Construction Labor Strikes: Entitlement and Excusable Delay

This is the second blog post in a five-part series about construction labor strikes and contractors’ potential recovery of delay and damages, along with case examples on the subject. The first post provides a brief history of the formation of labor unions and types of labor strikes, and this post discusses entitlement and excusable delay. The third post will focus on compensable delay, and the fourth post will address inexcusable or non-compensable delay. The final post will offer recommendations for contractors facing labor strikes.

Entitlement
Most construction contracts contain provisions for timely project completion, and strikes can cause owners, contractors, subcontractors, and suppliers to miss contractual milestones or finish dates. Not only do construction strikes inconvenience all parties, but strikes can also lead to more serious problems, such as the assessment of liquidated damages and contract disputes.

Generally, strikes only entitle contractors to a time extension—unless the owner causes the strike, in which case the contractor may also be entitled to time-related damages. United States federal courts generally recognize three different delay scenarios caused by strikes: excusable delay, compensable delay, or inexcusable (non-compensable) delay to the contractor.

Excusable Delay
Excusable delays entitle the contractor to a time extension for contract performance, but additional costs for the extended performance are not recoverable. In Andrews Construction Company, Inc.,¹ a board found that a contractor could not assess a subcontractor liquidated damages for delayed completion because informational picketing at the site was an excusable delay.

The contracting officer argued that the liquidated damages were properly assessed because the subcontractor’s pipefitters refused to cross an informational picket line established by a union not representing the pipefitters. The contracting officer stated that the delay was not excusable and informational picketing constituted neither a strike nor a picket line. During the strike, the subcontractor’s project engineer attempted to mitigate the effects by directing the pipefitters to work and calling the local union for replacements, but all efforts were unsuccessful.

The Board of Contract Appeals (BCA) decided that the subcontractor made reasonable efforts to obtain labor replacements. Moreover, the determination of whether informational picketing constituted a strike was irrelevant because “the fact that the job action causing this delay may possibly not be technically described as a strike does not abrogate the defense of excusability.”² The BCA found that liquidated damages were not proper because the delay arose from an unforeseeable cause, which was beyond control and without fault or negligence of the contractor or its subcontractor.

The fact that a strike occurs does not in itself entitle a contractor to an excusable delay. The contractor must prove that the strike caused a delay. Under federal contracts, the governing test of a strike is to determine whether the strike was unforeseeable by, beyond the control of, and without the fault or negligence of the contractor, subcontractor, or supplier. For example, if an owner or contractor commits an unfair labor practice that results in a strike, that strike is not an excusable delay because unfair labor practices are not beyond control of the parties.

In order to establish a strike as entitlement to excusable delay, the contractor must demonstrate cause and effect and present documented evidence. Additionally, the contractor must prove it acted reasonably by not unlawfully provoking or prolonging the strike, and it must take steps to mitigate the effects.

¹         Andrews Construction Company, Inc., GSBCA No. 4364 ¶ 11,598 (1976).

²         The BCA referenced Fred A. Arnold, Inc., ASBCA No. 16506, 72-2 BCA ¶ 9,608 (1972).

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