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Contractors deserve prompt payment

How long would you be willing to wait to be paid for your work?  A normal paycheque may be held back for a couple of weeks or a month, but most of us can be pretty certain when it will arrive.

Not so in for many contractors and their subcontractors in the Ontario construction industry. They often have to wait months or even years for payment, even though they are out of pocket for the labour and materials costs of keeping up their end of the bargain.

This problem is not unique to Ontario or in fact Canada. However, the fact that we have not changed the rulebook is very unique.

By contrast, in other countries like Australia, much of Europe, and the United States, governments have adopted prompt payment legislation, which sets strict time limits for when payment must be made after a construction contract has been completed.

Ontario law does not set terms for when a developer must pay a construction contractor and, in turn, pay a sub-contractor. But it is clearly to the benefit of the developer or contractor to hold off on payment as long as possible.

For example, in the condominium sector, a property developer can purchase land, hire construction contractors to build the condo, and then wait until every unit is sold before the construction company gets paid for actually building the condo.

And because this practice is so costly to the contractors and sub-contractors, they build this factor into their pricing, which raises the cost.  Overall, this makes construction more expensive, and in turn increases the cost of the property to the buyer – the new homeowner.

In this world of late payment, only the biggest fish can survive. Medium and small businesses are squeezed. Workers are often paid less than they are owed, or must wait as money made from their work sits in bank accounts earning interest for the richest companies in the development industry.

The practice of “late payment” in the residential construction industry has become the number one job killer in this sector. If a contractor or sub-contractor can’t afford to bid on the next project due to outstanding payments, they can simply lay off their workers. In some instances, employees are laid off mid-construction due to cash flow problems, making construction work even less appealing for those who need it.

Thanks to Ontario MPP Steven Del Duca, a form of prompt payment legislation, Bill 69, is now close to becoming law at Queen’s Park.  

In a rare display of cooperation, this private member’s bill has the support of all three parties in the legislature. It has passed second reading and has been referred to the Standing Committee on Regulations and Private Bills.  

If this bill is not passed, thousands of skilled trade workers will continue to lack the basic pay security many of us take for granted. But the bill has been bogged down for no good reason.

When the legislature reconvenes on February 18th, Kathleen Wynne, Andrea Horwath, and Tim Hudak have an opportunity to demonstrate that our democratic system can work in the public interest. All three leaders need to come together to prioritize this important bill and pass it before the expected election.

Photo: lendingmemo. Used under a Creative Commons BY 2.0 licence.