Labor Challenges Expected to Fuel Construction Disputes and Litigation in 2026

Construction Labor Shortages, Rising Costs to Drive Disputes and Litigation in 2026

A shifting labor landscape is expected to create significant challenges for the U.S. construction industry in 2026, potentially leading to an increase in disputes and litigation despite modest growth projections.

According to James F. Gallagher of Resolution Management Consultants, commercial construction is forecast to grow at just 2% in 2026, continuing a sluggish trend seen in recent years. However, underlying labor issues are expected to have a far greater impact on project delivery and contractual performance.

“Over the last few years, fundamental changes in the U.S. construction labor market have occurred affecting costs, availability and capabilities. These changes are having a significant impact on construction companies achieving contract compliance, triggering a higher incidence of disputes and litigation,” said Gallagher.

Labor shortages and rising costs reshape project outcomes

Industry experts point to tightening labor supply as a central issue. Increased immigration enforcement has reduced the available workforce, while demand for construction services continues to grow. This imbalance is pushing labor costs higher and placing pressure on contractors to meet budgets and timelines.

“As the construction labor force continues to shrink while demand is growing, the effect will be that overall labor costs will rise,” Gallagher noted, adding that rising costs can lead to missed deadlines and budget overruns—two common triggers for disputes.

At the same time, a decline in apprenticeship programs is limiting the number of skilled workers entering the industry. Training opportunities have decreased by an estimated 2% to 5% annually in recent years, further exacerbating workforce shortages.

Workforce quality and aging trends add pressure

Beyond availability, workforce quality is also becoming a concern. In an effort to fill gaps, some employers have lowered training and qualification standards, which may affect the quality of work delivered on projects.

“In order to include more people in the construction labor force, standards have been reduced in a number of areas, including depth of training, experience and qualification,” Gallagher said, noting that these changes are contributing to quality-related disputes.

Compounding the issue is an aging workforce. As experienced workers retire, fewer seasoned professionals are available to mentor younger employees or maintain productivity levels on complex projects. This transition is expected to slow project timelines and increase the likelihood of performance-related conflicts.

Additionally, limited training in emerging technologies—such as artificial intelligence, building information modeling and data analytics—is hindering the industry’s ability to offset labor shortages through efficiency gains.

Despite these challenges, Gallagher suggested that not all outcomes will be negative. As litigation costs continue to rise, more construction disputes may be resolved outside the courtroom through alternative dispute resolution methods.

“For the long-term health of the construction industry, labor issues must become a top priority, in order to be able to deliver the quality and consistency expected and ultimately, to reduce the number of disputes,” he said.

As contractors, owners and stakeholders navigate these evolving labor dynamics, addressing workforce development, training and retention will be critical to maintaining project performance and minimizing legal risk in the years ahead.

Originally reported by The National Law Review.