February 3, 2025

The Site Report - Construction Industry Insights, Issue 1, January 2025

Jennifer Baker, Jonathan Deasy, Stephanie Eaton, Steven Hemric, Julian Neiser, Mitchell Rhein, Derrick Price Williamson

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Issue 1, 2025

Welcome to our first 2025 issue of The Site Report! As we begin the new year, we look forward to bringing you insight into the myriad of legal, technological, code and other changes impacting the construction industry. In this edition, we examine I-9 audits and raids that could significantly impact the construction industry, what the AGC has recommended to the Trump administration, some changes in statutory employer immunity in Pennsylvania, how the construction industry is helping with climate change initiatives, cybersecurity trends, the surge in AI usage, and information regarding what organizations and associations are saying about the future of the industry. We also feature Steven Hemric, who addresses changes we may see in North Carolina, in particular.

Thank you for reading.

Businesses Should Get Ready for Immigration Raids and Audits

“Business owners in segments such as restaurants, construction, and meatpacking should be prepared for an increase in I-9 audits and immigration raids after President Donald Trump signed a slate of immigration-related executive orders.”

Why this is important: The first weeks of the Trump administration have confirmed that employers can expect increased enforcement of immigration compliance. Immigration & Customs Enforcement (ICE), Department of Homeland Security (DHS), and Homeland Security Investigations (HSI) will conduct more I-9 audits and other worksite enforcement actions (i.e., “raids”). All employers should develop proactive plans to mitigate the risks of these enforcement actions, including civil money penalties, seizure of employer resources, and criminal charges.

The most common enforcement action is an I-9 audit. These audits may be random. In such an audit, an ICE, DHS, or HSI agent will serve the employer with a Notice of Inspection requiring the employer to produce all Form I-9s for a specified period, supporting documents for the Form I-9s, and other information about employees (e.g., list of employees and contractors). The agent will review the documents provided by the employer. The agent may provide the employer time to correct any minor errors, and uncorrected technical and substantive violations can result in a civil penalty of $281 to $2,789 for each individual violation.

“Raids” are much more infrequent than I-9 audits. These actions require a warrant for agents to seize information and individuals. Unlike an audit, an employer will have no advance notice. Many agents will appear at the worksite, secure the worksite, and enter the worksite with a warrant. In response, employers must immediately contact its legal counsel. Employers do not have to answer an agent’s questions, but agents may detain unauthorized workers and seize employer property.

To mitigate the risks of enforcement actions and penalties, employers should have an attorney conduct or supervise an internal audit of the employer’s I-9 compliance. Any errors discovered during such an audit should be corrected to avoid or mitigate potential penalties before the employer is audited or raided by immigration agencies. Additionally, employers should ensure responsible employees are properly trained on preparing and maintaining Form I-9s and how to respond to any worksite enforcement actions. --- Mitchell J. Rhein

5 Ways Builders Say Trump can Support Construction

“The Associated General Contractors of America itemized priorities for the incoming administration that will help bolster building activity.”

Why this is important: With any change in a Presidential administration comes unknowns and policy shifts. To keep the construction industry on track to maintain the momentum and even increase building over the next four years, the Associated General Contractors of America (AGC) itemized priorities for the Trump administration:

Reduce Workforce Shortages – AGC recommended new temporary work visa programs for the construction industry so that projects do not fall behind. With large-scale data center and battery facility projects on the rise, labor needs will continue to increase. This recommendation also relates to the need for high school and post-secondary school construction education and training to further increase the labor pool.
Avoid Tariffs – AGC expressed concern regarding how tariffs can negatively hamper supply chains, and/or make products cost-prohibitive, some of which are specialty products that are already the most expensive parts of certain projects.
Accelerate Permitting – AGC emphasized how streamlining the permitting process for federal projects can reduce overall construction time and reduce the number of projects that are paused or abandoned while waiting on requisite paperwork and approvals.
Broaden Participation on Federal Projects – AGC asked the new administration to revoke the prior administration’s Executive Order mandating project labor agreements for federal projects exceeding $35 million, which Executive Order significantly undermines the country’s construction capacity by restricting two-thirds of the existing workforce.
Support Infrastructure Projects – AGC wants to continue the current pipeline of infrastructure projects funded by federal investment in these projects. Significant projects for improved airports, roadways, bridges, and schools need to continue to benefit the construction industry and the country as a whole.

As 2025 unfolds, we will track which of the AGC’s priorities are supported by the new administration, and how the new administration’s decisions bolster or hamper federal and federally funded construction in the U.S. --- Stephanie U. Eaton

‘Statutory Employer’ Immunity in Jeopardy in Pennsylvania

“Pennsylvania's general contractor classification protections are under scrutiny as a case involving a construction company is working its way through the courts.”

Why this is important: In Pennsylvania, the concept of "statutory employer" under Section 302(b) of the Workers' Compensation Act holds general contractors secondarily liable for workers' compensation if a subcontractor fails to pay. This status provides general contractors immunity from further legal action by the injured worker. In the case of Yoder v. McCarthy Construction, Inc., a jury ordered McCarthy Construction, Inc., a general contractor, to pay $5.6 million to a worker injured on-site. The Pennsylvania Superior Court, however, reversed this decision, stating McCarthy Construction was not liable under the "statutory employer" provision. The Pennsylvania Supreme Court has since agreed to review the case, with oral arguments expected in March. The National Association of Home Builders and the Pennsylvania Builders Association have filed an amicus brief, expressing concern that removing "statutory employer" protections could significantly increase costs for general contractors and subcontractors across Pennsylvania. This issue is important because it could reshape liability protections for general contractors in Pennsylvania. If the Pennsylvania Supreme Court overturns statutory employer immunity, general contractors may face increased legal and financial risks from workplace injury lawsuits, rather than being shielded by the Workers’ Compensation Act. This could lead to higher insurance costs, project delays, and added legal complexities, particularly for the construction industry. --- Jonathan A. Deasy

From Giant Lego-Style Bricks to Artificial Reefs, How the Construction Industry is Using Tech to Tackle Climate Change

“The construction industry is ‘by far’ the largest emitter of greenhouse gases of any sector, according to the U.N.”

Why this is important: Given the immense greenhouse gas emissions contribution created by the global construction industry, all efforts that contractors, engineers, product manufacturers, and designers can make to implement “greener” construction practices will keep the industry moving in a positive direction. This article highlights several building technologies that reduce harmful emissions and provide other beneficial characteristics. For example, renewable composite known as Renco was developed in Turkey. Renco is used to form blocks that look like giant Legos used to construct buildings that are rated to withstand earthquakes and Category 5 hurricanes. The blocks are made of 40 percent repurposed materials, such as fiberglass and resin, and once they are fitted together, they are secured with glue. Because these blocks weigh approximately 80 percent less than concrete, more blocks can be transported to job sites at a time, reducing fuel needs. Even better, Renco is 100 percent recyclable according to the Managing Director of Renco USA, Patrick Murphy. Another more sustainable building product is cross-laminated timber, or CLT, which has been used in buildings in the U.K., Europe, and the U.S. Designing and constructing buildings made from CLT, various studies predict substantial emissions reductions over the use of concrete and steel in construction. In Monaco, developers have created an “eco-neighborhood” called Mareterra that is built on water. The development was constructed using an underwater “caisson” that serves as a flood barrier and haven for marine life. Mareterra may become a model for sustainable coastal development, especially with sea water rising caused by climate change. Finally, as contractors evaluate the environmental impacts of their proposed projects, construction company Skanska USA developed EC3, a tool that allows contractors to quantify emissions. Mindful incorporation of more sustainable products and building techniques will eventually reduce the construction industry’s pollution. --- Stephanie U. Eaton

Lone Star Adoption: Texas Microgrid Growth Up Nearly 20X in Past 10 Years

“Since early 2021, when Winter Storm Uri’s extended freeze caused 52 GW in lost grid capacity and eventually led to more than 100 deaths, commercial customers have added nearly 100 defined microgrids statewide.”

Why this is important: The article details efforts in Texas to pursue “microgrids,” which are essentially a campus of end-users served by a dedicated electric generation source. The explosive microgrid growth in Texas has been spurred in part by the loss of power that occurred during Winter Storm Uri; a microgrid or campus with its own dedicated on-site or near-site power supply can avoid outages caused by reliance on a large-scale wholesale power grid or when there simply is not enough electric generation capacity available or affordable within that larger grid. Microgrid campuses can also stabilize the price of power compared to taking power from a wholesale power market. This is important because various regions anticipate that there will not be enough electric generation production capacity to meet the growth in electric demand. For existing and new large manufacturing, industrial, chemical, and data intensive users, microgrid development can ensure a steady, evenly priced power supply without depending on the monopoly utilities to build or purchase new power generation sources. In turn, this will advance the economic growth and strength of the states in which microgrids are embraced. --- Derrick Price Williamson

4 Cybersecurity Trends to Watch in 2025

“Critical industries are up against never before seen challenges to remain secure and operational, while regulatory pressures have completely upended the role of the CISO in corporate America.”

Why this is important: (1) Single points of failure continue to proliferate critical IT systems - While 2024 had its fair share of high-profile IT systems failures, such as Change Healthcare’s ransomware attack and CrowdStrike’s faulty software update, cybersecurity experts forecast single points of failure will continue to be a problem in 2025. Many businesses fail to recognize single points of failure vulnerabilities or do not accurately gauge their potential impact, and are no match to these sophisticated and efficient systems-wide cyberattacks occurring regularly resulting in diminished customer confidence. Analysts urge businesses to stop singularly focusing on preventing cyberattacks, and realize that they need to accept and prepare for the inevitable – catastrophic failures can and will occur. That is why resilience-based thinking is recommended. Businesses will have the best chance to bounce back by anticipating and preparing for these intrusions in lieu of prevention considerations only.

(2) Regulatory environment, tense threat landscape create new landscape for CISOs - With malicious cyber activity on the rise, federal and state regulatory obligations and compliance have increased exponentially placing a heightened burden on Chief Information Security Officers (CISOs) and other top security executives. Regulatory officials seek to gain real-time intelligence and insight into cyber threats and to ensure prompt disclosure of risks and cyberattacks to key stakeholders. One cybersecurity company, Trellix, is considering splitting the role of the CISO to include a business CISO role in order to deal with the dramatic increase in state and federal regulations. According to National Cyber Director Harry Coker, Jr., efforts to streamline the regulatory burden on companies are underway so as to lessen the amount of time a CISO must spend in compliance versus the time being spent in defending against inevitable cyberattacks. In late 2023, the Securities and Exchange Commission (SEC) began enforcing rules requiring publicly traded companies to report material cyberattacks and breaches to the agency. It is reported that this resulted in a 60 percent increase in cyber disclosures to the SEC, though less than 10 percent of these disclosures were of a material nature. More than 75 percent of incident disclosures filed with the SEC were made within eight days of the actual incident, with 40 percent of companies making additional disclosures with Form 8-K.

(3) Telecom attacks will fester into 2025 - Federal cyber authorities were overwhelmed in 2024 with containing and determining the scope of a sweeping series of attacks on telecom networks in the United States, and this problem will persist in the new year. Salt Typhoon, a threat group sponsored by China’s government, is believed to have ongoing access to at least nine telecom companies in the United States after infiltrating these networks in 2024. These attacks on critical infrastructure in the United States are an attack on its citizens' cyber-interconnectivity, and the public remains vulnerable as this infiltration remains ongoing without an understanding as to the extent of what Salt Typhoon has done. Defenders have not been able to boot the attackers embedded in telecom networks. Federal authorities suspect espionage, while other possible motives include evolving communication disruption capabilities in times of crisis or conflict. Incredibly, there appears to be no end in sight as telecom networks remain vulnerable.

(4) Evolution of the CISO - In December 2023, the SEC rule on Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure went into effect which places increased responsibilities on CISOs, particularly at publicly traded companies. The SEC ruling finds CISOs being held to a much higher standard in terms of reporting cybersecurity incidents and risks to stakeholders and to the SEC. With this increase in regulatory responsibilities, CISOs are also experiencing more prominent roles within the governance structure of modern companies and increased influence in the boardroom and C-suite, particularly with technology strategy. --- Jennifer A. Baker

The AI Arms Race is On for Builders in 2025

“As spending, interest and education around artificial intelligence increases, pressure grows for contractors to either adapt or get left by the wayside.”

Why this is important: The construction industry is experiencing a surge in the use of artificial intelligence, with major contractors developing AI tools to manage vast amounts of project data. These AI systems, such as Balfour Beatty's StoaOne and Skanska's Sidekick, function as chatbots that provide instant access to project information, enhancing efficiency and decision-making. The widespread availability of AI is leveling the playing field, enabling contractors of all sizes to access and interpret complex data. However, this democratization also introduces pressure to adopt AI swiftly to remain competitive. Industry leaders emphasize the importance of integrating AI into data models to effectively manage unstructured information and maintain a competitive edge. Ultimately, the rise of AI in construction is crucial because it enhances efficiency, reduces project delays, and improves decision-making by providing instant access to vast amounts of project data. As AI tools become more accessible, companies that fail to adopt them risk falling behind competitors who leverage automation for cost savings and productivity gains. --- Jonathan A. Deasy

ABA Forum on Construction Law Mid-Winter Meeting

As part of the Spilman Construction Practice Group’s continued commitment to staying on the cutting edge of the legal issues facing the construction industry, I had the pleasure of attending the American Bar Association Forum on Construction Law’s Mid-Winter Meeting in Tampa, Florida on January 15-17. This meeting was the second in a planned trilogy of meetings designed to address hot topics and issues facing the three main construction project participants—design professionals, owners/developers, and contractors. The Mid-Winter Meeting was centered on “Proven Strategies for Project Owners and Developers,” and I had the opportunity to hear about and exchange ideas on a variety of project-owner centric topics. The meeting included the opportunity to hear directly from major developers about the practices that “make or break” their multi-use development projects, insights on selecting project delivery methods, creative mid-project dispute resolution programs, insurance and bonding best practices, and discussions about effective management and resolution of post-construction operations and maintenance issues. As the Spilman Construction Practice Group looks forward to continuing to provide clients with the best solutions and guidance possible across all project stages, we will be staying at the forefront of the industry and putting into practice the new insights the practice group members gain through events like this one. --- Steven C. Hemric

Ask the Attorney

Steven C. Hemric is a Member in our Winston-Salem office. He practices in North Carolina and South Carolina with a focus on advising construction industry clients across all project stages, from bidding and contract negotiation through resolution of jobsite disputes and litigation. He also advises a variety of business clients from startups to Fortune-recognized businesses on supply chain, insurance coverage, and general transactional and litigation-related issues that impact their businesses.

Q: The North Carolina Department of Administration’s State Construction Conference is set to kick off on March 6. As a regular attendee and presenter at conferences such as these, we know there are hot button issues that are addressed. We are looking at three main issues and want to get your thoughts on their status and what people want to keep an eye on in the future.

What building code changes are on the horizon?

A: This time of year, code changes are less on the horizon and more on the doorstep, with updated codes typically going into effect this time of year. Building, fire, and energy code updates have been hot button issues in North Carolina over the past couple of years, in particular. A comprehensive suite of 10 codes updating North Carolina from the 2018 International Codes is already effective for use and is expected to become mandatorily effective on July 1. All of the changes are available via the Office of State Fire Marshall. In Virginia, the codes updated to the 2021 versions last year (January 2024). South Carolina’s update process is underway with plans to move to the 2024 International Code editions. The South Carolina Building Codes Council will be accepting comments on its proposed update from February 3 through August 4.

With new administrations come new projects. What are you seeing regarding state funding for projects and where should the industry be looking as we move into 2025?

A: With the current focus on government spending, it will be interesting to see how the new administrations (both national and at the state level) approach construction spending. Infrastructure is expected to be a continued priority, with spending on roads, bridges, and utilities continuing to be a strong focus of the new administrations. For example, the I-20 widening in South Carolina is expected to begin in 2025. On the private side, the City of Greenville (SC) is also expected to see construction begin on an ambitious new 29-story multi-use development that could become the tallest building in South Carolina. In North Carolina, the Hurricane Helene recovery effort is sure to be a focus, and Governor Stein has already signed several executive orders on temporary housing and rebuilding private roads and bridges that will create opportunities for contractors. In Virginia, one of the more unique opportunities should be workforce housing, which should be bolstered by Governor Younkgin’s Executive Order 42 from November 2024 and several proposals that will be before the legislature during the 2025 legislative session.

And finally, are there any changes you see with MBE/DBE opportunities?

A: The stage is set for the M/W/DBE environment to be volatile and for programs to undergo swift, significant changes. These programs have already been under fire following the Supreme Court’s ruling on affirmative action programs in college admissions, and it will be interesting to see how the new federal administration approaches M/W/DBE programs following its early abolition of DEI employment programs in federal agencies. I will certainly be tracking this issue closely across the litigation, legislative, and executive/agency action fronts.

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