New Zealand returned to alert level 4 for the second time on August 17, 2021 at 11:59 p.m. In many ways, this feels like a “here we go again” scenario. For the construction sector, however, there are important priorities this time. While the legal position is always important, the issues associated with this lockdown are largely practical (and, at first glance, may not be as expected).
In this update we offer practical guides on:
- Which construction projects can be operated in level 4;
- The legal situation according to NZS 3910: 2013 (and whether this has changed since the first blocking of level 4); and
- Vaccination of employees.
Industry participants should keep these considerations in mind:
- The government is strong that the construction industry must act sensibly. It is imperative that industry players hold credible positions and adhere to government policies and practical guidelines.
- The contract is the first point of contact for assessing whether the blocking is a change or an extension of the deadline (ROT) and / or a foreseeable event.
- Vaccination is the key. While employers cannot force their workers to vaccinate, there are certain locations where unvaccinated workers can be banned (e.g. in elderly and elderly care facilities).
- School principals and employers should lead in vaccination. Whenever possible, they should encourage vaccinations and provide vaccination opportunities. The government is considering vaccination programs “within the company” to make this easier.
Which projects and services can be operated in level 4?
As per COVID-19 Public Health Response Requirements (Warning Level Requirements) (No. 9) 2021 (command) companies must close unless it is a “Warning level 4 company or service” and “operates in accordance with the requirements of warning level 4”.
What has changed this time?
When the level 4 was last blocked, the list of “material companies” was updated frequently, creating confusion as to which companies could still operate below level 4. This time the government has replaced the concept of a “substantial company” with a more prescriptive list of “Warning Level 4 companies or services” listed in Appendix 2 of the regulation itself. If uncertainty persists, the regulation provides for an application procedure for an exemption. The Ministry of Economy, Innovation and Employment (MBIE) also provides guidelines for companies wanting to clarify their status.
Can construction continue on level 4?
The government’s strong message is that the threshold is deliberately high and that the parties must act sensibly.
“Construction, construction and maintenance services” is one of the 30 exempted categories if those services are required for one or both of the following conditions:
- address immediate health and safety risks; and or
- for nationally important infrastructure.
“Nationally Important Infrastructure” means an infrastructure that enables or supports supply chains that are required for one or both of the following conditions:
- to meet the current needs of people and communities; and or
- to enable or support the recovery of all or part of New Zealand from the effects of COVID-19.
Another exception applies to any body with legal responsibility for the construction and resource permits required to enable the construction, construction and maintenance services.
This time around, the government has made efforts to make businesses more secure. However, the exception categories applicable to the construction industry are interpretable and can lead to confusion.
If you are unsure whether you can work at Level 4, we recommend that you seek advice from MBIE and your legal advisor. The government is actively considering practical guidance and will regularly update MBIE’s website on the Construction Warning Level 4 (available here).
What happens now under NZS 3910: 2013
In the final warning level 4, construction work was suspended due to a government order that all non-essential workers must stay at home. In response, contractors attempted to achieve time and cost relief by asserting an EOT and / or a change in accordance with key provisions of the NZS 3910: 2013 General Terms and Conditions.
Common reasons for claiming an amendment and / or an EOT were based on legislative changes and / or unforeseen circumstances.
Was this lockdown in sight?
Movement restrictions and bans are now the “new normal”. It is arguably more difficult to argue that the effects of COVID-19 are not foreseeable circumstances – especially if the relevant tendering process took place after its application in March 2020), given the circumstances, it makes sense to reconsider the predictability provision.
Parties should keep the following in mind when considering or claiming an EOT:
- viral mutation can in itself be a predictable event;
- the delta variant is a continuation of the existing virus (albeit with a different genome); and
- The Delta variant hasn’t changed the fundamental nature of the government’s COVID-19 response at this point, which is still focused on raising and lowering alert levels.
How about a “change in the law”?
Again, the contract itself will be the starting point, as newer contracts will undoubtedly address what constitutes a deviation in relation to COVID-19 and what constitutes a change in the law. In general, in accordance with General Terms and Conditions 5.11.10, the contractor is entitled to a change in the event of a change in the law and can compensate for an associated increase in costs.
MBIE previously issued a guide to facilitate the assessment of claims (but this is ultimately subject to the terms of the specific construction contract). The MBIE guide provides the following:
- The government interprets clause 5.11.10 to mean that the transition to level 4 leads to restrictions due to regulations or laws (the Ordinance on Infectious and Notifiable Diseases (No. 2) 2020, which on 11th “Serious Respiratory Diseases” in the list of notifiable diseases, which in turn enabled the introduction of the Level 4 directive).
- As a result, the contractor is entitled to a change and the associated cost increases.
It remains to be seen whether this position will remain unchanged in the current Level 4 lockdown. Contractors can argue that the new regulation was enacted under new legislation (namely the COVID-19 Public Health Response Act 2020 as opposed to the existing Health Act 1956) and is therefore a “change in law” for previously concluded contracts. On the other hand, contracting authorities can argue that the new legislation simply mirrors the existing legislation, which contains the genesis for imposing the bans – leaving it up to contractors to argue that commissioning under either statute is a ” Change of law ”, similar to arguments for date.
We also note that while the court found certain restrictions placed on New Zealanders unlawful, that decision does not affect the legality of the restrictions placed on companies during the lockdown. but raises questions about individual arrests and prosecutions during the period in question.
Vaccination of employees and health and safety protocols for ongoing projects
Vaccination is arguably the most important focus in this lockdown and in further development.
The question of whether all employers can lawfully require an existing employee to vaccinate is not clear. While the COVID-19 Public Health Response (Vaccinations) Order in 2021 (command) stipulates that certain employees must be vaccinated, MBIE has taken a conservative approach to roles outside the Order. In particular, MBIE has said that employers cannot require their employees to:
- be vaccinated;
- disclose their vaccination status; or
- State the reasons for not vaccinating.
However, both MBIE and WorkSafe believe that an employer could require a vaccinated individual to assume a certain role, provided that a health and safety risk assessment has been carried out to support that requirement. Any health and safety risk assessment for the need for a function to be performed by a vaccinated individual must consider two factors:
- the likelihood that an employee will be exposed to COVID-19 while performing their function; and
- the potential consequences of this exposure for others.
While this will be factual, retirement and elderly care jobs and construction sites are examples of workplaces where unvaccinated workers may be banned from working.
Our employment team has prepared a comprehensive summary of COVID-19 vaccination in the workplace, which is available here. The CHASNZ website (available here) contains all the information on the alert level logs and is updated regularly. CHASNZ has also created comprehensive guides on how to operate construction sites for Alert Level 3, which they are maintaining with updates on their website, which is available here. The overarching message is that vaccination remains at the forefront of the response.
Where to from here?
At the time of this update, it is unclear how long Level 4 will be valid. It is also unknown whether the government will take a regionalized approach to the alert levels or maintain a nationwide level 4 response.