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Welcome to our seventh issue of 2024 for our construction industry insights e-newsletter - The Site Report. In this edition, we address a range of construction issues from potential impacts to OSHA’s authority and issues related to the data center construction boom to the Department of Energy’s push toward zero carbon emissions in federal buildings by 2024. We also introduce you to one of our new team members, Emily Merritt.
In addition, we are always mindful of issues that impact corporate issues facing construction companies. By way of reminder, there are less than six months left for companies formed before January 1, 2024 to file their initial beneficial owner report under the Corporate Transparency Act. As a reminder, the Corporate Transparency Act requires some businesses to submit information to the Financial Crimes Enforcement Network (FinCEN) about the beneficial owners of the business. For more information about who is required to file a report, who is considered a beneficial owner, and what information must be reported, please see our prior update on this topic, which can be found here or FinCEN’s FAQs, which can be found here.
If your company was formed before January 1, 2024, your initial report is due by December 31, 2024. If your company was formed between January 1, 2024 and December 31, 2024, your initial report is due within 90 calendar days of the date the entity is formed. Companies formed on or after January 1, 2025, will have 30 calendar days from their formation to file their reports.
If you have not already done so, we encourage you to determine whether your company is required to file a beneficial owner report. If you are required to file a report, we encourage you to begin collecting the information needed to make the submission. Please contact us if you have any questions about your reporting obligations or would like assistance with filing your initial beneficial owner report.
If you have any questions about the Corporate Transparency Act, please contact Brienne T. Marco, Member and Chair of the Corporate Department and/or Joseph C. Unger, Senior Attorney.
Thank you for reading!
Stephanie U. Eaton - Co-Chair, Construction Group; Vice Chair of Southern Offices, Litigation Department; Editor, The Site Report
and
Julian E. Neiser - Co-Chair, Construction Group; Vice Chair of Northern Offices, Litigation Department
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“But this case could find a receptive audience in the court’s conservative supermajority.”
Why this is important: The Supreme Court has declared open season on federal agencies' rulemaking authority in striking down the 40-year-old precedent that gave rise to the Chevron doctrine. Under this doctrine, a court was required to defer to a federal agency’s reasonable interpretation of ambiguities in its own statutes if Congress had not addressed the particular question clearly. The Supreme Court however now says this doctrine was “fundamentally misguided” because it is the court's responsibility to decide whether the law means what the agency says. As a result, even when an ambiguity exists involving technical or scientific questions that fall within an agency’s area of expertise, courts now have the final say on how a federal agency should best implement its regulatory authority.
Those looking to take advantage of the Supreme Court’s decision and curb regulatory burdens have already placed OSHA in their crosshairs. Allstates Refractory Contractors, LLC recently filed a petition for writ of certiorari with the Supreme Court presenting the question of whether Congress’s delegation of authority to write “reasonably necessary or appropriate” workplace safety standards to OSHA was constitutional. Given the broad scope of this question, finding Congress’s delegation of authority to be improper would have monumental impact of invalidating the lion's share of OSHA’s workplace safety standards. Likely for this reason, the Supreme Court denied certiorari and will not take up the question at this time. However, it’s worth noting that both Justice Gorsuch and Justice Thomas would have granted the petition. Justice Thomas however went even further and dissented stating this case “exemplifies the problem” with Congress’s delegation of authority. Make no mistake, the question surrounding OSHA’s authority is far from over. --- Jonathan A. Deasy
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"The computing-power demands of artificial intelligence is a big reason why."
Why this is important: In today’s evolving digital age, the construction of data centers has rapidly increased due to the need for large volumes of data storage and the development of artificial intelligence technology (AI). In fact, it is predicted that the total amount of operational data centers will have increased by 57 percent over the course of the next three years. While the construction of data centers undoubtedly fosters economic growth, as it creates jobs in both the construction and technology industries and efficiently processes the transmission of digital information, these construction projects also present significant environmental and legal challenges to be aware of.
At any given moment, data centers are processing all of the information that is transmitted between digital networks and devices. As such, the centers require enormous amounts of energy to function properly, specifically the use of electricity to power each server and cooling system within the centers. According to the Environmental Protection Agency (EPA), 60 percent of electricity is produced from burning fossil fuels, such as coal and natural gas, but these fossil fuels also contribute to the largest source of greenhouse gas emissions in the United States. To combat this negative environmental impact, data centers are starting to rely upon renewable energy resources, such as solar and wind energy, and should continue to do so as data center construction projects continue to expand throughout the country.
In addition to these environmental considerations, the construction of data centers is also putting pressure on utility companies to quickly respond to the significant growth in electricity needs. For example, in 2023, the Georgia Power Company (GPC) filed an Integrated Resource Plan Update (Resource Plan) with the Georgia Public Service Commission (Commission) in which it proposed, among other things, the construction of three combustion turbines that would rely upon fossil fuels to generate energy (See In Re: Georgia Power Company’s 2023 Integrated Resource Update Plan). The Commission ultimately approved GPC’s Resource Plan because of the increasing energy demand, but this sparked criticism in the community for its negative environmental impact. As a result, parties have filed, and are continuing to file, pleadings with the Commission that respond to these environmental concerns with clean energy solutions.
Ultimately, the increased construction of data centers will ignite economic prosperity within the construction and technology industries. However, such prosperity will also be met with other environmental and legal challenges. As more data centers are constructed, utility companies will be forced to construct more energy generation facilities, which rely upon various fossil fuels that negatively impact the environment. Consequently, sustainable companies may continue to flood the docket of Public Service Commissions with pleadings that advocate for clean energy solutions. It is important to keep these opposing goals in mind as construction and technology professionals choose how to structure and where to locate their business ventures. --- Emily R. Merritt
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“As the construction manager at risk delivery method grows in popularity, there are key ways for contractors to ensure they’re getting a good deal.”
Why this is important: Boasting increased flexibility and promises of shorter project timelines and reduced costs, the construction manager at risk delivery method has quickly grown in popularity both for private and public projects. The early collaboration between the construction and design teams required under the CMAR framework is one of the main drivers of CMAR’s attractive results, but that non-linear structure also comes with its own unique perils for contractors, designers, and project owners. This article provides several excellent starting points for hot button issues to consider when evaluating CMAR as a delivery method and when negotiating CMAR contracts. --- Steven C. Hemric
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“It significantly reduced the time Florida’s statute of repose and statute of limitations give plaintiffs – including subrogating insurers – to bring civil actions regarding the design, planning, or construction of improvements to real property.”
Why this is important: Florida Senate Bill 360 (SB 360) reduced both Florida’s statute of repose - which imposes a deadline to file civil actions based solely on the date of the defendant’s last act or omission regardless of when an injury or damage is discovered - and Florida’s statute of limitations - which sets a deadline to file civil actions triggered by the date of an alleged offense or harm. The grace period allowed by SB 360 expired on July 1, 2024. Thus, civil actions filed now are subject to SB 360.
Instead of the prior 10-year statute of repose triggered by the latest of the following series of dates, SB 360 requires that parties filing civil actions must do so seven years from the earlier of the following dates: “…the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion of the contract or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer . . . except that, when the action involves a latent defect, the time runs from the time the defect is discovered or should have been discovered with the exercise of due diligence.” The statute of limitations also runs from the earlier, not the later, of the above-referenced dates. SB 360 also has specific trigger dates for statutes of limitations and repose to run for single-dwelling “model homes” and separate trigger dates for each individual building for projects involving multiple buildings.
These changes are very important for construction lawyers, insurers, and property owners. It will likely result in earlier property inspections, enhanced diligence in preserving evidence, and early identification of all potential defendants and service of notices, even if evidence is not fully developed by the statutory deadlines. Further, contracts and warranty time periods may need to be adjusted, subrogation waivers may be impacted, and times for investigation, adjustment and payment of insurance claims will be shortened.
If you have questions about how SB 360 may impact your Florida construction project or impact recovery for damage to real property, contact Spilman’s construction practice group for assistance. --- Stephanie U. Eaton
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“That’s a nearly 12% reduction from the agency’s $632.3 million budget for FY 2024.”
Why this is important: While the Supreme Court has declined to cut OSHA’s rulemaking authority for now, the House is continuing its charge on the financial front of OSHA’s budget. Recently, the House proposed significant budget cuts to OSHA and other safety agencies for 2025. The proposed Labor, Health and Human Services, Education and Related Agencies Appropriations bill allocates around $557.8 million to OSHA, a near 12 percent reduction from the agency’s $632.3 million budget for 2024. The White House however has proposed a near 4 percent increase to OSHA’s budget for 2025, which amounts to roughly $655 million. It remains to be seen how this will ultimately shake out as the Senate has yet to weigh in. Nonetheless, it is something to keep an eye on given the significant amount the House is seeking to cut. OSHA contends it is already financially strained and a budget cut of approximately $75 million would seriously hinder its ability to conduct inspections following workplace accidents and complaints. OSHA’s ability to conduct research and provide training resources would also likely be affected. In the event these budget cuts are enacted, project owners and contractors would be wise to pick up some of this tab to ensure their workers are properly trained in order to limit workplace accidents and accompanying liability. --- Jonathan A. Deasy
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“The U.S. Department of Energy finalizes standards that decrease carbon emissions for new and renovated federal buildings.”
Why this is important: Under the Department of Energy (DOE)’s Clean Energy for New Federal Buildings and Major Renovations for Federal Buildings Rule (Clean Energy Rule), there will be significant movement toward the Federal Sustainability Plan’s objective of achieving net zero carbon emissions from all federal buildings by 2045. In conjunction with Executive Order 14507 and the Federal Building Performance Standard, the Clean Energy Rule is expected to eliminate on-site fossil fuel emissions related to heating and water heating in federal buildings. The DOE will be issuing guidance for agencies to assist in compliance with the Clean Energy Rule. Implementation of the Clean Energy Rule is important because it will not only reduce pollution, it will generate additional construction jobs for federal building construction and renovations. --- Stephanie U. Eaton
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Selecting a site for a construction project is one of the most important decisions made during the construction process, and there are several issues to keep in mind from a legal perspective. We asked one of our newest associates, Emily R. Merritt, who practices in this area, about legal issues to consider when siting a project.
"Obviously, the site of your location is paramount. But when there are multiple location options, the legal implications can make or break a project’s success. It’s vital that you understand the area’s zoning, building codes, and regulations. Regulations can vary greatly depending on your situation and knowing the time and costs of those regulations can help tremendously. And, the type of regulations is extremely important. Given the state of environmental regulations today, knowing that any site near an environmentally sensitive area can have an immediate impact on your selection. Of course, permitting requirements and property rights and ownership have a huge impact. There are many areas of the country where clear titles are not as obvious and rights-of-way can even be impacted – and that includes any contractual agreements that may already be in place. Knowing things such as the availability of utilities, risk assessments and mitigation, accessibility and transportation, and any needed cultural preservation requirements are very important. And, financial and insurance considerations are necessary to make sure you are prepared from the very start. But, one component that many overlook is the local community and stakeholder considerations. Open communication and getting all parties on board from the beginning can save so many headaches, time, and financial implications. Having an attorney review all of the above can get your project started on the right foot and help keep you on top of all issues that will come your way. Finding an attorney well versed in this area is worth it – every single time." --- Emily R. Merritt, Associate
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