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ILLINOIS: An Introduction to Construction

ILLINOIS: CONSTRUCTION INDUSTRY OVERVIEW 

Any current overview of the construction industry in Illinois – indeed throughout the USA – must start with the COVID-19 pandemic. Though COVID-19 did not mandate the complete shutdown of construction projects in Illinois, it has certainly imposed significant hurdles for project stakeholders. Longstanding skilled labor shortages have been exacerbated, project delays are on the rise, and obtaining materials at predictable prices sometimes seems like an impossible feat. However, the Illinois construction industry has not crumbled under the weight of this crisis, but has instead demonstrated its resilience and willingness to work collaboratively to navigate the impacts of the global pandemic. That collaborative approach will be critical as the industry confronts some daunting effects from the pandemic.

Price Escalation 

Estimating the costs of construction materials – especially for multi-year construction projects – has long been a key to a project’s success. The current economic climate – which includes increased tariffs on foreign goods, trade wars, and extraordinary supply chain disruptions triggered by an ongoing health crisis and related worker scarcity, as well as weather-related events – has made this already difficult task seem nearly impossible.

Skyrocketing lumber prices, doubling copper prices, and unpredictable iron and steel prices have dominated news headlines and wreaked havoc on the industry. Construction stakeholders have been forced to ask some very hard (and very costly) questions like, "who is going to pay for this?"; "who bears the risk of exorbitant and unexpected price escalations and delay?"; and "how can industry players mitigate future, potentially bank-breaking, price escalation risks?"

In an effort to answer some of these questions, stakeholders are increasingly considering and implementing price escalation clauses in their construction contracts as a way of hedging against, or more equitably sharing, the risk of cost increases. Price escalation clauses are contractual provisions that provide an avenue for contract adjustment when material prices increase or decrease during the life of the project.

There are two main types of price escalation clauses: "delay" or "event price escalation" clauses and "percent change price escalation" clauses. Delay/event price escalation clauses involve a specific event or delay, which when triggered, allow the affected party to seek reimbursement for the increased costs. Though the triggering event or delay may be due to the conduct of one of the parties (for example, a party default), they are more commonly due to external factors (natural disasters, acts or omissions caused by other contractors or the project owner, or a global pandemic). Percent change price escalation clauses involve a specified percentage increase in a budgeted cost, and when properly triggered, typically allow the affected party to recover at least some of the increased cost.

Skyrocketing prices during contract performance could have dire consequences for the party left holding the bag. Price escalation clauses allow industry players a more collaborative way to equitably distribute the risk of unforeseen cost increases during this unprecedented time. What remains to be seen is whether price escalation clauses – or other strategies – are suitable to navigate what appears to be truly pervasive disruption and unnerving price volatility across so many sectors that affect the construction industry.

Job Site Safety and COVID-19 

During the COVID-19 pandemic, job site safety protocols have expanded. On sites throughout Illinois, contractors are providing additional hand washing stations and requiring their use, requiring the use of personal protective equipment (PPE) where necessary, maintaining separation from other workers wherever possible, limiting sharing of tools and equipment, and conducting discussions and inspections virtually when possible. It is now common practice to assess the health of workers upon arrival and during work, often including a temperature scan of each person entering a job site. Some job sites even employ contact tracing technology to help protect personnel. Some, if not all of these measures, may continue even after the nationwide vaccination program has been completed.

While these measures are imperative to slow or stop the spread of COVID-19 and keep employees safe, it is important that the legal risks associated with such measures are properly assessed and addressed. To illustrate, before the pandemic, temperature screening for the purpose of allowing that person to enter a job site was typically considered an involuntary health examination under the Americans with Disabilities Act (ADA). While the EEOC has issued a temporary suspension of claims for mandatory temperature screening due to the pandemic, contractors must monitor EEOC guidance and be ready to discontinue the practice when the moratorium comes to end in order to avoid a violation.

Construction industry stakeholders in Illinois must also be careful that their safety measures do not run afoul of the Illinois Biometric Information Privacy Act. The act regulates how private entities – including contractors, subcontractors, and vendors – collect, use, and share biometric information and biometric identifiers. Physiological biometrics pertain to the human body and include DNA, retinal scans, fingerprints or other characteristics (such as the shape of a person’s hand or face or the sound of their voice) that can be used as an identifier. In Illinois, the definition of biometric information is expansive and means any information, regardless of how it is captured, converted, stored, or shared, based on an individual’s biometric identifier used to identify an individual.

Though temperature screening is not likely to fall within the definition of biometric data in Illinois, the collection of other biometric data – even when the collection is for the worthy purpose of contact tracing – may run contrary to the act. The act is considered one of the most rigid of all biometric privacy laws in the nation and allows for a private right of action for both statutory and negligent damages and, based on current court interpretations, does not require the claimant to prove actual harm in order to recover and potentially be awarded attorneys’ fees and costs as the prevailing party.  

Skilled Labor Shortage 

Even before the pandemic, the construction industry was confronting shortages in skilled labor. A combination of factors seemed to quell interest in employment as an electrician, plumber, ironworker or other trade worker. As construction activity is picking up steam, this issue is arising yet again. Some attribute the present shortage to the lingering effects of the pandemic. Another likely contributing factor to this shortage is the ongoing debate on the national stage about immigration reform. Many of the construction trades rely upon newly-arrived immigrants to perform their work. The uncertainty of the legal status of these workers, not necessarily a new challenge but an increasingly fraught one, will likely make finding a sufficient number of workers an ongoing struggle. That struggle will affect certainty on pricing and scheduling of projects.