New Federal ‘Prompt Payment’ Legislation Aims to Get Construction Workers Paid Faster

Canadian government official announces new legislation took effect Dec. 9; addresses construction worker complaints of slow remittance

"We reached a major milestone in ensuring that subcontractors who work on federal government contracts get paid on time,” said Minister of Public Services and Procurement Jean-Yves Duclos. “The coming into force of this legislation will alleviate payment delays and enhance financial stability for small and medium-sized construction companies, helping to support the more than 1.5 million workers of the industry during these difficult times for all Canadians."

— Image courtesy of IT World Canada

Public Service and Procurement Canada, the government’s media relations department, published yesterday that Minister of Public Services and Procurement Jean-Yves Duclos announced new federal prompt payment legislation that came into effect on Dec. 9.

The legislation addresses long-standing construction industry concerns, the minister’s office said, including the timeliness of payments, protecting vital construction jobs and making it easier to do business with the Government of Canada.

The construction industry employs an estimated 1.5 million people in Canada, the government said in the Dec. 12 news release, making it an important driver of the economy. In 2016, industry stakeholders raised the long-standing issue of payment delays along the contracting chain, and we listened.

Public Services and Procurement Canada said it collaborated with key construction industry stakeholders, as well as other government departments, to develop federal prompt payment legislation, which led to the Federal Prompt Payment for Construction Work Act.

Under the terms of the legislation, the federal government will have 28 calendar days to pay after the contractor submits a proper invoice. The contractor will then have 7 days to pay its subcontractors; subcontractors will have another seven days to pay their sub-subcontractors, and so on down the contracting payment chain.

In the statement, the Canadian government said the new legislation aims to ensure all parties in the construction chain receive timely payment for the construction work provided for a project. “It is the predictable and timely payment of contractors and subcontractors (and sub-subcontractors) that allows important federal infrastructure projects, such as work on buildings and bridges, to be completed.”

All existing construction contracts will have 1 year, as of December 9, 2023, to comply with the Federal Prompt Payment for Construction Work Act.

Quick facts

The Government of Canada has a strong record of promptly paying its contractors. The government pays 90% of its invoices in accordance with the previous mandatory 30-day payment period. However, delays have been reported down the payment chain.
The Federal Prompt Payment for Construction Work Act and supporting regulations have been informed by national consultation with industry representatives.
The Act allows for the designation of provinces and territories that have enacted a reasonably similar prompt payment and adjudication regime.
Any federal construction work in those designated provinces will, by default, be under the prompt payment regime of the province. At this time, Ontario, Saskatchewan, and Alberta are the only provinces with fully implemented prompt payment regimes and have been designated on the in-force date.
In August 2023, the Canadian government awarded a contract to ADR Chambers Inc. to provide adjudication services and oversee the adjudication process.

For more information on the new regulations, click HERE.