Payment exemption law splits construction sector
SASKATOON Evan Demers questions why the Saskatchewan government would consider exemptions to new legislation aimed at ensuring contractors, subcontractors and trades workers are paid for their work within a reasonable period of time.
“Why would we play favourites? Either you pay your bills or you don’t pay your bills. Why should one sector be exempt from this whole thing ?” said Demers, who coowns the Saskatoon-based electrical contractor Age of Electric Ltd.
Demers is not alone in thinking the legislation should be applied equally. The Saskatchewan Construction Association (SCA), which lobbied for its introduction, and others share his view that it should be a level playing field.
“The point of this legislation is to protect contractors who aren’t being paid for work they’ve completed satisfactorily, and to rebalance the imbalance that exists in the power structure in contracts,” SCA president Mark Cooper said.
“If there’s any exemption, it undermines exactly that — especially in the residential sector, where contractors are most vulnerable.”
The Saskatoon and Region Home Builders Association (SRHBA) takes a different view, and has asked for its members to be exempt. It is one of a dozen or so organizations thought to have made similar requests for exemptions.
Prompt payment is important, but the legislation as written does not provide sufficient flexibility for a sector of the broader construction industry that largely relies on small companies rather than major corporations, SRHBA CEO Chris Guerette said.
“We’re not against prompt payment, absolutely not, but we need to make sure it’s protecting our industry,” Guerette said, adding that “minor tweaks” could avoid additional problems for an industry already under pressure amid an economic downturn.
“If we increase costs and we increase red tape, at the end of the day … the price of your home will go up.”
Late payment is widely regarded as a problem in the construction business. According to the SCA, its members are currently reporting between 40 and 80 per cent of their invoices as overdue, with half of those more than 90 days late.
Demers said it’s “common enough” for bills to be overdue, which in turn delays payment to suppliers. The SCA has said previously that the first 60 days without payment costs a typical construction company around 20 per cent of its margin.
Last fall, in response to lobbying from the SCA and other groups, the Saskatchewan government introduced new legislation forcing project owners to pay contractors within 28 days, and contractors to pay subcontractors in another week.
The legislation also includes a new dispute mechanism. However, unlike Ontario — which became the first jurisdiction in Canada to enforce prompt-payment law last year — Saskatchewan’s bill leaves the door open to exemptions for groups or industries.
Consultation on the regulations, which will define which groups receive an exemption, took place over the summer. Cooper, who expects the regulations to be unveiled in the next couple of months, questioned why the government would “pick winners and losers.”
Not only is there a political risk to offering exemptions, but applying the law unevenly could create uncertainty among contractors, some of whom work in multiple different sectors, when it is not clear which rules apply, Cooper said.
“(It) should not have exemptions if it’s going to give any meaningful protection to those it’s supposed to protect,” added Steve Ness, president of the Surety Association of Canada, which represents companies that take on risk in construction projects.
The Saskatchewan Co-operative for Integrity in Home Construction, a group that its president says is made up of homeowners and subcontractors who have had bad experiences, has also asked the government not to provide any exemptions.
The provincial government did not make Justice Minister Don Morgan available for an interview on Monday.
In a prepared statement, Ministry of Justice spokeswoman Jennifer Graham said many jurisdictions with similar legislation have exemptions, which are generally related to “certain industry work in relation to residential contracts.”
At the same time, Graham said in the statement, it would be “inappropriate to discuss ‘the possibility of various exemptions’ in Saskatchewan while the regulations are still being developed.”