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Recent actions by the federal government have called into question the use of measures intended to foster diversity, equity, and inclusion (“DEI”) on federal construction projects or projects receiving federal funding.  On January 21, 2025, President Trump signed Executive Order 14173 (the “Order”) revoking Executive Order 11246 signed by President Johnson in 1965.  The revoked Executive Order 11246 mandated equal employment opportunities for federal employees and federal contractors. On January 24, 2025, the Acting United States Secretary of Labor, Vincent Micone, issued Order 03-2025 directing the Office of Federal Contract Compliance Programs (“OFCCP”) to “immediately cease and desist all investigative and enforcement activity under the rescinded Executive Order 11246… and regulations promulgated under it.”

What Does President Trump’s Executive Order Say?

Section 1 of the Order provides a brief explanation for the basis for the Order.  After reaffirming the United States’ commitment to protect the civil rights of individual Americans from discrimination based on race, color, religion, sex, or national origin, it then proceeds to characterize DEI and Diversity, Equity, Inclusion, and Accessibility (“DEIA”) policies as “dangerous, demeaning, and immoral race- and sex-based preferences” while further asserting that such policies “violate the text and spirit of our longstanding Federal civil-rights laws” while undermining “national unity, as they deny, discredit, and undermine the traditional American values of hard work, excellence, and individual achievement.”

Section 3(b)(ii) of the Order directs the OFCCP to immediately cease “[p]romoting ‘diversity,’” “[h]olding Federal contractors and subcontractors responsible for taking ‘affirmative action’,” and “[a]llowing or encouraging Federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin.”

Section 3(b)(iv) of the Order further directs the heads of each government agency to include language in every contract or grant award by which the party signing the contract or receiving the grant attests that they are in compliance with all federal anti-discrimination laws and to affirm that they do not operate any “programs promoting DEI that violate any applicable Federal anti-discrimination laws.”

The Order specifically notes that it does not apply to employment or contracting preferences for veterans or to persons protected by the Randolph-Sheppard Act, which provides persons with blindness with remunerative employment and self-support through the operation of vending facilities on federal and other property.

How Does the Order Affect Federally-Funded Projects?

The short answer is that it is not yet clear how the Order affects projects that are funded in whole or in part by federal funds. This lack of clarity stems in part from ambiguities in the Order itself:

  • The Order requires the OFCCP to immediately cease promoting “diversity.”  But the Order puts the term “diversity” in quotation marks, suggesting that the term is undefined but may remain subject to interpretation by the OFCCP.
  • The Order repeatedly uses the phrase “Federal contractors and subcontractors,” but those terms are not defined. Do they mean only contractors and subcontractors working on federal projects?  Do they include contractors and subcontractors working on state- or local-level projects that are funded only in part by federal funding or grants? 
  • The Order requires grant language to include provisions mandating that grant recipients attest that they do not operate programs “promoting DEI that violate any applicable Federal anti-discrimination laws.”  It is unclear which, if any, federal anti-discrimination laws are implicated by the use of DEI or disadvantaged business enterprise (“DBE”) requirements. 
  • The Order requires all executive departments and agencies to terminate all “discriminatory and illegal preferences, mandates, policies, programs, activities, guidance, regulations, enforcement actions, consent orders, and requirements.” But, due in part to the changing legal landscape regarding affirmative action, it is unclear what constitutes “illegal” DEI efforts. For instance, if a municipality, or state Department of Transportation, or local transit authority utilizes DBE goals or requirements in awarding contracts, will it now be prohibited from doing so if their projects receive any federal funding?
  • In the short term, the Order permits federal contractors to continue operating under the prior regulatory scheme for 90 days from the date of the Order. Following those 90 days, however, it is unclear what the new rules will be for entities that bid on federal or federally funded contracts. If a public entity’s request for proposals (RFP) was issued before the Executive Order was issued, but the awarded contract is entered into after the 90-day period, will the contract be subject to the new rules?  If an RFP is issued during the 90-day period, but the awarded contract is not executed until after the 90-day period, will the contract be subject to the new rules?  

Until further guidelines and clarity are provided by OFCCP, these questions remain unanswered.

Going Forward:

The Order contains several ambiguities that will hopefully be resolved by further guidance from appropriate authorities or interpretation by the courts. 

It is also possible that the Order will be affected by legal action. On February 3, 2025, a group of plaintiffs including the National Association of Diversity Officers in Higher Education, the American Association of University Professors, the Restaurant Opportunities Centers United, and the Mayor and City Council of Baltimore, Maryland filed an action in the United States District Court of Maryland arguing that the Order illegally encroaches on the powers of Congress and impermissibly engages in viewpoint discrimination in violation of the First Amendment. Other lawsuits are likely. Hahn Loeser & Parks will continue to monitor this issue and provide further relevant updates as they become available.

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President Trump’s prospective assessment of 25% tariffs on certain materials coming from Canada and Mexico, and prospective 10% tariffs on certain material from China, may increase contractor costs in fulfillment of construction contracts. While the details of which materials are tariffed will be clarified in the coming days, impacts on project costs may be substantial. Who is responsible to pay or absorb these costs?

Project participants should consider promptly reviewing the contract regarding liability for tax increases.  Additionally, contractors should consider reviewing the source of all materials, included those from outside the United States. Prudent contractors will immediately determine where tariffs may increase costs and the availability of substitute American made products. To the extent contractors believe they are entitled to pass these costs to customers, then extra costs/claim notice requirements must be promptly triggered.

Proactive contractors and owners will review the cost impact together to determine and confirm:
1) If the contractor has the ability to continue and absorb any additional costs that fall on the contractor, (or does the financial impact materially prevent the contractor from completing the work)
2) If costs are passed to the owner, for the owner to determine whether the project is still viable and cash flows (you cannot raise rent simply because the materials cost more to obtain), and
3) If adjustment in project schedule or suspension is possible to see if the tariffs will remain long term or be adjusted as political negotiations move forward.

Further, proactive contractors will also want to connect with their subcontractors and vendors to assess the impact of the tariffs. In particular, equipment vendors will be impacted directly and immediately, so it will be wise to determine how they plan to handle the tariffs.

Tariffs on foreign goods will likely increase the value of American made products. It may also spur more American manufacturing, but that takes time before product is available in the domestic market. Conversely, the tariffs may decrease the underlying cost of the foreign made goods, so that when the tariff is placed on it, it matches the price of the American made materials. 

What is clear is that project participants at all levels should be ready to have their hands around the quickly changing material and price landscape and share information in real time to permit all parties to review the impact of price increases on the project, and the ability or desire of parties to perform. Parties contracting now for new projects and improvements should consider evaluating if their proposed contract addresses substantial cost revisions, increased costs of construction materials, further unpredictable tariffs and tax revisions, and the potential of the project to withstand increased inflation.

Updates Expected

Hahn Loeser’s Construction team stands ready to assist any client in reviewing the impact of tariffs on a current project, negotiation of any contract, provide notice to an owner or contractor on future performance/payment, and escalation of claims.

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Prefabrication is nothing new to the construction industry.  And, over the past several years, we have seen a rather significant increase in the utilization of prefabrication.  With this increase, however, it has revealed some vulnerabilities that, if not properly managed, lead to undesirable results.  Let us take a closer look…

Prefabrication is the assembly of buildings or their components at a location other than the building site.  Some contributing factors that have gained favorable recognition of prefabrication in construction projects stem from factors such as Covid, market variability, and labor shortages. The key benefits of assembling various building components in a factory-like setting include:

  • Improved quality and consistency
  • Improved labor efficiency and production
  • Improved schedule flexibility and enhancements
  • Reduced material waste and lost time incidents
  • Reduced on-site installation labor
  • Favorable cost benefits and effectiveness

For these many reasons, the construction industry is finding more and more ways to embrace prefabrication as a normal practice and apply it more broadly across the various building systems. So, the focus we look to elaborate on is managing the process and having the necessary and applicable controls in place to execute the work.

The process, or also commonly referred to as the method, of prefabrication drives early coordination into projects. This naturally creates a conduit for increased communication in preplanning efforts and promotes early engagement amongst the team. As we are all aware, project success starts day one; so, having a process, or method, in place that recognizes the value of early communication is a significant benefit to steering a project towards success. But let us dive a bit into implementation.  

In numerous instances, we are finding a vital step in the preplanning effort may not be in full consideration at the very early stages of a project. Utilizing prefabrication in a broad sense may be lacking consideration of governance and control of the prefabricated system itself. Many projects rely on building component specific project specifications and design, such as manufacturer data, performance criteria, tolerance, execution, etc. But assembly of multiple building components before reaching the building site has added layers of consideration that may not be completely apparent until the system is being installed. Of considerable concern, in many cases, is cumulative tolerance.

Cumulative tolerance, also known as tolerance stack-up, is the effect of all individual building component tolerances as part of a system or assembly. In traditional design and construction of various building systems, manufacturer tolerances and field installation tolerances are generally accounted for and occur component by component.  This provides flexibility for aesthetics, such as lining up vertical and horizontal joints, while constructing a system that functionally performs. Introducing prefabrication into a design that relies on these numerous component-by-component tolerances can create significant issues.

For instance, five curtainwall units installed in the field have six total joints with plus/minus tolerance flexibility.  Those same five curtainwall units prefabricated as one five-unit segment now have four joints assembled in a factory that can maintain zero tolerance and leaves two joints in the field to potentially account for the cumulative tolerance of the components making up that portion of the system. This, in turn, leads to oversized and/or inconsistent field joints and the potential of performance issues at concentrated locations.

Establishing governance and control for the prefabricated system itself needs to be identified early in the process by working collectively with all members of the project team, including owners, designers, contractors and manufacturers.  Consideration of items such as manufacturing parameters of individual components, prefabrication assembly requirements, onsite preparation, sequence of installation and execution, local building code requirements, performance functionality, and aesthetics, is critical.  The unique perspectives of each team member and evaluation of individual components making up a prefabricated system will help to establish a clear set of boundaries to achieve a seamless final installation. 

So, as we continue to recognize the many advantages of prefabrication and its broadening role in the construction industry, it is imperative to manage the process and have the necessary and applicable controls in place to execute the work.  With implementation of a collaborative approach and early recognition of the importance of managing the prefabrication process, issues such as cumulative tolerance can be vetted to minimize and avoid undesirable results. 

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Artificial Intelligence (“AI”) has roared into the discourse of the new economy. While the construction industry has lagged behind in its implementation, there is no doubt that AI has become an inescapable reality. Opportunity for improvements in efficiency make the construction industry primed for a boom in the expansion of construction-related AI applications. The Stanford Institute for Human-Centered Artificial Intelligence reports, in its seventh edition of the AI Index Report, that several studies suggest AI enables labor to operate faster and with improved outcomes.[1] Inevitably, as AI expands into new industries and erupts in existing uses, the need to assess risk and prepare for the challenges that accompany AI cannot be ignored. Contractors, design professionals, owners and construction practitioners are wise to take stock of where AI applications have materialized in the industry and how to stay ahead of the curve.

Applications of Artificial Intelligence in Construction

Estimation and Scheduling: Estimating project costs and optimizing schedules are key components of measuring a project’s success, especially in the early stages of a project. AI modeling assists in computing millions of data points to enhance existing Building Information Modeling data. Assessing criteria of a project, while accounting for external factors, additional materials, resources and waste, enables managers to more accurately predict overruns and improve the utilization of existing resources.

Risk Mitigation: Site safety is and will continue to be a priority for construction managers. AI applications have the ability to turn a job site into a smart site. Construction site analytics are collected through sensors, cameras, and other digital technology capable of generating reports on predictive and proactive safety management. For example, an existing application of AI software evaluates whether the use of personal protective equipment is properly implemented by processing images and videos of a site.

Robotics: Think 3D printing, drone mapping, and highly specialized equipment that mimics physical human actions. Machine learning in automated equipment proposes to fill a gap in the shortage of skilled labor. The construction industry is witnessing developments in machines that are capable of bricklaying, welding, performing sitework, grading, excavation, demolition and paving.

As new as AI is to the market, even more novel are the legal challenges related directly and indirectly to AI. Given the lack of a definite regulatory framework, construction professionals may look to comparisons in other industries where AI litigation grapples with unresolved questions of liability. As of yet, there is no known litigation related to the use or misuse of AI utilized in a construction project. The only known real estate specific AI litigation involves unfair competition challenges against a real estate software and data analytics company that is accused of artificially inflating the prices of residential real estate rents, creating a data-driven rental property cartel.

Litigation involving AI has been heavily characterized by privacy, copyright, and trademark claims, although there is sure to be an increase of legal theories involving the use or misuse of AI in tort, breach of contract, defective design, product liability and negligence.

Despite having reached the market several years ago, there is little guidance from courts regarding liability in the context of self-driving cars. A number of suits brought against car manufacturer, Tesla, highlight the uncertainty of outcomes in AI litigation. In at least two instances, Tesla was found not responsible following jury trials in California state courts. Tesla recently settled a case involving the death of an Apple engineer, and several other cases are set for trial this year. Outcomes of these cases and cases with similar machine learning applications, appear to hinge on whom to attribute liability for mistakes involving AI systems: the user, the developer, or the AI by and of itself?

Modeling the Future

Construction professionals are encouraged to be considerate of mechanisms to mitigate risk in the immediate future: 1) continue to follow how the courts resolve questions of liability involving AI, and how that might translate in the construction industry; 2) evaluate how insurance coverage might be leveraged to mitigate risk (although AI-specific coverage is limited, property insurance, general commercial liability, and errors and omissions coverage can play an essential role in protecting against loss); and 3) inclusion of contract language that contemplates the risks of AI (subject to a future article).

[1] “The AI Index 2024 Annual Report,” AI Index Steering Committee, Institute for Human-Centered AI, Stanford University, Stanford, CA, April 2024.

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The Federal Trade Commission’s effort to ban non-compete agreements has been upended by a U.S. District Judge in Texas. As a result, the non-compete ban will not go into effect nationwide.

The Judge ruled the Commission lacked authority to write regulations restricting what the law calls “unfair methods of competition.” The non-compete ban, issued in April, was part of the Commission’s effort to eliminate agreements that restrict the ability of workers to switch jobs.

The Texas judge ruled the agency lacked the authority to enforce the ban, which was planned to take effect on September 4.

Hahn Loeser’s labor and employment team continues to monitor potential lawsuits, rulings and updates. For questions on potential impacts to your organization, please contact Hahn Loeser’s Labor & Employment team.

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As many contractors know, whenever doing federal projects there might be a nagging feeling in the back of your mind.  What exactly does my contract say?  What type of plan do I need to address environmental concerns? You might even wonder, what are my environmental concerns? In an attempt to ease your mind, you flip through your Task Order or contract.  At first glance the contract seems innocuous, but hiding in plain sight are the dreaded “Clauses Incorporated by Reference” under the Federal Acquisition Regulation (FAR).  Federal contracts tend to involve a lot more than initially meets the eye.  Among those things include a thicket of environmental law ranging from Clean Water to Fish and Wildlife.  It is incredibly important to look at your contract in detail to see what environmental obligations lie in the fine print. 

Environmental Regulations Incorporated by Reference

Most government contracts contain any number of FAR provisions that are incorporated into your contract by reference without setting forth the full text of the FAR provision.  Indeed, hiding beneath a string of headers may be requirements related to everything from Pollution Prevention (FAR 52.223-5) to Protection of Existing Vegetation, Structures, Equipment, Utilities, and Improvements (FAR 52.236-9).  Not only do these provisions require a contractor to cross reference the FAR to determine its obligations under the contract, many of the cited provisions in turn reference additional statutory framework that is likewise incorporated into your contract.  For example, Pollution Prevention and Right to Know Information (FAR 52.223-5) states that “Federal facilities are required to comply with the provisions of the . . . the Pollution Prevention Act of 1990 (PPA) (42 U.S.C.13101-13109).”  As a result, what first appears in your contract as simple heading may actually incorporate the entire Pollution Prevention Act by reference.  The sheer volume of statutory rules that may be incorporated into your contract can be too much to fit onto a ream of paper.  As a result, it is incumbent upon a contractor to do the leg work and know what environmental issues are applicable to each project.

Environmental Protection Plans

Thankfully, a contractor’s Environmental Protection Plan (EPP) on applicable projects is an opportunity for a contractor to discuss known environmental issues or other environmental concerns that may be applicable to a federal project. An EPP typically requires a contractor to meet with the contracting officer to discuss environmental concerns that might arise on a project. This is the time for a contractor to review the contract, understanding which provisions have been incorporated by reference, and develop a plan to address those issues or concerns so that you are in compliance with the thicket of regulations that might be attached to your contract. 

In particular, in your general overview, your EPP should very clearly set forth each set of regulations that are addressed in the plan to ensure that you and the contracting offer are on the same page in terms of your obligations. Providing a list of the laws and regulations that are applicable to the project in your EPP both shows that you have grasp on project requirements and a solid plan in place to ensure that your work on the project is compliant with all environmental regulations. Your contracting officer can then review and discuss how or if your plan needs to be adjusted to account for any other environmental concerns.

Beware, however, that your EPP does not excuse you from any of your obligations under FAR, including any of those incorporated by reference. Again, to the extent a FAR provision related to environmental regulation is incorporated by reference into the contract, but does not appear in your EPP, a contractor is still required to follow all the terms of the contract. In other words, the obligations of the contract stay with the contractor, even after the parties have agreed to an Environmental Protection Plan.

The best time to address any of these environmental concerns is almost always before a dispute arises.  Look under every nook and cranny of your contract, find what regulations apply, and address them head on with your contracting officer. You will be doing right by your business and will be ensuring the health, welfare, and preservation of the environment.

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For decades, employers have depended on the rule that transferring or reassigning an employee would not give rise to an actionable discrimination claim, as long as such an action did not “significantly” change an employee’s pay or benefits. Employers, however, may no longer rely on that rule following the Supreme Court’s recent decision in Muldrow v. City of St. Louis, 601 U.S. ____ (2024).

As of last week, an employee seeking to demonstrate that their employer transferred or reassigned them in violation of Title VII of the Civil Rights Act of 1964 need show only that such an action produced “some” harm or disadvantage to an identifiable term or condition of their employment. Changes in schedule, decreased opportunities to work on important projects, alteration of responsibilities, and the loss of position-related perks, such as losing access to a company-owned vehicle—which courts previously disregarded as mere de minimis workplaces issues insufficient to establish employer liability—may now be actionable discrimination under Title VII.

What the Supreme Court did not do is explain whether there are some harms that are simply too trivial or minor to support a Title VII discrimination claim. Employers and employees alike will have to define the contours of the Supreme Court’s decision in Muldrow through future litigation. 

Following Muldrow, employers should consider exercising caution before transferring or reassigning an employee to a different position, even if it does not appear that such an action will alter the employee’s pay, benefits, or significantly injure the employee.

For guidance on this development and its impact on your organization, please contact Hahn Loeser’s Labor & Employment team.

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On April 23, 2024, the Federal Trade Commission voted 3-2 to issue a final rule that bans most worker noncompete agreements. See Fed. Trade Comm’n, Non-Compete Clause Rule, RIN2084-AB74 (Apr. 23, 2024). The final rule, which becomes effective September 4, 2024, provides that it is an unfair method of competition for employers to enter into non-compete agreements with workers. 

The final rule defines “non-compete clause” as “a term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from (1) seeking or accepting work in the United States with a different person where such work would begin after the conclusion of the employment that includes the term or condition; or (2) operating a business in the United States after the conclusion of the employment that includes the term or condition.” In addition, the final rule defines “worker” as “a natural person who works or who previously worked, whether paid or unpaid, without regard to the worker’s title or the worker’s status under any other State or Federal laws, including, but not limited to, whether the worker is an employee, independent contractor, extern, intern, volunteer, apprentice, or a sole proprietor who provides a service to a person.” Importantly, the final rule does not apply to non-competes entered into by a person pursuant to a bona fide sale of a business entity. Moreover, the final rule does not apply where a cause of action related to a non-compete accrued prior to the effective date.

With respect to existing non-compete restrictions, specifically, non-compete restrictions entered into before the final rule’s effective date, the Commission adopts a different approach for senior executives versus other workers. Existing non-compete restrictions with senior executives may remain in force, as the final rule does not cover such agreements. The final rule defines “senior executive” as “a worker who: (1) was in a policy-making position; and (2) received from a person for the employment: (i) total annual compensation of at least $151,164 in the preceding year; or (ii) total compensation of at least $151,164 when annualized if the worker was employed during only part of the preceding year; or (iii) total compensation of at least $151,164 when annualized in the preceding year prior to the worker’s departure if the worker departed from employment prior to the preceding year and the worker is subject to a non-compete clause.”

For workers who are not senior executives, existing non-compete restrictions are no longer enforceable after the effective date. Notably, employers must provide these workers with existing non-compete restrictions notice that the non-compete restriction is no longer enforceable. The final rule includes model language that satisfies this notice requirement.

Within 24 hours of the Commission’s vote on the final rule, two lawsuits were filed challenging the Commission’s authority. At present, no court has made a ruling that would prevent the final rule from going into effect. Hahn Loeser’s labor and employment team is monitoring the status of the lawsuits and will update this alert if a court issues an injunction that stops the final rule from going into effect.

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On April 23, 2024, the U.S. Department of Labor (DOL) announced that effective July 1, 2024, the salary threshold for the overtime exemption for employees employed in a bona fide executive, administrative, or professional capacity will increase from $684 per week ($35,568 per year) to $844 per week ($43,888 per year). The salary threshold will increase again on January 1, 2025, to $1,128 per week ($58,656). To keep pace with changes in employee pay and to remain effective in helping determine exemption status, the DOL will update the salary threshold every three years, beginning July 1, 2027, to reflect current wage data.

The salary threshold is one of three factors which determines whether an employee falls within the executive, administrative, or professional exemption from federal overtime requirements. To be considered exempt, the employee must:

  • Be paid a salary;
  • Be paid at least the specified weekly salary level; and
  • Primarily perform executive, administrative, or professional duties, as provided in DOL regulations.

The DOL also announced that the salary threshold for highly compensated employees will increase to $132,964 per year effective July 1, 2024, and to $151,164 per year, effective January 1, 2025. The salary threshold for highly compensated employees will likewise be updated every three years.

With the proliferation of wage and hour litigation, employers should take this opportunity to review employees’ primary duties to confirm continued compliance with the standard duties tests, in addition to compliance with the new salary threshold.

If you have questions regarding your wage and hour compliance, including classification of employees, please contact a member of Hahn Loeser’s Labor and Employment Practice Group.

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Warranties provided to project owners are often some of the most-negotiated provisions in a construction contract.  What will the warranties cover?  How can they be enforced?  Perhaps most importantly: how long will they be in force? Arguments regarding one recent construction project in Ohio demonstrate the importance of knowing whether contractual language does, or does not, create a warranty—and how long the project owner can attempt to enforce it.

Ohio, like many states, has enacted a statute of repose applicable to construction matters: R.C. 2305.131.  In essence, the statute of repose bars a party from bringing claims for injury or property damage arising out of defective construction later than ten years from the date of substantial completion of the project.  See R.C. 2305.131(A).  The statute serves an important public policy goal of preventing “stale litigation” where availability of evidence may be problematic, documents may no longer be preserved, and memories may have faded due to the passage of time.  See, e.g., Board of Education of Martins Ferry School District v. Colaianni Construction, Inc, et al., 219 N.E.3d 1021, 2023-Ohio-2285, ¶ 17 (7th Dist.).  As with many statutes, however, the devil is in the details because R.C. 2305.131 contains several exceptions.  Of interest here, R.C. 2305.131(D) states that the ten-year statute of repose does not prevent an action against “a person who has expressly warranted or guaranteed an improvement to real property for a period longer than [ten years after substantial completion] and whose warranty or guarantee has not expired as of the time of the alleged bodily injury, injury to real or personal property, or wrongful death in accordance with the terms of that warranty or guarantee.”  (Emphasis added.)  Thus, if the contractor provided a warranty lasting more than ten years from the date of substantial completion, that warranty trumps the statute of repose.

In Board of Education of Martins Ferry School District v. Colaianni Construction, Inc, et al., the project at issue involved construction of two new school buildings for the Martins Ferry School District (the “District”).  The District claimed that the roofs of the buildings at issue had been defectively constructed and required complete removal and installation of new roofs.  Although the project at issue was substantially completed in 2008, the owner did not file its complaint until 2019 (i.e., beyond the statute of repose’s ten-year cutoff).  The District therefore attempted to use the exception provided in R.C. 2305.131(D) to escape application of the statute of repose.  The District argued that the project had been designed according to the requirements of the Ohio School Design Manual (“OSDM”), including, but not limited to the requirement that “[s]chool building structures and exterior enclosures shall be designed and constructed of materials which will perform satisfactorily for 40 years with only minor maintenance and repairs, and for 100 years before major repairs or replacement of primary structural or exterior enclosure elements is required.”  Id. at ¶ 45 (emphasis added).  The District also argued that one of the specification sections for fiberglass shingles required the contractors to “[p]rovide manufacturer’s 40-year transferable warranty with the first five years non-prorated and the remaining time prorated, and a 40-year guarantee for all roofing products installed under this Section.”  Id. at ¶ 93 (emphasis added).  The trial court rejected those arguments in a summary opinion without significant analysis, and the District appealed the ruling to the Seventh District Court of Appeals.

The Seventh District Court of Appeals affirmed the ruling of the trial court.  The opinion addressed many different arguments asserted by the District in its attempt to avoid application of the statute of repose, but as relevant here, the opinion explained why it rejected the arguments relating to the warranty exception in R.C. 2305.131(D).  As to the OSDM argument, the Seventh District reasoned that the design contracts only required the architects to “endeavor to ensure” that the designs complied with the OSDM, which was insufficient under Ohio law to incorporate all the requirements of the OSDM—including the alleged 40- and 100-year warranties—into the design contracts.  Id. at ¶ 92.  As to the specification argument, the Seventh District reasoned that the specification referenced only a manufacturer’s warranty and, since the District was complaining that the products installed were incorrect (as opposed to being defective), that warranty did not come into play.  Id. at ¶ 94.  The District chose not to appeal the ruling of the Seventh District Court of Appeals to the Supreme Court of Ohio, meaning that the Seventh District’s ruling became final.

Martins Ferry v. Colaianni Construction is important because it provides certainty for roofing contractors and architects under the specific OSDM provisions and specifications at issue in that case.  It also provides a useful lesson for the industry as a whole.  Contracting parties must look beyond the provisions clearly labeled as “warranties” or “guarantees” in their contracts and consider whether other provisions—although not labeled as such—could be interpreted as warranties or guarantees.  When negotiating contracts, contracting parties should consider clarifying such provisions to expressly state whether they constitute a warranty or guarantee.  After all, succession planning at any company is difficult enough—it shouldn’t require also passing on knowledge of potential risks posed by extended warranty periods that the company entered into decades ago.

This article was previously published as “Statute of Repose Warranties” in the April 2024 issue of Properties Magazine.