Yesterday, construction industry members in Ontario, Canada received some great (if not overdue) news – prompt payment laws are coming to Ontario! Last year, we wrote about the fact that there were no laws for prompt payment in Canada. Ontario’s Bill 142 is different from the legislation in that post (the prior post refers to Bill S-224, federal prompt payment legislation which has passed the Senate and is currently in the House of Commons). While Bill 142’s passage means Ontario will soon be enforcing prompt payment, we may have to wait a bit longer for Bill S-224 to institute federal legislation. But it’s still great news!
Ontario’s Prompt Payment Act
The passage of the Ontario prompt payment act is a landmark moment for Canadian construction payment. To better understand the impact, let’s look at prompt payment laws generally and what went into the creation of this legislation. For a quick overview of key changes under the bill, here’s Ontario’s news release which also includes helpful graphics.
Prompt Payment Laws (Generally)
It’s no secret: there’s a problem with construction payment. As it stands, construction payment and financial risk go hand in hand, and industry members suffer from crippling delays in payment. The further down the chain a party stands (that is, the further attenuated the relationship is between the party providing work and the owner), the longer it takes to get paid.
Where present, prompt payment laws work to force payments down the chain. Prompt payment laws institute timeframes for making payments, and when they aren’t met, penalties are incurred by the party who fails to pay. It should come as no surprise that payments come faster where prompt payment laws are present. Because there were no prompt payment laws in Ontario, the sluggish pace of construction payment inspired an inquiry into how prompt payment laws could be utilized to speed up construction payment.
Prompt Payment Ontario
Prompt Payment Ontario (PPO) has been the leading force for Canadian prompt payment laws since its inception in 2014. The coalition is made up of members from every level of the Canadian construction industry, and as you could probably tell by the name, was instituted to study and recommend the province’s path to promoting (and requiring) prompt payments. The prompt payment review was headed by Bruce Reynolds and Sharon Vogel, two highly respected construction law experts, and their findings and suggestions were released in September of 2016. Now that Bill 142, which was based on the prompt payment review, has passed, PPO will see its mission come to fruition in the near future.
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