Over the past three years, many jurisdictions across Canada have been attempting to remedy issues of non-payment and late payment that are inherent in the construction industry. When entering into a contract for work, contractors and subcontractors should feel secure that they will promptly receive payment at the end of a construction project. To make this a reality, three provinces have enacted legislation that applies solely to timely payment and adjudication for resolving issues quickly and out of the courts.
This blog discusses prompt payment legislation pertaining to the construction industry in Ontario, Saskatchewan, and Alberta. It’ll help construction employers better understand their rights and obligations as owners, contractors, or subcontractors.
Ontario was the first province to implement prompt payment adjudication for the construction industry. The changes to the Construction Act came into force on October 1, 2019, and contain an expedited way to handle disputes that occur during a construction contract. The adjudication process is generally commenced prior to the completion of the contract.
These changes require an owner to make full payment of a “proper invoice” remitted by a contractor within 28 calendar days or dispute the invoice within 14 calendar days. Successively, a contractor must provide full payment to their subcontractors within seven calendar days of receipt of payment or provide notice of disputes to their subcontractors within seven calendar days.
In Ontario, the adjudication process is overseen by the Ontario Dispute Adjudication for Construction Contracts (ODACC). An owner who is disputing a contract may file a complaint with the ODACC using the prescribed forms.
Saskatchewan has developed legislation regarding prompt payment in the construction industry that mirrors Ontario’s.
The changes came into effect on March 1, 2022, under the Builders’ Lien (Prompt Payment) Amendment Act, and the Builders’ Lien Amendment Regulations. The changes only affect contracts entered into on or after March 1, 2022.
The designated timelines for owners to pay or dispute an invoice are the same as those set out in Ontario’s legislation, as are the timelines to provide notice of dispute or full payment to subcontractors.
Saskatchewan has also developed their own adjudicative branch called the Saskatchewan Construction Dispute Resolution Office (SCDRO). The SCDRO provides adjudicators to oversee construction contract disputes for prompt payment.
The SCDRO adjudication does not govern architects, engineers, land surveyors, services for material or labour in the mining industry, or projects pertaining to renovating infrastructure that generates, transmits, or distributes electrical energy (such as power grids or nuclear power plants).
Most recently on August 29, 2022, Alberta’s Prompt Payment and Construction Lien Act (the Act) came into effect; making it the third jurisdiction in Canada to enact prompt payment and adjudication legislation for the construction industry.
The Act applies to any construction contract that was entered into on or after August 29 and allows contracts entered into before that date two years to become compliant with the Act if the contract is to remain in place past August 29, 2024.
As with Ontario and Saskatchewan, when an owner receives a “proper invoice” from a contractor, they have 28 days to pay the amount or 14 days to issue a notice of dispute. Contractors must then pay their subcontractors within seven days of receiving payment or deliver the required notices to them. If the contractor fails to deliver the applicable notices to their subcontractors on time, they will still be required to pay them (even if they have not received payment from the owner).
Under the Act, “proper invoice” is defined as “a written bill or other request for payment for the work done or materials furnished in respect of an improvement under a contract or a subcontract…” in order for the invoice to be considered valid, it must contain numerous components including, but not limited to:
- the contractor’s or subcontractor’s name and business address
- the date of the proper invoice and the period during which the work was done or materials were furnished
- a description of the work done or materials furnished
- the amount required for payment and the corresponding payment terms broken down for the work done or materials furnished, and
- the name, title, and contact information of the person to whom the payment is to be sent
Lastly, the adjudication process laid out in the Act states that the Minister residing over the Act (the Minister of Service Alberta) may choose one or more entities to act as a Nominating Authority. The Nominating Authority then appoints an adjudicator to preside over the adjudication. The types of matters that can be heard at adjudication include change orders, non-payment, and lien fund amounts owed at the end of a contract.
It is worth noting that while the above three provinces are the only jurisdictions with prompt pay legislation in effect, other regions appear to be onboard.
For example, on April 12, 2019, Nova Scotia’s Builder’s Lien Act received Royal Assent, but is yet to come into force.
If and when the Act comes into effect, the name will change to the Builder’s Lien and Prompt Payment Act and will include concepts similar to those in Ontario, Saskatchewan, and Alberta.
Both British Columbia and Manitoba have submitted reports and recommendations to support a legislative framework pertaining to prompt payment and adjudication for construction contracts. While there are no laws in place yet, they may be developed in the future.
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