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Prompt payment becomes law in Ontario

Developers must pay contractors within 28 days for work completed
Waterfront Development-Workers
Ontario contractors and tradespeople now have the law on their side in pursuing delinquent payment from project developers.

Bill 142, otherwise known as the Construction Lien Amendment Act, passed unanimously at Queen's Park, Dec. 5.

It’s considered a major victory for more than 400,000 contractors and tradespeople in Ontario in resolving payment delays which have been the industry’s largest barrier to growth.

"This legislation could not have been introduced at a better time, as higher interest rates will make delayed payment unbearable,” said Prompt Payment Ontario director Ron Johnson in a news release.

Prompt Payment Ontario is a single-issue lobby group made of contractor associations, unions, suppliers, general contractors and pension trust funds.

“We hope that this groundbreaking piece of legislation will set the stage for change across the country.”

For years, industry groups have said delinquent payment has driven up the cost of construction, constricted cash flow to small business, stymied job creation, affected worker payroll, and reduced apprenticeships.

Trade contractors have waited months to get paid for work that’s been certified as being complete.

Under the new rules, the owner of a construction project is required to pay the general contractor within 28 days of receiving the invoice.

The subcontractor must receive payment from the general contractor within seven days of receiving payment from the owner.

Other changes concern providing more time for contractors and subcontractors to resolve their disputes outside of court by extending timelines to file liens and start court actions from 90 days to 150 days.

After earlier prompt payment bills died on the legislature floor, the Wynne government appointed an independent review in 2015, led by construction law experts Bruce Reynolds and Sharon Vogel.

The recommendations of the “Reynolds Report.,” which included several rounds of industry consultation across the province, formed the backbone of Bill 142.

The legislation was introduced last spring and received royal assent before the Ontario legislature adjourned for the season.

It’s the first of its kind in Canada.

“This is the biggest change to our construction laws in over 34 years,” said Attorney General Yasir Naqvi.

“I would like to thank the many organizations and individuals who lent their knowledge and expertise to this incredible effort. These changes will have a real impact on people’s lives, giving workers assurance they will be paid on time and in full, and help to ensure disputes are resolved quickly.”

Prompt Payment Ontario thanked Naqvi for his “ardent” support and "Bruce Reynolds and Sharon Vogel for the incredible work they have accomplished, they truly paved the way for this bill."

In a statement released by their law firm, Borden Ladner Gervais LLP, Reynolds and Vogel said they were “pleased with the passage of the Construction Lien Amendment Act.”

“These changes, including promptness of payment and dispute resolution through adjudication will go a long way to modernizing the construction industry across Ontario. We would like to thank and acknowledge the advisory group as well as the many government and industry groups who provided advice during our review and subsequent work on the bill.”