684 per week, paid on a salary or fee basis) to $132,964 (with at least $844 per week, paid on a salary or fee basis). A second increase would have raised the amount to $151,164 (including at least $1,128 per week, paid on a salary or fee basis) on January 1, 2025.

The Texas Lawsuit
In June 2024, following a legal challenge by the state of Texas, a federal district court in Texas temporarily blocked the 2024 Rule from taking effect for Texas state employees. Several business groups joined the lawsuit, seeking to vacate the 2024 Rule nationwide. The court consolidated these challenges and issued its decision setting aside and vacating the 2024 Rule—nationwide—on November 15, 2024.

In reaching its decision, the court determined that the DOL exceeded its authority, stating that the agency “does not have the authority to effectively displace the duties test with such a predominant salary-level test.” It added that this reasoning applied equally to the highly compensated employee exemption and the associated increases to the minimum compensation thresholds.

The court further concluded that the DOL lacked the authority to implement automatic adjustments to the required salary levels for executive, administrative, and professional employees, as well as the HCEs’ compensation amounts, on a three-year cycle.
What This Means for Employers

The Texas court’s decision vacates the 2024 Rule in its entirety. As a result, the compensation threshold will not increase on January 1, 2025, as planned, and the July 1, 2024, increases are invalidated. Effective immediately, the salary level test amount for executive, administrative and professional employees returns to $684 per week ($35,568 annually), and $107,432 annually (including at least $684 per week, paid on a salary or fee basis) for HCEs.

The DOL may choose to appeal the court’s decision, and an appeals court could either uphold or overturn the lower court’s ruling. This process could take place before President-Elect Trump assumes office. If the appeal is unresolved when President-Elect Trump takes office on January 20, 2025, the incoming administration is expected to withdraw the appeal, as the 2024 Rule is considered anti-business.

Employers who have already reclassified employees or increased employee compensation in response to the 2024 Rule may be contemplating whether to revert employee classifications or reduce salaries to align with prior DOL requirements. If you are considering reclassifying employees, lowering compensation, or deciding not to implement previously announced increases, it is advisable to consult with legal counsel to carefully evaluate your strategy and the potential legal implications.

Reminder of State Laws
Several states have their own criteria for determining exempt status, which may be more stringent or have their own salary threshold requirements—e.g., Alaska, California, Colorado, Maine, New York, and Washington. Employers must evaluate exempt status under both state and federal (and sometimes local) tests to ensure compliance with wage and hour laws.

If you have questions about the impact of this decision, make sure to contact Alexandra or Leah.

As a single dad of seven, resolving daily disputes is a common occurrence in my house. Whether it’s whose turn it is to pick the next Netflix stream or who gets the last Crumbl cookie, disagreements are inevitable. Fortunately for my kids, they don’t need to go to an arbitrator or judge to resolve these battles. Instead, they have me, their dad, as the sole decision-maker—immediate, fair (at least in my mind), and no legal costs involved! But for construction industry players, the resolution process isn’t as simple.

In the world of construction, disputes often arise and the language in the parties’ contract makes all the difference. A common challenge is to decide whether disputes between the parties will be resolved by litigation or arbitration. As one contractor recently learned in a New Mexico Court of Appeals decision, the words matter!

In Atlas Electrical Construction Inc. v. Flintco LLC, a dispute arose between a subcontractor (Atlas) and a general contractor (Flintco) over work performed on a large renovation project at the Albuquerque International Sunport. The subcontract included a dispute resolution clause that gave Flintco the sole discretion to choose whether any disputes would be resolved through arbitration or litigation. When Atlas filed a breach of contract claim in court, Flintco invoked this clause and successfully moved to compel arbitration.

Atlas argued that the clause was unfair because it was one-sided—Flintco, the general contractor, had all the power to decide the method of dispute resolution, while Atlas, the subcontractor, had none. The appellate court agreed with Atlas, finding that the arbitration provision was “substantively unconscionable.” The court ruled that the clause was so one-sided it was unfair and unenforceable. The subcontractor had no say in whether a dispute would go to court or arbitration, and this imbalance tipped the scales too far in Flintco’s favor.

So what?  Here is the primary lesson learned from the Atlas decision—whether you are an owner/developer, contractor, subcontractor or supplier, take the time to review every provision of the contract.  Don’t skimp. Don’t get lazy. Don’t assume things will work out.  You see, words matter!

Even if you believe that the contract negotiation has gone your way, understand that a decision-make might come to a different conclusion down the road.  While I, as a father, can make quick decisions to keep the peace in my house of teenagers, construction industry players don’t always have that luxury. This recent court decision is a reminder of how important it is to carefully review and negotiate the terms of your contracts.

I recently blogged about the use of AI and ChatGBT in the construction industry. Today’s guest post by Alexandra Shulman and Leah Lively addresses the recent guidance by the USDOL on the issue of using AI when hiring in recruitment, which is applicable to those constructions who use AI in the recruitment process.

AI in hiring: About 80% of U.S. and almost all Fortune 500 companies use AI-powered hiring software. AI may be used to target online advertising for job opportunities and to match candidates to jobs on employment platforms (e.g., LinkedIn, Indeed). AI may also be used to reject or rank applicants using automated resume screening and chatbots based on knockout questions, keyword requirements, or specific qualifications or characteristics.

With the growing use of AI comes a growing concern by the government (and argument by plaintiffs) that AI tools present a risk of worsening workplace discrimination based on race, gender, disability, and other protected characteristics. AI tools are trained on vast amounts of data and make predictions based on patterns and correlations within that data. However, many of the tools used by employers are trained on data from the employer’s own workforce and previous hiring practices, which, it is argued, may reflect institutional and systemic biases already present in the organization.

The Department of Labor responds to AI: If your company uses (or is thinking of using) AI in hiring, you need to be aware of the U.S. Department of Labor’s (“DOL”) recently issued “AI & Inclusive Hiring Framework.” The Framework is designed to “help organizations advance their inclusive hiring policies and programs, specifically for people with disabilities, while managing the risks associated with deploying AI hiring technology.” The Framework was published by the Partnership on Employment & Accessible Technology, which is funded by the DOL’s Office of Disability Employment Policy.

The AI Framework includes ten focus areas designed to address five overarching themes:

  1. Advertising employment opportunities and recruiting inclusively. Employers utilizing AI in hiring should continue to consider the rights and user experiences of job seekers with disabilities and members of other protected classes.
  2. Impact of procuring AI hiring technology. Employers utilizing AI in hiring technology should consider its impact on their DEIA (diversity, equity, inclusion, and accessibility) initiatives.
  3. Providing reasonable accommodations to job seekers. Employers must continue to provide reasonable accommodations to applicants and employees.
  4. Selecting candidates and making employment offers responsibly. Utilizing AI in hiring does not absolve employers of the responsibility of ensuring that they are complying with applicable federal, state, and local laws in hiring.
  5. Incorporating human assistance and minimizing risk. Employers should develop human oversight policies to address possible AI errors.

What this means for employers. Employers must continue to be mindful of anti-discrimination laws as they begin to integrate AI into the workplace. Employers should take the time to evaluate their AI practices and ensure that proper safeguards are in place to identify and rectify any discriminatory impact. This can be done through:

  • Conducting AI audits. Employers need to know when and how AI is used in the hiring process. Employers should audit the AI tools and algorithms they use in hiring to identify potential bias or discrimination. This can be achieved by having third-party experts, like employment counsel, evaluate the data inputs and outputs.
  • Ongoing monitoring. AI hiring bias compliance cannot be a one-time effort. Companies must implement ongoing monitoring programs to regularly reassess their tools as models are updated and new data is incorporated. To ensure full transparency, feedback loops that provide detailed hiring outcomes are essential.
  • Do not forget the human factor. AI should not be allowed to make final hiring decisions autonomously, as its effectiveness depends on the quality of the data it processes. We recommend that companies equip their HR teams/hiring managers with technical knowledge of AI systems to better manage and evaluate their use.

If you have questions about using AI in the employment process, or would like additional information about compliance with the DOL’s new Framework, make sure to contact Alexandra or Leah.

Alexandra Shulman
    Leah Lively

    When Hurricane Helene struck North Carolina, it caused severe disruptions to construction projects across the state. Baxter International’s North Cove facility in Marion, N.C., was completely shut down after floodwaters damaged the site and bridges leading to it. Elsewhere, landslides and floods wiped out large sections of Interstate 40, making transportation of materials and equipment nearly impossible. Many contractors in western North Carolina found their projects halted, and their schedules thrown off by this force majeure event.

    In situations like these, contractors and subcontractor need a plan to mitigate the impact of such natural disasters on their projects. Here are five practical tips to help you secure time extensions and/or compensation for delays:

    1. Include a Robust Force Majeure Clause in Your Contract

    When disaster strikes, your contract is your first line of defense. A well-drafted force majeure clause can make the difference between bearing the costs yourself and getting an extension or compensation. The clause should clearly list specific events such as hurricanes, floods, and road closures as qualifying force majeure events.

    Make sure the clause also specifies what type of relief you are entitled to—whether it’s an extension of time, compensation for additional costs, or both. Without this clarity, owners may argue that delays due to weather or other external events don’t qualify for relief. As we saw with Hurricane Helene, road closures and site flooding can bring construction to a complete halt. A strong force majeure clause can help shift the risk of these delays from the contractor to the owner, ensuring you don’t suffer financially for something out of your control​.

    2. Provide Immediate Notice to the Owner

    When a force majeure event occurs, time is of the essence. Many contracts have a requirement for the contractor or subcontractor to give prompt notice to the owner as soon as it becomes clear that the event will impact the project timeline. This is often a strict requirement, and failure to provide timely notice can void your claim for additional time or costs.

    For example, if Hurricane Helene causes road closures that delay the delivery of materials, you need to inform the owner right away. This notice should be in writing and include as much detail as possible about how the event will affect your project. Timely notification not only keeps the project owner informed, but also helps to preserve your rights under the contract to seek an extension or compensation later on​.

    3. Keep Detailed Documentation

    After a force majeure event, the burden is often on the contractor to prove that the event caused the delays and that the contractor took reasonable steps to mitigate the impact. Documentation is key to making this case.

    Start by keeping detailed records of how the event affected your project. Take photos of the site conditions before and after the storm, save emails from subcontractors and suppliers about delayed shipments, and keep copies of any official announcements about road closures or weather conditions. This documentation will provide the evidence you need to support your claim for additional time or costs​.

    In addition to documenting external factors, make sure you also track your own efforts to minimize delays. For example, if you rerouted materials or brought in additional labor to catch up, keep a record of these actions. This will show the owner that you took reasonable steps to mitigate the delay, further strengthening your claim.

    4. Coordinate with Local Authorities and Agencies

    In major disasters like Hurricane Helene, local and state authorities often have critical information that can help you manage the impact on your project. For example, www.driveNC.gov provides lived updated information on road closures affected by the storms.

    Staying informed can help you plan around obstacles and demonstrate to the project owner that you are taking the necessary steps to minimize delays. In addition, these updates may provide you with valuable documentation to support your claim. For example, if road closures prevent the delivery of materials, documentation from the state and local agencies can help validate your request for additional time​.

    5. Consider Insurance Options

    While a well-drafted force majeure clause can help protect you from financial loss, depending on the size of the project and whether the owner/developer is foreign, there may be insurance coverage in some limited instances. According to IRMI, force majeure insurance is a type of insurance that can cover certain losses that occur when a project is delayed or halted due to an unforeseen event (i.e., fire, earthquake, war, revolution, flood, and epidemics).

    Force majeure insurance typically covers the costs of restarting a project after a natural disaster, as well as any losses resulting from the delay. In some cases, it may even provide coverage for increased material costs caused by supply chain disruptions—something that was a major issue after Hurricane Helene. In this is part of your insurance program, you can further protect your business from the financial impacts of a disaster​.

    By following these five tips, you can be better prepared to handle force majeure events and protect your construction projects from the financial consequences of delays. Whether it’s including a strong force majeure clause in your contracts or ensuring you have the right insurance, these steps will help you navigate the challenges that come with natural disasters like Hurricane Helene.

    As a construction lawyer, contractor licensing is a very key aspect of my practice. This can include new contractor applications, increase or changes in monetary limits or license classifications, change in ownership or qualifying agent , and, of course, licensing violations.

    The recent decision in Incident365 Florida, LLC v. Ocean Pointe V Condominium Association serves as an important reminder for general contractors and subcontractors regarding the significance of proper licensing and thorough contract review in disaster recovery and construction services.

    Case Overview

    In this case, Incident365 Florida, LLC entered into disaster recovery agreements with several condominium associations (“Associations”) following Hurricane Irma. The agreements involved various tasks such as water damage mitigation, dehumidification, and the removal of unsalvageable materials. However, Incident365 lacked the appropriate contractor’s license when performing the work, which became a focal point in the dispute when the Associations refused to pay the remaining balance of $1 million, citing the absence of the required licensure.

    The Associations argued that under Florida law, particularly section 489.128, Florida Statutes, Incident365 was acting as an unlicensed contractor, which made the contracts unenforceable. The Associations contended that Incident365 engaged in significant demolition and repair work, which required a contractor’s license. Without the appropriate licensure, the company could not legally enforce its claims for breach of contract or seek payment for the services performed.

    Incident365 countered by arguing that many of the tasks it performed, such as water extraction, dehumidification, and sanitation, did not fall under the statutory definition of “contractor” as outlined in section 489.105(3), Florida Statutes. According to Incident365, these tasks did not constitute “construction,” “repair,” or “improvement” to the structure of the buildings, and therefore did not require a contractor’s license. They maintained that if some services did require a license, only those portions of the agreements should be severed, allowing them to recover payment for the services that did not require a license.

    The court found that the statutory definition of a “contractor” under section 489.105(3) was pivotal. It defines a contractor as someone who, for compensation, undertakes activities such as “constructing, repairing, altering, or improving a building or structure.” The Associations asserted that Incident365 was performing activities that constituted repairs or improvements, including removing unsalvageable materials and performing structural dehumidification, which, under the statute, required licensure.

    However, the court acknowledged that some of the activities performed by Incident365, such as water extraction, dehumidification, and anti-microbial application, were not clearly tied to building repairs or improvements and may not fall within the scope of work requiring a contractor’s license. Therefore, the court reversed the summary judgment for most of the claims and remanded the case for further proceedings on whether specific activities like structural removal of affected materials required licensure under Florida law. This case highlights key licensing requirements and their critical role in contract enforceability.

    Key Takeaways for General Contractors and Subcontractors

    This case provides vital lessons for general contractors and subcontractors involved in construction work. Here are three actionable tips to avoid similar legal pitfalls:

    1. Ensure Proper Licensing for All Contracted Work

    One of the main reasons Incident365 was unable to recover the full amount owed was due to performing work without the required contractor’s license. Under Florida law, services such as repair, remodeling, or any work involving structural components typically require a building contractor’s license.

    Tip: Always review your contracts to ensure that the scope of work aligns with your licensure. Subcontractors should also confirm their compliance with licensing requirements before accepting jobs. Some states, like Tennessee, require that only some subcontractor trades have appropriate licensing. Working without the required license can result in unenforceable contracts, jeopardizing payment for completed work.

    2. Regularly Review and Revise Construction Contracts

    The agreements between Incident365 and the Associations lacked clarity on the severability of tasks that did not require a license. The court touched on whether tasks like water extraction and general dehumidification fell under activities needing licensure. While the trial court’s ruling was reversed for some tasks, the lack of clarity in the contract’s language regarding severability led to further litigation.

    Tip: Regularly review and revise your construction contracts to ensure they include clear provisions about the scope of work and any licensing requirements. Including severability clauses can protect your right to recover payment for work that does not require a license, even if other parts of the contract do. Well-crafted contract language is crucial in safeguarding against total contract invalidation.

    3. Maintain Detailed Records and Documentation

    One of the factors leading to disputes in this case was the ambiguity over whether certain tasks, such as mold remediation or structural removal, required a license. Without detailed records or clear industry standards provided, determining the licensing requirements became a point of contention.

    Tip: After reviewing your contract, ensure it includes provisions for keeping thorough records of the scope of work performed. This documentation can help support your case in court if a licensing or payment dispute arises. Detailed records are essential for clarifying whether certain tasks fall under regulatory requirements for licensure.

    Conclusion

    The Incident365 Florida, LLC v. Ocean Pointe V Condominium Association case serves as a crucial reminder for general contractors and subcontractors to ensure they comply with all licensing requirements, regularly review and revise their construction contracts, and maintain comprehensive documentation to avoid legal disputes that could affect their ability to collect payment. Implementing these practices can provide contractors with the tools they need to safeguard their business operations and financial interests.

    Yesterday, I posted about potential construction delays and supply chain challenges resulting from the strike at the East Coast ports, such as New York, New Jersey, Savannah, and Charleston.

    A reader asked me about the specific types of construction materials that may be subject to delays. Geographically, the East Coast ports handle a variety of imported construction materials and supplies, especially from Europe, South America, Africa, and sometimes Asia. With the expansion of the Panama Canal, they also receive goods from Asia, though traditionally West Coast ports have dominated Asian imports.

    Here are specific construction materials and supplies commonly imported through East Coast ports:

    1. Lumber and Engineered Wood Products

    • Plywood and oriented strand board (OSB) from Canada and South America.
    • Laminated veneer lumber and cross-laminated timber (CLT) from Europe.
    • Exotic hardwoods for high-end flooring or millwork from Africa and South America.

    2. Stone, Tile, and Flooring Materials

    • Granite, marble, and limestone from countries like Italy, Brazil, and Spain.
    • Ceramic and porcelain tiles from Italy and Spain.
    • Engineered stone and quartz for countertops from Europe and South America.

    3. Steel and Metal Products

    • Structural steel and rebar from Turkey, Ukraine, and Eastern Europe.
    • Aluminum extrusions and sheet metal from Europe and Asia.
    • Stainless steel products (such as fittings, pipes, and plates) from Europe.

    4. Plumbing Supplies

    • Copper tubing and piping from Europe and South America.
    • Valves, fittings, and fixtures from European and South American manufacturers.

    5. HVAC and Mechanical Components

    • Air conditioning units and ductwork components from Mexico, Europe, and occasionally Asian sources (especially from companies with distribution hubs on the East Coast).
    • Boilers and heating systems from Europe, particularly Italy and Germany.

    6. Glass and Windows

    • High-performance glass and window systems from Europe, including the United Kingdom, Germany, and Italy.
    • Curtain wall systems and specialized glass products for high-rise buildings from countries like Spain and Belgium.

    7. Electrical Equipment and Components

    • Electrical transformers and switchgear from Europe.
    • Lighting fixtures from Italy, Spain, and other European nations.
    • Cables, conductors, and wiring from Europe and occasionally Mexico.

    8. Specialty Building Materials

    • Insulation products, such as mineral wool and foam boards, from European manufacturers.
    • Adhesives, sealants, and coatings from Europe, particularly high-performance products for specialized applications.
    • Elevator systems and escalators, often imported from European manufacturers like KONE and Schindler.

    9. Fasteners and Hardware

    • Bolts, screws, nails, and fastening systems from Europe and South America.
    • Specialty hardware for doors, windows, and cabinetry from European suppliers.

    While West Coast ports dominate Asian imports, East Coast ports play a critical role in handling materials from Europe, South America, and other regions. The materials coming through these ports are often used in both residential and commercial construction, particularly for high-end projects that rely on imported specialty products and finishes. Additionally, the expanded Panama Canal has increased the flow of some Asian goods to the East Coast, though the volumes still generally remain lower compared to the West Coast.

    At midnight on October 1, 2024, longshoremen and harbor workers at major East Coast ports went on strike, causing significant disruptions to the flow of goods and materials of all sorts, including those essential for the construction industry. The strike has brought operations at ports like New York, New Jersey, Charleston, and Savannah—key entry points for a wide array of construction materials—to a standstill.

    The construction industry relies heavily on imported materials, many of which enter the U.S. through East Coast ports. For contractors, subcontractors, and suppliers, the impact is likely to be felt across the country. Delays in critical shipments can affect project schedules, material costs can dramatically , and the potential for long-term disruptions could be significant. But don’t take my word, just listen to the words of Harold Dagget, the President of the International Longshoremen’s Association, who says the strike will “cripple” the economy, including the construction industry:

    What Led to the Strike?

    The strike stems from a breakdown in negotiations between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX), which represents port operators and shipping companies. Central to the dispute are concerns over wages, healthcare benefits, working conditions, and the increasing automation of port operations, which union members believe threatens job security.

    After months of failed negotiations, union members at major East Coast ports walked off the job, bringing cargo handling to a halt at some of the most important trade hubs in the U.S. The strike has not only impacted East Coast ports but is also affecting distribution centers and inland terminals that rely on the steady flow of goods through these key ports.

    Impact of the Strike on the Construction Supply Chain

    With port operations suspended, contractors can likely face delays in the arrival of critical supplies. The materials most likely to be affected by the strike include:

    • Steel and Metal Products: Structural steel, rebar, and sheet metal, commonly imported from Europe, Asia, and South America, are critical for framing, reinforcing concrete, and other foundational elements of construction projects.
    • Lumber and Engineered Wood: While much of the lumber used in construction comes from domestic sources, significant quantities of engineered wood products like plywood, oriented strand board (OSB), and laminated timber are imported from Canada, Europe, and South America. These materials are crucial for framing, flooring, and sheathing in various types of construction.
    • Plumbing Supplies: Copper tubing, PVC piping, and fittings—frequently sourced from Europe and Asia—are essential for the installation of plumbing systems. Delays in receiving these materials can halt mechanical and plumbing work.
    • HVAC Equipment and Electrical Components: Many HVAC units, ductwork components, electrical wiring, switchgear, and transformers are imported, often from China and other parts of Asia. Without these critical components, contractors face delays in installing building systems.
    • Tile, Stone, and Flooring Materials: High-end finishes such as marble, granite, ceramic tile, and hardwood flooring are commonly imported from Europe and Asia. Delays in receiving these finishing materials can impact the final stages of construction projects.
    • Fasteners and Hardware: Nails, screws, bolts, and other hardware, often imported in bulk from international manufacturers, are essential for construction. Even small shortages of these items can cause significant slowdowns.
    • Specialty Construction Materials: Items such as insulation, glass, adhesives, and coatings are also affected, especially custom or specialized products that are difficult to source domestically.

    With a large volume of these goods stuck in containers that remain unloaded at East Coast ports, contractors could face delays, increased costs, and shortages, all of which threaten the profitability and completion of projects.

    Five Practical Tips for Contractors to Address Supply Chain Disruptions

    Although the strike is beyond contractors’ control, there are several steps that can be taken to manage the resulting supply chain disruptions and protect project timelines and budgets:

    1. Diversify Your Supply Chain

    Relying heavily on East Coast ports for construction materials exposes contractors to significant risk during labor strikes like this one. Consider sourcing materials from alternative ports such as those on the Gulf Coast (e.g., Houston) or even the West Coast. Additionally, explore relationships with domestic suppliers or manufacturers that can provide materials without relying on imports. While alternative sourcing may come with higher costs, it can help mitigate extended delays.

    2. Communicate Transparently with Stakeholders

    Frequent and clear communication with project owners, subcontractors, and suppliers is essential during supply chain disruptions. Keep all parties informed of potential delays, changes in project timelines, and any new costs that arise due to material shortages. By being proactive in your communication, you can manage expectations, foster trust, and potentially negotiate new deadlines or contract terms to account for unforeseen delays caused by the strike.

    3. Review and Adjust Your Contracts

    Now is the time to review your contracts to ensure you’re protected against penalties or delays resulting from the strike. Focus on force majeure clauses and provisions related to delays and material price escalation. A well-drafted force majeure clause may offer relief if the strike is considered an unforeseeable event beyond your control. Additionally, consider adding language to future contracts that allows for extensions or price adjustments in the event of supply chain disruptions.

    4. Build Up Inventory Where Possible

    A “just-in-time” inventory strategy can be risky during times of supply chain instability. Consider shifting to a “just-in-case” approach by stockpiling critical materials where possible. While it may increase short-term expenses, having essential materials on hand can prevent costly project delays later. Evaluate which materials are most critical to your upcoming projects and secure as much of them as you can, even if it means paying more upfront.

    5. Seek Legal and Financial Advice

    The complexities of a disrupted supply chain may necessitate professional guidance. Consult with legal counsel to review your options for mitigating delays, exploring potential claims, and handling contract disputes related to the strike. Additionally, financial advisors can help manage the strain on cash flow caused by material shortages or increased costs. You may need to secure short-term financing, adjust payment terms with suppliers, or renegotiate contract milestones to maintain financial stability during this disruption.

    Managing Supply Chain Disruptions Amid the East Coast Ports Strike

    The October 2024 East Coast ports strike is just beginning to cause challenges across the states. Delays in the delivery of key materials, shortages, and rising costs can create a perfect storm for contractors, subcontractors, and suppliers alike. However, by diversifying supply chains, communicating clearly with stakeholders, reviewing contracts, stockpiling critical materials, and seeking professional legal and financial advice, you can mitigate the impact of these disruptions on your projects.