VIDEO: Force majeure during the coronavirus pandemic

In the event that the contractor is displaying one or more of the above signs, then it is worth considering the following actions to protect the employer’s position as far as possible:

• Closely monitor the financial and on-site performance of the contractor in order to assess the likelihood and timing of potential insolvency
• Ensure all bonds, guarantees and collateral warranties have been obtained under the building contract, and if not take steps to obtain them immediately
• Consider the terms of any guarantees to ensure that the guarantor’s obligations are not inadvertently discharged
• Bonds may require adjudication to have been commenced (or even completed) prior to insolvency so as not to be stayed pursuant to insolvency laws
• Carry out an audit of the on-site plant, equipment and materials, and evidence this (for example with photographs and written records)
• Ensure that copies of all relevant documentation have been obtained, for example drawings, specifications and anything required to comply with CDM requirements. If not, take steps to obtain these
• Review the payment position under the building contract, including whether any over payments have been made to the contractor which should be reclaimed, what retention is held or has been released, whether any payment notices may be necessary, and whether there are rights of set-off which should be exercised
• Check whether the involvement of any third party is required, for example funders, landlords, tenants or purchasers who may have rights in relation to the building contract and how it is administered
• Review the terms of the building contract relating to contractor insolvency – hopefully the parties will be fully aware of the building contract terms and have been administering it correctly to date, but if it has been hiding in a draw then now would be a good time to dust it off and ensure familiarity with the relevant provisions!

In general. there is often a stick or twist decision.  If the employer chooses to financially support the contractor (for example by agreeing different payment arrangements), this may help to keep the contractor solvent and more likely to complete the project, but it also exposes the employer to greater risk if the approach is not successful.  Conversely, withholding payments  from the contractor may make insolvency a self-fulfilling prophecy.  The precise advantages and disadvantages of the approach will be dependent on the specific circumstances of each case.

Most rent suspension clauses in commercial property leases are unlikely to come to the assistance of the tenant. These clauses normally apply only where the premises has suffered substantial physical damage and are, as a consequence, incapable of being occupied, used or accessed. The coronavirus pandemic does not involve any physical damage to a property, loss from the crisis will be purely financial. Such losses then will not be covered by the landlord’s buildings insurance policy in a way that will allow a tenant to claim rent suspension.

This free Getting back to business webinar was held on Wednesday 6th May. On this video, employment partner Paul Scope and associate Flora Mewies looked at your options if you need to flex your employee resource or reduce cost without reducing headcount. This may apply across the business or to particular functions. They discussed a range of options when the furlough scheme comes to an end, including: lay off, short time working, reduced hours, reduced pay and other ways to be flexible.

They also discussed the pros and cons of each option, and cover what you will need to undertake with each of these routes.

The end user client will be responsible for assessing if the contractor is employed or self-employed for tax purposes. It is required to take reasonable care in carrying out the assessments.

When an assessment is carried out the outcome must be confirmed to the contractor with accompanying reasons in a Status Determination Statement (SDS). This SDS must be provided to the contractor before making payment to them. It must also be provided to the agency if there is one in the chain (more on this later).

The end user client must have a dispute resolution procedure to enable to the contractor or agency to appeal the assessment outcome.

The Government introduced shielding in the peak of the pandemic. Current advice is that shielding is not required. However, those who have been shielding are likely to be the most vulnerable and will likely be nervous about a return to work. They may also be disabled under the Equality Act 2010. You should therefore consider any concerns that are expressed and take action to mitigate any risks. For example, it may be possible to keep these employees on furlough until the scheme runs out or they may be able to work from home. If you would like to discuss any specific scenarios then please contact one of the team.