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Covid-19

Construction Industry in light of COVID-19

On March 30th, 2020, the AGREEMENT issued by the General Health Council (Consejo de Salubridad General) was published in the Federal Official Gazette, declaring a health emergency due to the disease epidemic generated by the COVID-19 virus, as a force majeure (the “Agreement”). Likewise, the Secretary of Health established various extraordinary actions to handle the health emergency, among them, the suspension of all non-essential activities through April 30th, 2020. 

The Agreement stipulates specifically that only the activities listed as essential in said document will be able to continue their operation. One of the relevant activities that has been directly affected by the afore-mentioned restrictions, is the construction industry, as the essential activities listed in the Agreement do not specifically mention the construction and real-estate industry.

Pursuant to the above, article first, section e) of the Agreement indicates that the following shall be considered as essential activities: “those required for the conservation, maintenance and repair of the critical infrastructure that guaranty the production and distribution of essential services, namely: drinking water, electrical energy, gas, petroleum, gasoline, jet fuel, basic sanitation, public transport, hospital and medical infrastructure, among others that may be enlisted in this category”. As is apparent, there is no clear indication with regards to the construction industry as an essential activity.

Nonetheless, on April 2nd, 2020, the government of the State of Jalisco, issued a press release (the “Release”), whereby, jointly with representatives for business organizations, unions and municipal authorities, recommendations to facilitate the interpretation of the Agreement’s wording were determined. The Release lists as essential the following industries: “construction, maintenance and operation of the critical infrastructure and the one related with essential activities and its supply chain, as well as those with irreversible effects”. It is important to point out that the latter are “recommendations”, therefore, the competent authorities’ interpretation may be different to the Release.

Consequently, the Firm has the following recommendations for all those involved in the construction industry:

  • Link their main corporate purpose with any of the essential activities mentioned in the Agreement, or if applicable, point out the irreversible damages or effects that would develop if operations were to be stopped;
  •  Provide documental proof of said link through the development of an “Essential Activities Supporting Document”, which shall include:
  1. An analysis arguing why the activity shall be considered as essential or part of the supply chain of other essential activities;
  2. If applicable, agreement with the unions;
  3. A justification of the impossibility of stopping certain projects; and
  4. A legal analysis to consider the risks that may develop with the actions to be performed.
  • In all events, comply with the sanitary measures indicated in the Agreement as mandatory, including the social distancing measures issued by the Federal Secretary of Health.

Before the uncertainty faced by the construction industry concerning its qualification as an essential or as a non-essential activity, it is the ideal moment to counteract said uncertainty, justifying through the “Essential Activities Supporting Document” the reasons for which the construction activities shall be considered as essential.