Prompt payment gaining traction

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By Leah Den Hartogh

Contractors have long struggled with payment delays from general contractors and building owners.

In recent years, the industry through the National Trade Contractors Coalition of Canada (NTCCC) has lobbied hard for prompt payment legislation to fix the problem. Finally, it is seeing results or at least some activity in just about every province.

Ontario was the first province to do so, including prompt payment legislation in Bill 142, the Construction Lien Amendment Act, which passed in the provincial legislature Dec. 5. It will be introduced in installments with the final provisions and adjudication in full-effect by October 2019.

It establishes clear payment timelines for all parties involved in a construction project. The legislation states that once an invoice is received, owners are required to pay general contractors within 28 days. After that, general contractors are required to pay the sub-contractors within seven days. An adjudication period is in place to settle disputes. General contractors and sub-contractors receive mandatory interest on late payments and can suspend work on a project if not paid.

The federal government and provinces are looking at the Ontario legislation as a template for their own rules, remarked Richard McKeagan, recently retired executive director of the Mechanical Contractors Association of Canada (MCAC).

“Ontario chose to combine a tripartite legislation, they address lien reform, prompt payment, and adjudication all at the same time.”

Federal legislation

In Ottawa, the Liberal government is working on prompt payment legislation after a bill created by Conservative Senator Donald Plett, and widely supported by industry, failed to gain support from the federal Liberal leadership despite having been passed by all parties in the Senate.

Toronto Liberal MP Judy Sgro was expected to sponsor Plett’s bill in the House of Commons. However, when that didn’t fly, “we decided that the best way to have perfect and really solid legislation was to bring in the consultant that had worked on it in the Province of Ontario and engage them to make sure that everybody has been consulted that was necessary.”

Plett says he doesn’t see much of a difference between his bill and what the Liberals are proposing. He believes the federal government should have taken leadership on prompt payment, but now the provinces are way ahead.

Quebec to establish pilot project

In Québec, a prompt payment bill was expected by spring 2017 following a recommendation by the Charbonneau Commission into crime in the construction industry.

In December, Québec adopted Bill 108, which implements prompt payment pilot projects to test payment measures, reported Steve Boulanger, assistant general director for the Corporation of Master Pipe Mechanics of Québec (CMMTQ).

“We are still waiting for these pilots to be launched. It should be within the next month. It means that some of the projects identified by the government will be governed by new rules for testing and after one or two years they will evaluate and probably adopt permanent regulations about prompt payment.”

The pilot projects will set guidelines to determine payment timelines and create an adjudication period. “It’s a beginning. We will see how it goes. We would have liked a complete legislation, but you have to start somewhere.” The pilot projects will only include public projects. The province will have 30 days to pay.

Saskatchewan looks to prompt payment

Saskatchewan may soon be the second province in Canada to launch prompt payment legislation. Modelled after Ontario’s Bill 142, it will include amendments to the Builder’s Lien Act, said Carolyn Bagnell, executive director of the Mechanical Contractors Association of Saskatchewan. The changes are expected to be introduced in the fall.

The Saskatchewan Construction Association (SCA) is looking for the legislation to include five basic principles – a prompt payment cycle, right to suspend work, a dispute mechanism, interest on overdue payments, and transparency, said SCA spokesman John Lax. “What we are hoping for and what we are going to get are probably two different things,” he added. “Hopefully between Ontario and Saskatchewan we will set a standard in Canada,” he said.

Second reading in Manitoba

Manitoba could well be the second province to adopt prompt payment legislation. The Prompt Payments in the Construction Industry Act passed second reading in the Manitoba Legislature on April 24.

“This is a fair and balanced legislative proposal that ensures a timely flow of payments across the construction industry to companies and workers,” said Reg Helwer, the Progressive Conservative MLA for Brandon-West who originally proposed the legislation.

All parties are supporting the bill. “The proposed legislation is an important issue that needs to be tackled,” remarked Tom Lindsey, NDP MLA for Flin Flon.

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