UPDATED: Trends in Prompt Payment Legislation
Editors note: As this topic evolves, our team will continue to provide updates and commentary. Our most recent article pertaining to this subject can be found here.
There is a trend across Canada in establishing regimes to provide prompt payment to contractors and subcontractors for construction work performed and a regime to resolve disputes over the non-payment of that construction work. Recently, Bill C-97, Budget Implementation Act, 2019 No. 1, which includes the Federal Prompt Payment for Construction Work Act, received Royal Assent. This legislated a new regime related to Federal real property or Federal immovables in Canada, and for those contractors or subcontractors who undertake that work for the Federal Crown (or pursuant to a contract a service provider has with the Federal Crown). The Federal Prompt Payment for Construction Work Act will come into force upon a day fixed by order of the Governor in Council.
The Federal Prompt Payment for Construction Work Act is modeled (although different in several respects) after the Ontario regime, which made technical amendments to the Ontario Construction Act. British Columbia, Saskatchewan, Manitoba ,Quebec, Nova Scotia and New Brunswick have also taken steps towards implementing prompt payment regimes. Public consultation with interested parties and development of regulations will assist in tailoring final legislation that will hopefully address the needs of the industry in each province.
Alberta, however, has not (yet) followed this trend. Although Alberta Infrastructure has been implementing prompt payment clauses in its various contracts since 2016, no significant steps in Alberta have been taken towards a prompt payment regime in comparison to the other noted provinces. With that said, various Alberta industry associations have discussed their interest in implementing a prompt payment regime. Update December 2019: We are informed that Service Alberta has commenced an engagement for a review of the Builders Lien Act, with a view to implementing prompt payment rules for Alberta.
This does not mean that Albertans are not affected by prompt payment legislation. Once in force, those involved in Alberta projects within Federal jurisdiction will be subject to the Federal Prompt Payment for Construction Work Act. This covers any construction projects situated on federal government lands, generally administered by either Public Services and Procurement Canada or Defence Construction Canada.
The regulations of the Federal Prompt Payment for Construction Work Act are in the process of being developed, subject to input from the public, and will expand upon the general guiding provisions. For example, delivery of a “proper invoice” to the Crown (or service provider), triggers payment to be paid to the contractor within 28 days; triggering payment of the contractor to pay subcontractors within 35 days; and subcontractors to pay sub-subcontractors within 42 days. This chain of triggering events continues in increments of seven days.
There are also deadlines triggered that require formal notice of a description of the work and reasons for a party who refused to pay all or part of an invoice. In particular, the Crown (or service provider) has 21 days to provide a contractor with formal notice of non-payment; a contractor has 28 days to provide subcontractors with formal notice of non-payment, and so on. Similar to the payment increments, the chain for formal notice of non-payment continues in increments of seven days.
Where payment is not received within the legislated timelines, the contractor or subcontractor is entitled to seek a determination from an adjudicator. Unless the parties agree otherwise, the adjudicator’s determination is binding on the parties. There is a 21 day timeline to provide notice of adjudication from the later of the date a certificate of completion is received by the contractor or from the date payment is required.
Considering this, contractors and suppliers engaged on Alberta projects within Federal jurisdiction should be aware of the new Federal prompt payment regime. We will update you when the Federal Prompt Payment for Construction Work Act comes into force and when any developments occur with respect to a Provincial prompt payment regime in Alberta.