Update on Federal Prompt Payment – Royal Assent

Canada’s federal government is one step closer to introducing prompt payment and adjudication, changing the way in which the federal government operates its federal construction projects. Bill C-97, Budget Implementation Act, 2019 No. 1 was introduced on April 8, 2019, and received Royal Assent on June 21, 2019.¹

The Budget Implementation Act will come into force upon a day fixed by order of the Governor in Council², and includes the Federal Prompt Payment for Construction Work Act, the entirety of which is available online on the Parliament’s online database.

Upon coming into force, the Federal Prompt Payment for Construction Work Act will enforce prompt payment between Her Majesty or their Service Provider and the Contractor.

As we have said in previous articles, the new federal Act is based on the Report titled Building a Federal Framework for Prompt Payment and Adjudication³, prepared by Singleton Reynolds and delivered to Public Services and Procurement Canada in June of last year.

The federal Act adopts the Ontario method of using receipt of a proper invoice to trigger the payment scheme that is enforced by the dispute resolution approach of adjudication.

Initiated by the receipt of a proper invoice, the contractor or subcontractor paid by the Crown must pay each of its subcontractors no later than the 35th day after receipt of the invoice.⁴ This continues down the chain, with the subcontractor who receives payment from the contractor given 42 days after the date of the proper invoice to pay their subcontractors, alternatively providing them with a notice of non-payment no later than 35 days after receipt of the proper notice; the level below this has 49 days following the receipt of the proper invoice, or 42 days to provide a notice of non-payment.⁵ Unlike Ontario’s Construction Act, the Federal Prompt Payment legislation allows for parties to contractually agree to shorter timelines for payment time limits.⁶

If a contractor or subcontractor has not been paid the full amount owed to them minus the holdback contractually agreed to or provincially legislated, they can seek to have the dispute referred to an adjudicator by providing them with a notice of adjudication no later than the 21st day after they receive a certificate of completion or within the payment timeline of the proper invoice which applies.⁷ This begins the dispute resolution method of adjudication between the parties in an effort to resolve the payment dispute, the timeline of which is not specified in the legislation.

The federal Act interestingly has a retroactive transitional provision, so that existing contracts with Parliament or its agents will come under the authority of the Act one year after it comes into force.⁸ Unlike other provincial prompt payment legislation, this grandfathering provision will require careful review in respect of current projects undertaken with the Crown to ensure their practices fall in line with the incoming prompt payment scheme so they are not caught unaware by the time it applies.

The Act does not touch on many of the details found in Ontario’s Construction Act, such as the details of the adjudication procedure and immunity of adjudicators, and does not provide for consolidated adjudications.

It is understood that many details will be provided for in the eventual Regulations when they are released for public consultation, and it remains to be seen if the upcoming federal election will have an effect, if any, on the interpretation of this Act. Singleton Reynolds looks forward to the upcoming changes and will continue to monitor the legislation and its impact on the construction industry.

Special thanks to Summer Student Rosamund Taylor for her contributions to this article.

¹Bill C-97, Budget Implementation Act, 2019, No. 1, c. 29 s387 “Federal Prompt Payment for Construction Work Act” [Federal Prompt Payment for Construction Work Act].

²Budget Implementation Act, 2019, No. 1, s388.

³Public Services and Procurement Canada, Building a Federal Framework for Prompt Payment and Adjudication, by Bruce Reynolds and Sharon Vogel, (Report) (Canada: PSPC 2018).

⁴Federal Prompt Payment for Construction Work Act, s10(1).

⁵Federal Prompt Payment for Construction Work Act, ss11(1), 11(3), 11(4).

⁶Federal Prompt Payment for Construction Work Act, s16(1).

⁷Federal Prompt Payment for Construction Work Act, s16(2).

⁸Federal Prompt Payment for Construction Work Act, s25.

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