Audio: Five Trends Likely to Drive Construction Litigation in 2019

EVESHAM TOWNSHIP, NJ—Proactive planning and management is key when it comes to avoiding legal issues i n construction projects, according to construction litigation experts at Resolution Management Consultants.

“The start of a new year is a good time to reflect on challenges and weaknesses in order to prevent litigation,” says Jeffrey Kozek, a principal and founding member of Marlton, NJ-based Resolution Management Consultants. “When you get involved in litigation, you lose some form of control. Prior to litigation, you have the opportunity of it being resolved, possibly on more favorable terms. Once you move forward with litigation, there will be a trier of fact involved, and the outcome is out of your hands.”

RMC’s principals are veterans of the construction, contracting and engineering professions, and specialize in helping developers and contractors achieve project goals or resolve cost and time disputes between the contracting parties.

You can listen to the complete audio interview with Jeffrey Kozek and Jim Gallagher of RMC in the player below. If you do not see a player below, click here to listen to the interview.

In a wide-ranging, exclusive interview with GlobeSt.com, Kozek and co-principal Jim Gallagher say there are five broad construction litigation trends developers should keep in mind during 2019.

1. Cost of Litigation will Continue to Increase: In today’s litigious environment, it is not uncommon for parties to submit construction claims and/or file lawsuits before performing simple due diligence to ensure that good money is not being wasted on needless litigation. “In construction litigation, either you have one person—a judge—who really doesn’t understand construction, or twelve people—the jury —who also don’t do construction,” says Gallagher. “That’s a danger going into litigation, so in every instance, you try to avoid it. You try to try to settle it because these cases can get very expensive, very time consuming. Not only does it take the client away from their main job, which is building or designing or running a project but it also costs a lot of money and it takes a lot of time away.”While it was more common in the past for a legal action to be initiated only when large dollar value claims were in dispute, that is no longer the case. Alternative forms of dispute resolution provide the appearance that disputes of all values can easily be adjudicated in a timely and efficient manner. The reality is that the time it takes to resolve construction disputes will always take more time than initially envisioned and increases in relation to the complexity of the construction issues involved.

   The general rule to follow is only to proceed to litigation after exhausting all other alternatives. This should include exchanging a factual and complete analysis of the issue(s) in dispute to allow for a more meaningful and informed discussion of areas of disagreement. Getting all sides on the same page and working out as seamlessly as possible the “low-hanging fruit” will permit all to focus on the larger and more contested issues.

2. Tighter Labor Force Could Lead to More Claims: The pace of construction is picking up, but there remains a shortage of experienced workers. According to a national survey from the Association of General Contractors, 80 percent of contractors report difficulty finding “qualified craft workers” to hire. As a result, firms are making do with either less skilled laborers or smaller teams. This will likely lead to an influx in construction defect and inefficiency claims as construction firms continue to grapple with the influx of inexperienced workers. An issue often in contention is whether there are a sufficient number of workers on site to perform the work as planned.

“In the claims we get involved in, depending if it’s an owner versus a general contractor, or a general contractor or a subcontractor saying you’re not manning the job properly, you’re falling behind,” says Kozek.

Whether or not this is a valid argument depends on the particular conditions and issues on a project, but not having experienced workers only contributes to the problem, he says.

3. Trend Toward More Mediation Over Litigation: As we’ve seen over the past several years, fewer cases actually reach the litigation/arbitration stage where a third, independent party renders a final decision. While trials take time, expense and the commitment of resources, especially that of senior officials, and fact witnesses who may be prevented from moving on to their next project assignment, mediation preserves the right for the party to decide its fate, and not someone else. Resolving disputes quickly allows everyone to get on with the next project and continue to perform their primary function – construct.

“Within the last 20 years, many more cases go into mediation, some for the reason that you maintain the ability to make the decision. You can always say yes, you can always say no,” says Gallagher. “If you go beyond mediation and you’re into arbitration which is typically almost always binding.”

“It also provides an opportunity for both sides to actually weigh their strengths and weaknesses against the other side’s strengths and weaknesses to make a decision on whether or not to pursue it into arbitration or forms of litigation,” says Kozek.

4. Fewer Workers’ Comp Claims: The good news is that construction sites are getting safer, which means 2019 is predicted to bring fewer workers’ compensation claims in the industry. Data from the Bureau of Labor Statistics show a steady decline in the number of employer-reported workplace injuries (and illnesses). Technological advancements will make it easier to predict and identify hazards on the job.
5. More Disputes Over Overtime Pay:  More construction companies will be faced with wage and hour lawsuits related to alleged violations of the Federal Labor Standards Act (FLSA). However, due to ever-changing exemptions of who qualifies for overtime pay, this will not necessarily lead to more payouts.