The issue of who gets paid when and under what conditions has been an ongoing issue in the Ontario construction industry. Owners, generals, subs and suppliers have all pointed fingers at each other in a continual discussion on how we can make sure all are paid in a timely manner.
Until recently, little was done due to a belief that codifying the payment schedule will reduce the flexibility relating to freedom of contract. The challenge was to find a middle ground that will support both concepts.
The National Trade Contractors Coalition of Canada (NTCCC) identified the need for prompt payment legislation and in particular, the removal of “paid when” and “paid if” clauses in construction contracts. They reviewed other jurisdictions and found that it is common practice that exists in approximately 40 of 50 states. The NTCCC had draft legislation prepared based on these practices, and it was introduced as a private members Bill in the Ontario Legislature prior to the House adjourning for the provincial election.
OGCA approached the NTCCC this summer with our concerns on the process and contents of the draft proposal. We recommended a meeting to find a way to develop an industry agreement and this resulted in a decision that OGCA would work with NTCCC to develop an improved draft of the legislation. There was also an agreement that we support the concept of “prompt payment” for all participants. OGCA recognised the concerns with “pay when paid” clauses that developed when contractors experienced difficulty in obtaining timely payments from owners. Geza Banfai of Heenan Blaikie was retained to draft legislation based on the following principles:
- Draft prompt payment legislation is to be prepared which embodies the payment principles sitting within the standard CCDC/CCA contract documents.
- One of those principles will be the “pay when paid” provision in CCA 1-2008, including the process set out in that contract whereby the GC’s payment obligation can be delayed for a limited time (90 days) provided the various steps prescribed in that contract are followed.
- No other “pay if paid” or any other type of “pay when paid” concept is to be contemplated in the draft legislation.
This has been an ongoing process since September and we anticipate that a decision on the draft may be reached very soon. Any proposal will go the OGCA Board and upon finalisation will be distributed to the membership as soon as possible.
