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FGIA: New payment-protection laws are being mandated across the country

Prompt payment and mandatory adjudication legislation is in various stages of being enacted across Canada. Such legislation sets out the rights and responsibilities of all parties to a construction project through the establishment of minimum standards for payment, dispute resolution and communication.

At the federal level, the Federal Prompt Payment for Construction Work Act, which applies to federal construction projects, was passed on June 21, 2019. However, it is not yet in effect. Meanwhile, most provinces are developing their own approaches to the problem, although all anticipate an eventual national adjudication model. 

Ontario is the first jurisdiction with a prompt payment and adjudication regime layered on top of existing construction lien requirements with its Construction Act, that took effect on Oct. 1, 2019. It requires the owner either to pay within 28 calendar days or to log a dispute within 14 calendar days. In turn, the contractor must either pay its subcontractors or send notices of dispute within seven calendar days of receipt.

The Builders’ Lien and Prompt Payment Act was approved in Nova Scotia on April 12, 2019, but is yet to take effect. Although it includes concepts from Ontario’s new prompt payment regime, it takes a narrower approach to adjudication.

In Saskatchewan, The Builders’ Lien (Prompt Payment) Amendment Act, 2019 and The Builders’ Lien Amendment Regulations, 2020SR92/2020 came into force on March 1, 2022. These describe a prompt payment and adjudication regime that largely parallels Ontario’s. Alberta’s Builders’ Lien Amendment Act, 2020 takes effect on August 29, 2022. Unlike Ontario-style prompt payment requirements, monthly billings are mandated through proper invoices issued at least every 31 days.

Similar measures are in process in several other provinces, which are currently involved in varying degrees of study or legislation development.

In July 2020, the British Columbia Law Institute presented 86 recommendations to simplify the province’s Builders Lien Act. However, the report does not address prompt payment or adjudication. The government has established an industry working group tasked to provide expertise and guidance to shape legislation with the goal to see this tabled in the fall 2022 session.

Manitoba is introducing new legislation that will specify a timely payment structure based on the progress of the work and achievement of certain project milestones. On March 16, 2022, Bill 28, The Prompt Payment for Construction Act, received its first reading in the legislature.

In New Brunswick, prompt payment and adjudication legislation will take shape in two phases. The first, the Construction Remedies Act and the General Regulation, took effect on Nov. 1, 2021, modernizing existing lien legislation. The second phase will discuss stakeholder concerns.

Quebec continues to lay the foundation for a prompt payment and adjudication regime. Since implementing a pilot program in 2018, Quebec has gathered data on monthly invoicing, payment timing and disputes. As more provinces bring prompt payment and adjudication legislation into force, expect Quebec to take further steps to implement wider legislative reforms to construction legislation.

Such prompt payment requirements will increase efficiency and productivity; drive investment, employment, training, innovation and purchase of equipment; and increase competition – all resulting in lower construction project costs.

By staying informed – and engaging legal experts with proven experience and know-how – industry participants can ensure that their existing projects are not disrupted and new projects are structured to mitigate the risk of unforeseen delays and cost overruns.

Amy Roberts is FGIA director of Canadian and technical glass operations.