Ontario, British Columba Leading Prompt-Payment Progression in Canada
On the heels of British Columbia introducing legislation last month setting deadlines for companies to pay contractors, sweeping changes to how contractor payments are made continues to be a key issue.
For business owners, payroll, and accountants, this means important new payment rules to follow.
Here are the most notable changes to be aware of:
1. Ontario Leading the Country in Passing Prompt-Payment Legislation
Leading the way in prompt-payment legislation is Ontario, whose amendments to the Construction Lien Actcame into effect in 2018 years after changes were first proposed.
Stage One of these changes, now in effect, sought to first modernize the Act. This involved, of note, the clarification of language in the Act of better reflect projects with multiple owners; contractors and subcontractors now having 60 days to start a lien (and 90 days to start a court action); and new bookkeeping regulations for contractors to protect subcontractors in the event of bankruptcy.
2. Effective October 2019, Ontario Business Owners Have 28 Days to Pay Contractors
The big changes in Ontario, however, comes into law in October 2019 in Stage Two. Focused on reducing costly disputes caused by mandatory adjudication by getting cash moving faster, this stage involves the full enactment of prompt payment and adjudication legislation.
As part of this, business owners will now have 28 days to make a contractor payment after the receipt of a proper invoice. From there, contractors will have seven days to pay their subcontractors.
The consequence for not following prompt-payment legislation? Accrued interest.
3. British Columbia Follows Ontario’s Lead Setting Payment Deadlines
Echoing Ontario’s prompt-payment laws, British Columbia’s legislation – introduced in May 2019 – will also require businesses to pay contractors within 28 days and for subcontractors to be paid within seven days after this period by contractors after receiving their payment.
4. Federal Government Moving Forward with its Own Prompt-Payment Legislation
Recently announced in the federal government’s budget bill was “An Act to implement certain provisions of the budget tabled in Parliament on March 19, 2019 and other measures.” Like the BC legislation, it, too, follows much of the precedent set by Ontario – including the 28 days to pay a contractor and 7 days to pay a subcontractor – but still has a lot of to-be-decided provisions.
5. Saskatchewan, NS Have Legislation in Discussion; Other Provinces Considering Changes
Prompt-payment legislation has been tabled in Saskatchewan and Nova Scotia as well, with changes to contractor payments on the near horizon in these provinces. Closely mirroring the Ontario model, Saskatchewan’s Bill 152, The Builders’ Lien (Prompt Payment) Act is in its third reading and should come into force in 2020.
In Nova Scotia, meanwhile, their proposed legislation, Bill 119, renamed Builders Lien and Prompt Payment Act, includes similar concepts to the Ontario approach as well but appears to include some more defined rules around the adjudication process of payments.
While Nova Scotia and Saskatchewan followed the lead on new contractor payments legislation behind Ontario, British Columbia, and the federal government, other provinces – notably Manitoba and New Brunswick – are either in the phases of legislative modernization or consideration.
Why the Changes to Speed Up Payment to Contractors?
The question of why these changes are happening in Canada now is interesting. While it seems right on an ethical level to issue payment to contractors in a prompt manner without unnecessary delay, it’s also an economic one: it just makes good business sense.
Delayed payments to contractors produce a negative impact on all facets of society – including the businesses late in receiving these contractor payments, their employees, and the economy as a while.
Based on research by Contract Simply, just 12% of subcontractors received payment within a 30-day window; even worse, another 42% of contractor payments aren’t issued until 30-60 days.
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