Feds Pass Prompt Payment Legislation for Federal Construction Projects

July 11, 2019 | Jonathan Martin

On June 21, 2019, the Canadian Parliament passed the Federal Prompt Payment for Construction Work Act  (the “Act”). Passed as part of the larger federal budget Bill C-97, the Act  will apply to construction projects on lands or immovables owned by the Federal Government, with the exception of leased federal lands or immovables, where the construction project is being undertaken by the lessor. Types of work that fall under the Act include any kind of work that will improve the value, productivity, or useful life of a building. The Act, however, excludes maintenance or repair work performed to prevent normal deterioration or to maintain the normal, functional state of the real property or immovable.‍

Several provisions in the Act resemble the provisions of the recently adopted Saskatchewan and Ontario legislation (the “Provincial Legislation”). Key similarities include similar timelines for providing a proper invoice (monthly or as specified in the contract), and for providing payment (28 days after proper invoice for owner to General Contractor and 7 days subsequently for each level down the construction pyramid). The means of selecting, training, and appointing adjudicators, as well as the effects of adjudicator decisions, will also be similar to the Provincial Legislation.

Notable differences include the following:

1. The deadline for the General Contractor to provide a notice of non-payment to the owner will be 21 days after the proper invoice rather than 14 days as in the Provincial Legislation;

2. Discretion for the Governor in Council to exempt specific projects from the Act;

3. Ability to commence adjudication up to 21 days after the completion of a project;

4. The Act will immediately apply to all new contracts entered into after it comes into force and, after one year, will apply retrospectively to all contracts entered into prior to its coming into force;

5. Many elements have been entirely left to the Governor in Council to define through regulation, including:

(a) the types of disputes that will be subject to adjudication;

(b) most of the form and content of the relevant forms; and

(c) the procedures and timelines to govern adjudication.

The new legislation is meant to work in tandem with provincial prompt payment legislation and the Governor in Council will have the power to exempt the application of the Act, or certain portions of the Act, for federal construction projects in provinces with satisfactory prompt payment legislation of their own.

The Act will come into force on a day to be fixed by order of the Governor in Council. Stay tuned as we keep you informed on crucial legislative or regulatory developments for this important new legislation.

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