Piling Canada

Preparing for Prompt Payment in Saskatchewan

This Prairie province is the next to put this legislation in force

Photo: mrtwister/132RF

Those who have attended a construction event or webinar in the last few years, have likely heard the words ‘prompt payment’ at least once or twice. Frankly, they probably heard it a lot more than that! Across the country, many provincial legislatures have been exploring these requirements, with Ontario being the first jurisdiction to proclaim them into force.

Saskatchewan contractors have known that prompt payment requirements were on the way, as The Builders’ Lien (Prompt Payment) Amendment Act, 2019 received royal assent in May 2019. Last fall, the Government of Saskatchewan announced that the provisions would be proclaimed into force effective March 1, 2022, and would apply to all construction contracts signed on or after that date.

This new framework will affect all players in the construction industry, including owners, consultants, general contractors, subcontractors and suppliers.

Similar to the legislation in Ontario, the Saskatchewan prompt payment laws will impose mandatory payment deadlines and a unique process for interim dispute resolution for non-exempt construction contracts. This new framework will affect all players in the construction industry, including owners, consultants, general contractors, subcontractors and suppliers.

The intent of the adjudication process is to offer a swift, practical and cost-effective method for resolving payment disputes on the project.

The key provisions of the new legislation are outlined below.

1. The requirements apply to some, but not all

The new provisions apply to all construction contracts signed on or after March 1, 2022, with the following exceptions:

  • Contracts for services or materials for any improvement with respect to a mine or mineral resource;
  • Contracts with architects, engineers and land surveyors; and
  • Contracts for services or materials with respect to SaskPower infrastructure projects.

The provincial prompt payment provisions do not apply to federal undertakings either, even though they may be located in Saskatchewan.

2. The legislation cannot be waived

For those tempted to contract their self out of these new requirements, know that Section 99 of The Builders’ Lien Act will thwart those intentions. This section of the Act prohibits the waiver of rights granted under the Act and deems contracts/subcontracts to be ‘deemed amended’ insofar as it is necessary to be in conformity with the Act.

3. The clock is ticking on payments

Similar to the Ontario legislation, the prompt payment timelines begin with the submission of a ‘proper invoice’ (as defined in the Act) from the Contractor to the Owner. This is considered to be Day 1 in the prompt payment scheme and triggers a series of deadlines and obligations for the parties thereafter, such as:

  • The Owner must pay the invoice by Day 28, unless they serve the Contractor with a Notice of Non-Payment by Day 14;
  • If the Contractor receives payment, they must pay their Subcontractors within seven days thereafter, unless they serve the Subcontractor with a Notice of Non-Payment by Day 35;
  • If the Contractor is not paid, they must:
  • Notify their Subcontractors if they received a Notice of Non-Payment from the Owner;
  • Pay their Subcontractors by Day 35 unless the Contractor serves the Subcontractors with a Notice of Non-Payment within seven days of receiving the Owner’s Notice (or by Day 35 if the Contractor did not receive a Notice from the Owner); and
  • If the Contractor serves a Notice of Non-Payment on the Subcontractor, they must also undertake to commence the mandatory adjudication process to ensure the payment dispute is resolved quickly.

These ‘Pay or Notice’ obligations continue downward for each player in the construction chain (with deadlines increasing in seven-day increments at each level) until the final Subcontractor/Supplier is reached.

4. There’s a new sheriff in town for payment disputes

Late or withheld payments can have a detrimental impact on cash flow for contractors and subcontractors, and legislators have recognized that the court system can sometimes be an inefficient method of responding to these urgent disputes. For this reason, a new interim dispute resolution framework, known as ‘adjudication,’ was adopted for payment disputes during the project. The intent of the adjudication process is to offer a swift, practical and cost-effective method for resolving payment disputes on the project. The disputes are heard by certified adjudicators, who are specially trained to hear construction disputes and render quick decisions. To be eligible for certification, adjudicators must meet certain criteria, including at least 10 years experience in the construction industry. A major benefit of the adjudication process is the ability to request the adjudicator of your choice (on agreement of both parties), meaning the parties can select an adjudicator with specific training or experience relevant to their dispute.

Once an adjudicator is appointed, the parties must provide the adjudicator with their relevant documents and the adjudicator must render a decision on the issue within 30 days (with some extensions permitted if requested by the adjudicator or agreed by the parties). To render a decision within this short timeframe, the adjudicator is given broad powers to gather and assess evidence, which may include requesting site visits or obtaining verbal evidence from a party when necessary. The process is more ‘practical’ than ‘perfect,’ which is why the adjudicator’s decisions are only binding on an interim basis, and can be overturned by a court or arbitrator down the road. However, since the adjudicator’s decision is binding in the interim, any payments ordered by the adjudicator must be made within 10 days of their decision, so cash must flow on the project until a court or arbitrator rules otherwise.

The entire adjudication process is facilitated by an ‘Authorized Nominating Authority’ appointment by the government. In Saskatchewan, the appointed Authority is the Saskatchewan Construction Dispute Resolution Office. Their role includes training and certification of adjudicators and handling requests for the appointment of adjudicators where parties cannot agree.

5. Contractors now have a legislative right to stop work

If a party fails to pay the amount awarded by an adjudicator within 10 days, the Contractor/Subcontractor has an immediate right to stop work on the project until that amount is paid, along with accrued interest and associated demobilization costs. If those amounts are thereafter paid, the Contractor/Subcontractor is further entitled to payment of their remobilization costs when they return to site.

Are you ready?

If working in Saskatchewan, it would be wise for businesses to prepare for these important changes now. How to prepare best for this?

1. Remember which hat is being worn

For every project, know where the business sits in the payment chain, and ensure staff know the crucial deadlines for making payments and disputing payments. Don’t be confused by the terms Contractor and Subcontractor, as trades working directly for a developer can be considered a ‘Contractor’ even if their business is trade specific.

2. Treat this like a fire drill

You wouldn’t wait until an actual fire to practice the pre-planned fire drill, so treat prompt payment in the same way. It’s one thing to know ‘about’ the requirements, but it’s entirely different when a Notice of Non-Payment actually pops up in an inbox. The timelines for all players are very tight, so run through a few scenarios with staff and ensure they’re prepped on how to respond quickly. Similarly, obtain a copy of the mandatory forms (i.e. the Notice of Non-Payment and Notice of Adjudication, available in the Regulations to this Act), and customize them to include the business name and address. This will save time searching for them online when they’re actually needed.

3. Revisit contracts

It’s a good time to revisit standard contracts as the prompt payment legislation does permit some flexibility for certain terms. For example, the legislation requires invoices to be submitted monthly unless the parties agree otherwise in their contract.

4. Get legal advice before a payment dispute occurs

As they say, an ounce of prevention is worth a pound of cure. Discussing the prompt payment requirements and business needs with legal counsel in advance is much more beneficial than seeking advice in the midst of a dispute, especially with such tight deadlines. Piling Canada

Misty S. Alexandre is a partner with Robertson Stromberg LLP.

Category: Business

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