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Province not moving fast enough on prompt payment

Sault Ste. Marie Construction Association manager Adam Pinder describes the prompt payment issue in Ontario as a “huge, epidemic” problem with far-ranging impacts on the province’s economy.
With an independent review completed, Ontario’s construction industry wants swift action by Queen’s Park in tackling the critical issue of late payments for work completed on construction projects.

Sault Ste. Marie Construction Association manager Adam Pinder describes the prompt payment issue in Ontario as a “huge, epidemic” problem with far-ranging impacts on the province’s economy.

After the city’s largest private employer, Essar Steel Algoma, went into creditor protection last fall, 150 of his members were owed more than $250 million for work performed and services supplied for the struggling steel producer. Now, Essar’s India-based parent company has placed the entire steelworks on the selling block.

But Pinder reconciles that by saying the situation on the ground in the Sault is no different than Thunder Bay or Toronto. More education is still needed in the industry, he said, to advise contractors of their contractual rights and obligations.

“Bigger than the Essar, if you spent a week in my office, the No. 1 reason people come in here is: how do I get paid? That’s what we’re dealing with on a regular basis, and if you speak to anyone who does my job across the province they’d tell you the same thing.”

After two failed attempts by the Ontario government to pass legislation that would require developers and prime contractors to pay their subtrades in a timely fashion, the province took its third kick at the can by deciding to overhaul the broader Construction Lien Act through an independent review. Prompt payment legislation will be folded into an eventually revised act.

Bruce Reynolds, a construction law expert, was appointed by the Attorney General in February 2015 to head up the review. His report, with recommendations, was expected to be done last December, but after asking for an extension to do more industry consultation, Reynolds filed his review with that ministry and the Ministry of Economic Development, Employment and Infrastructure on April 30.

Perhaps suspecting some political doctoring of the report is going on, Prompt Payment Ontario, a coalition of construction associations and unions, issued a May 11 release “urging” for the immediate release of Reynolds’ highly-anticipated report.

“Families in Ontario can’t wait for up to four months or longer for their loved ones to get paid for construction work already completed,” said Ron Johnson, a Prompt Payment representative, in a statement. “It is time to remedy the issue so our trades can get paid fairly, within a standard of 30 days.”

Johnson was not made available for comment.

Construction associations, like Prompt Payment Ontario, paint the delinquent payment in construction as a “rampant and a growing problem” with contractors often having to wait four months or more to get paid for work that’s certified as being finished.

While many American states have passed prompt payment legislation for public and/or private sector contracts, Ontario’s Lien Act is considered outdated and only addresses non-payment as opposed to delinquent payment, a time-sensitive issue that can put many small and medium-sized companies out of business or force them to lay off employees.

“The bottom-line is we’ve waiting for this movement for quite a while,” said Pinder. “Two pieces of legislation ultimately stalled out in the legislature. I think Prompt Payment and other organizations want to hold their feet to the fire: get this done and move it forward.”

Pinder is appreciative of the time Reynolds took to “get it right” and the thoroughness of his approach, but like many he’s anxious to see what the recommendations are, and how swiftly Queen’s Park will move.

“There isn’t a ton of insight as to what the report’s going to say. Until we know what’s being said or written, we can’t be critical of it.”

In major mill towns like Sault Ste. Marie, contractors waiting to get paid are often reluctant to draw the line with a project manager, fearing they’ll be blackballed from bidding on future contracts or will often keep working in the hopes that they’ll get paid.

“They’re concerned about biting the hand that feeds,” said Pinder.

One loophole in the current legislation, Pinder points out, is that the majority of contractor work performed in the Sault is ongoing maintenance, work that doesn’t fall under the Lien Act “because it’s not new construction.”

He’s wondering if that oversight will be addressed with changes to the new act, but has no knowledge if that is among Reynolds’ recommendations.

“I’m certainly anxious to read it because it’s the most important issue we face.”

Many of contractors, trade unions and suppliers favour a system where money flows down the construction project pyramid within 30 days.

Pinder basically wants to see payment legislation that “works for everybody,” specifically for small contractors on the bottom rungs who hold down the dual roles of both running a business and working as a tradesperson.

“That’s the backbone of the construction industry across the province, and you need something that works for those guys,” said Pinder, who anticipates government action on the report within a month’s time.

“The Lien Act isn’t how you should get paid. The Lien Act is the fallback when you don’t. The lines have been blurred over time which is the need for this review and this change.”