Federal prompt payment law for contractors now in force

Federal prompt payment for Canada’s construction industry is now in effect. 

The Federal Prompt Payment for Construction Work Act came into force Dec. 9 to ensure contractors and subcontractors working on Government of Canada infrastructure projects, like buildings and bridges, get paid in a timely and predictable fashion.

The Act was passed in June 2019.

Prompt payment has been a long-standing issue with the industry going back to 2016. The regulations in this legislation were crafted in consultation with construction industry representatives, a government news release said.

Under the Act, the federal government has 28 calendar days to pay after a contractor submits an invoice. The contractor will then have seven days to pay its subcontractors, subcontractors will have a seven days to pay its subs, and so on down the payment chain.

All existing construction contracts will have one year, as of Dec. 9, to comply with the legislation.

In the release, the government said it has a “strong record” of paying 90 per cent of its invoices within the previous mandatory 30-day payment period. However, there were reported delays down the payment chain.

Provincially, only Ontario, Saskatchewan and Alberta have their own prompt payment regimes. The news release said any federal construction projects in those provinces will be under the prompt payment regime of that jurisdiction.

“The coming into force of this legislation will alleviate payment delays and enhance financial stability for small and medium-sized construction companies, helping to support the more than 1.5 million workers of the industry during these difficult times for all Canadians,” said Jean-Yves Duclos, minister of public service and procurement, in a statement.

The Canadian Institute of Quantity Surveyors (CIQS) called the enactment of the act a “crucial step towards fostering a fair and transparent construction industry.”

The group said it address challenges related to delayed payments and delivers much-needed relief to contractors, sub-contractors and suppliers.