This feature is part of ‘The Dotted Line’ series, which takes an in-depth look at the complex legal landscape of the construction industry. To see the entire series, click here.
Contractors have many legal issues to ponder in 2026.
Whether they face immigration, tariffs, opportunities and risks data center construction boom or as artificial intelligence is making its way into all aspects of business, builders must ensure their contracts can comply with today’s changing legal landscape.
First and foremost among those concerns is immigration and increased enforcement during President Donald Trump’s second term, said attorney Trent Cotney, construction team leader at Adams & Reese in Tampa, Florida.
“ICE raids and I-9 audits have severely impacted crews,” Cotney said. “No one wants illegal workers, but as you eliminate potential labor, either voluntarily because they leave or involuntarily because they are detained and deported, the total pool of available workers is reduced.”
Here are five of the top construction legal issues lawyers say contractors need to track in 2026.
Labor cost increases
With fewer workers on the job due to immigration enforcement, the workers who remain can demand higher wages, Cotney said. Among his clients, he sees wage rates increase between 4% and 10%. He advises builders to push for strong language in their contracts to recoup increased overhead.
Trent Courtney
Courtesy of Adams and Reese LLP
“I’m always a big proponent of including a price escalation provision in your contract,” Cotney said. “It’s simple and it’s going to work no matter what the basis for the price increase is. I’ve used it during hurricanes. I’ve used it during COVID. I’ve used it during wildfires. I’ve used it and it works.”
Along with price, contractors should write provisions into their contracts to allow more time on projects for delays caused by labor constraints, said construction attorney Carol Sigmond.
“What if I can’t get enough labor in a particular area?” said Sigmond, partner and member of the Infrastructure Group in Nossaman’s New York office. “I need an extension of time because I need everyone to recognize that I cannot control the labor market.”
Tariff impacts
The tariffs that Trump has imposed in his second term will also need careful consideration. A pending the decision of the US Supreme Court will determine whether these fees are constitutional. If they are overturned, the government would have to pay billions of dollars in rebates. Contractors must prepare regardless of the outcome, Sigmond said.
“People are starting to try to adjust both ways,” Sigmond said. “In other words, if there are new rates, what do they do? And what do they do if rates go down?”
From a contractual perspective, the key is determining who bears the costs of the prevailing rates and who would get refunds through a rebate clause.
“Homeowners are starting to ask contractors, if these costs go away, can they get their money back?” Sigmund said. In this case, the owners and contractors are putting clauses in the contracts to say “this has to reimburse us again”. Sigmund he said
Carol Sigmond
Courtesy of Carol Sigmond
However, he warns that the chain of repayments owed by the government could quickly become complicated. The process will likely involve importers, contractors and owners, all of whom may try to get a piece of the pie back.
Construction of the data center
With a projected $3 trillion overall spending for data center development by 2030, builders have the opportunity to benefit from the boom around these facilities.
“Right now, there’s money to be made,” Cotney said. “If you’re a contractor, it’s definitely worth pursuing.”
“Typically, the first sign you have a problem is that they start fighting over exchange orders or start slowing down payments. Make sure that if you see these triggers, you’re reacting appropriately.”
Carol Sigmond
Partner, Nossaman
But as with any development cycle, contractors should look at this opportunity with wary eyes, lawyers say, and be prepared to deal with a downturn if the music suddenly stops. By the end of 2025, fears around an AI bubble forming similar to the dot-com bust of the early 2000s that rocked the stock market.
While those concerns appear to have subsided by early 2026 (observers say data center demand looks healthy for at least next year), contractors should make sure they have language in their contracts to protect them if things go sideways.
One way to do this is to limit the scope of the termination for convenience clause, a contractual trick that usually allows either party to walk for almost any reason. Although such clauses are common in construction contracts, contractors should ensure that they can be recovered as much as possible, should a deal fall through due to financing or borrowing hurdles, for example.
Cotney said that the termination for convenience clause contained in the American Institute of Architects standard contract documents it is widely recognized as fair on both sides. Contractors should also strive for language that allows them to get back as much as possible in terms of what they put into a project up to a certain point.
But some data center contracts he’s seen have tried to contain more of those expenses.
“Traditional cancellation for convenience means you’re usually entitled to all of your reasonable costs and profits and overhead from what you’ve done to date, but not future profits and overhead,” Cotney said. “With these that I’ve been seeing, it’s more that you’re only entitled to certain costs. They’re very specific and the owner has the right to charge things back for incomplete work.”
In addition to those clauses, Sigmond pointed to early warnings that a high-flying data center project could face new financing hurdles.
“Usually the first sign you have a problem is they start fighting over change orders or they start slowing down payments,” Sigmond said. “Make sure that if you’re seeing these triggers, you’re reacting appropriately.”
This means making sure payments follow predetermined project completion milestones and making sure payment obligations are in place to keep the contractor whole. It is also important to file any liens against a project that are in arrears within the allotted time specified in the contract, usually 90 days.
Crepe scope
As constructions become more complex, contractors are often asked to do more than they signed up for. This may even include a request to perform or guarantee work that is beyond a contractor’s area of expertise.
“You have contractors who have to become architects, engineers and lawyers all at the same time,” Cotney said. “The reason it’s happened is that the systems we use for construction have become more complicated.”
Examples of where builders may be asked to provide information beyond their own remit include building performance specifications, R-values for insulation, fire codes, and product manufacturer specifications. While contractors usually define what they will do within the scope of a given job, it is increasingly important to put in writing what they will not do.
“If you’re not in the design business, why don’t you have a design exemption that says if you make suggestions in that area, that’s it, suggestions,” Cotney said. “You want to put something in there that says a design professional has to sign off on them before it becomes the Bible.”
“The question isn’t whether AI will be part of the build, but whether you’re using it intentionally or letting it go unguarded.”
Nate Simon
Founder, Simon Law
AI in contracts
Any discussion of legal issues for contractors in 2026 would be incomplete without looking at the impacts of AI, both on construction contracts and the workplace.
Nate Simon
Courtesy of Simon Law
“If you don’t think your team members are using AI, they are,” said Nate Simon, former in-house counsel at Gray Construction and founder of Simon Law in Lexington, Kentucky. “The question isn’t whether AI will be part of the build, but whether you’re using it intentionally or letting it go unguarded.”
Lawyers largely agree that AI isn’t quite right yet tool for creating construction contracts. Simon also said the technology isn’t suitable for reviewing entire contracts, although it does better when it focuses on individual clauses. Where he really shines, he said, is helping contractors understand what’s in a contract in the first place.
“Summarizing an existing contract in plain English so your project team can actually use it; helping to draft a notice letter when you already know the deadline and delivery requirements; comparing two versions of a subcontract to see what’s changed on the red line,” Simon wrote via email. “These are tasks where AI saves time and you can catch mistakes because you know what the right looks like.”
But technology does not, and should not, turn contractors into lawyers.
“Understanding what a clause does is different from deciding whether to accept it, value it or roll back,” Simon said.
That last point is especially important as contractors use AI to answer questions from project owners and other stakeholders, according to Cotney. He said he has started writing AI disclaimers into contracts to make sure contractors don’t just commit to under-delivering.
“We’ve had to develop a contract provision that basically says that to the extent AI is used for planning or preliminary estimates, the customer can’t rely on it until boots on the ground have determined whether those field measurements are accurate.
