The construction industry continues to be a leader of the Canadian economy. Continued investment is expected in major public infrastructure projects over the next two years with a corresponding increase in the demand for skilled workers across several sectors, including residential, transportation, utilities, pipelines and hospitals.

More than 206 public private partnership projects (PPPs) are operational in Canada, with another 37 projects currently under construction and a further 31 projects at various pre-construction phases. These projects include significant healthcare, education and transportation expenditures.

In 2016, the Government of Canada announced over CAD180 billion of infrastructure funding nationwide over twelve years (www.infrastructure.gc.ca/index-eng.html) for projects that are "shovel ready" (where the planning and engineering is sufficiently advanced that with enough funding, construction can begin within a very short period), to be spread equally among public transit, green infrastructure, social infrastructure, trade and transportation projects. Since the implementation of this funding, 84,000 projects across all sectors have been approved with a total value of CAD129 billion (www.infrastructure.gc.ca/plan/icp-report-rapport-pic-eng.html#2).

Similar investments in infrastructure are being made by Canada's provinces and territories, including Ontario, which announced in its April 2022 budget a “Plan to Build,” which commits close to CAD1 billion for critical legacy infrastructure and significant capital over the next ten years for support planning, building and improving highways and the expansion of public transit (budget.ontario.ca/2022/pdf/2022-ontario-budget-en.pdf).

COVID-19. In Canada, the effects of COVID-19 and the resultant temporary closures and slowdowns greatly impacted the construction industry. Throughout the pandemic, certain types of construction activity, by government order, came to a complete stop, while other "essential" activities were permitted to continue, subject to additional guidelines for site health and safety (see Question 39). The significant scope of work stoppages gave rise to a number of issues, including worker layoffs, project delays, delays in project funding and the application and enforcement of local lien legislation (see Questions 17 and 39).

In Ontario (ON), current major projects are dominated by transit infrastructure and include:

In Québec (QC), major projects include:

For Newfoundland and Labrador (Nfld), New Brunswick (NB), Nova Scotia (NS) and Prince Edward Island (PEI), major projects include:

For British Columbia (BC), Alberta (Alta), Saskatchewan (Sask), and Manitoba (MB), major projects include:

Procurement arrangements in Canada apply equally to domestic and international contractors.

Competitive tendering is required for government projects (whether federal, provincial or municipal) for the acquisition of goods and services alike. For government, government-funded, or other public sector projects, the relevant guidelines state the rules to be followed for competitive tendering, such as the:

The United States-Mexico-Canada Agreement (USMCA) came into force on 1 July 2020, replacing the North American Free Trade Agreement (NAFTA). At the municipal level, procurement by-laws must typically be followed.

Increasingly, tendering authorities are using electronic tendering processes to solicit bids.

There are no similar guidelines for private sector owners. However, all competitive bids are subject to Canadian common law. The 1981 Supreme Court of Canada decision in R v Ron Engineering established that an enforceable contract could be created at the bidding stage, before the award of a contract. Over time, that decision has been revisited on several occasions, most recently affirmed by the Supreme Court of Canada (Tercon Contractors Ltd. British Columbia (Transportation and Highways) [2010] 1 SCR 69, 2010 SCC 4).

Any bidder to a Canadian project must be familiar with the principles of the Ron Engineering line of cases and must be aware that competitive bids in Canada can attract liability and are not viewed simply as invitations to treat as is the case for many other jurisdictions, including the US.

Owners, including government, government-funded and private sector owners, often use requests for proposals (RFPs). Whether these are binding or non-binding procurement processes depends on the substance of the terms, and not the title of the document.

Foreign companies can establish business operations in Canada using any one of the business forms described below:

Subject to the laws of the applicable contract or project jurisdiction, the corporate vehicles are essentially the same for international and local projects.

The financing of domestic construction projects varies based on the project itself. The factors influencing the form and venue of financing relate to the:

Public infrastructure projects are funded by the municipal, provincial, or federal governments, sometimes jointly.

Private sector projects are typically funded through traditional lending structures, including:

International construction projects are typically financed by a combination of:

Security over the investments of construction project funders generally takes the form of a mortgage over the project land. Additional options include:

Under Ontario's Construction Act, R.S.O. 1990, c. C.30 (Construction Act) (amended in 2018), any contractor who enters into a public contract where the price is greater than CAD500,000 is required to provide a 50% performance bond and a 50% labour and material payment bond in forms prescribed by the Construction Act. A "public contract" includes any contract where the owner is the Crown, a municipality or a broader public sector organisation. Alternative financing and private public partnership projects are also subject to this requirement as they are deemed to be governed by public contracts.

The investor can also negotiate:

The loan agreement between the lender and borrower can also include:

The most common standard forms of contracts used on construction projects are published by the following organisations:

The parties must determine the form of contract that they would like to use. There is no set standard form for international construction contracts for use in Canada. Parties can use the CCDC contracts that most construction parties are familiar with or other forms. Some projects use the FIDIC (The International Federation of Consulting Engineers) contracts and others adopt the AIA (American Institute of Architects) forms. Alternatively, parties often negotiate their own customised contracts specific to the project.

Parties to construction contracts allocate and take on risk under the terms of the project contract. A general duty to act honestly and in good faith in the performance of contractual duties was affirmed by the Supreme Court of Canada in the case of Bhasin v Hrynew [2014] SCC 71, which appears to have been confirmed to apply in the construction context.

The most common form of contract used for construction projects in Canada is a stipulated fixed price or lump sum contract between a project owner and a contractor, which allocates most of the risk to the contractor with respect to:

Generally, risks associated with any changes or unexpected conditions fall on the owner. These risks are typically addressed by the contract's change order process. This allows contractors to receive compensation beyond the contract fixed price and for time extensions when project scope changes or delays occur because of causes beyond the contractor's control.

This approach to risk allocation appears to be common to both local and international projects, although the form of contract or specific negotiated terms often alter the allocation of risk.

Liability can be excluded for certain breaches of contract and defaults, through exclusion of liability clauses. These provisions are common in construction contracts and procurement documents in Canada. A typical construction contract exclusion is for consequential damages.

Generally, the courts apply a plain and literal reading of the terms of an exclusion of liability clause and enforce the clause based on its wording.

In 2010, the Supreme Court of Canada ruled on the enforcement of exclusion of liability clauses in Tercon Contractors Ltd. v British Columbia (Transportation and Highways) [2010] 1 SCR 69, 2010 SCC 4. The court enumerated a three-part test outlining the applicability of exclusion of liability clauses, where the court:

Following the Tercon decision, owners tend to include broadly worded exclusion of liability provisions in their procurement documents and contracts, in an effort to shield themselves from liability.

In some contracts, the parties may agree to a cap or limitation on liability. In standard form contracts, caps on liability are not often included. Caps on liability are most typically found in design consultant service agreements (such as those involving architects and engineers). Such provisions are not as common in contracts between owners and contractors for domestic building projects, although they are common on international projects, particularly common in EPC (engineering, procurement and construction) and EPCM (engineering, procurement and construction management) contracts. These provisions are typically negotiated.

Where there is a cap on liability, the limit can be tied to one or more of:

It is also common for specific types of loss to be excluded from the application of the cap on liability. For example, it is common for losses resulting from an injury or death of a worker to be excluded from the cap on liability. Also, damages from fraud and wilful misconduct, which are intentional acts, are typically excluded.

Force majeure exclusions are available and enforceable in Canada. They are almost always included in construction contracts.

Force majeure clauses are interpreted based on a plain and narrow reading of their language and meaning. The intention of the clause and the circumstances covered should be clearly stated and enumerated. Contractors will often seek to expand the ambit of force majeure clauses, while owners will seek to limit the clause to extraordinary circumstances, outside the control or contemplation of the parties. The party invoking force majeure must show that it was impossible to perform its obligations under the contract.

Some extraordinary circumstances commonly covered include:

In Canada, given the impacts and restrictions imposed by COVID-19, there have been arguments made by various stakeholders that COVID-19 is a force majeure event. Whether this is the case depends on various factors, including the precise wording of the force majeure provision, assuming one has been included within the contract. Disputes over whether COVID-19 is considered a force majeure event and whether contractors are entitled to receive additional compensation and extensions of time continue to arise.

For both local and international projects, there are three types of material delays that must be considered when negotiating a construction contract:

For each of these types of material delays, the parties must consider the impact on:

This includes failure to coordinate and manage the work or delivery of materials or failure to properly staff the project in terms of resources or qualifications. The following factors must be considered:

These can arise from changes authorised by the owner that increase scope of the work, late delivery of owner-supplied materials or services and design errors by the owner's consultants. The following factors must be considered:

These are unforeseeable external events that have the effect of delaying a project (such as weather events, strikes, fire, acts of war, acts of government and certain impacts from the COVID-19 pandemic such as supply chain issues) for which the following factors must be considered:

It is possible for two or more of the above types of delay to occur at the same time. This is referred to as concurrent delay, which is commonly used as a defence when one party asserts a claim for damages for delay. The response from the other party is that the claiming party (or force majeure) caused or contributed to the delay, such that the delay would have occurred in any event.

Variations to the works during the performance of the contract (also known as "changes") are usually made under a change order or a change directive. Both change orders and change directives authorise the contractor to make the specified changes to the works. The key difference is the terms on which the changes are made.

These are written documents issued by the owner or the contract consultant that direct the contractor to make a change in the works and records the agreed terms of that change. This includes agreement on whether the change increases or decreases the scope of the works and, correspondingly, the contract price and contract time.

These are written documents issued by the owner or the contract consultant that direct the contractor to perform a change in the work before there is any agreement to a change in contract price or time. Changes to the contract price or time are determined after the fact by:

Change directives reflect the owner's inherent need to keep a project moving forward, despite disagreement on certain (usually) minor changes.

As well as the provisions discussed in Questions 8 to 12, the following contractual provisions are also often heavily negotiated by the parties to the contract:

Typically, under the common law doctrine of privity of contract, only parties to a contract can enforce their rights under the contract, despite any benefits that may flow to non-contracting third parties. In London Drugs Ltd v Kuehne & Nagel International Ltd [1992] 3 SCR 299 and Fraser River Pile & Dredge Ltd v Can-Dive Services Ltd, [1999] 3 SCR 108, the Supreme Court of Canada developed the "principled exception" to the doctrine of privity.

The principled exception permits third party beneficiaries to enforce a contract to which they are not a party.

Construction contracts can contain language expressly excluding third parties from enforcing any rights arising from a contract or specify limited enforceable rights to certain third parties. This is typically the case in a traditional project model, in which the owner retains a contractor and a consultant (for example, architect or engineer) to carry out construction. In a contract between the owner and the contractor, the consultant or other design professionals often require that they have enforceable rights under the contract between the owner and contractor. Such rights can include:

However, it is also possible for third parties to hold subsisting rights to take over a project where one of the main parties defaults. This is common on projects with third party financing. Lenders involved in the financing of major projects typically require that the construction contract provide certain rights to the lender, entitling the lender to review, inspect, monitor and audit the construction, and "step-in rights" to cure defaults on behalf of the owner (borrower). These rights of the lender feature prominently in most PPP projects.

Design professionals and other owner-engaged consultants are typically retained through either a competitive tender process or single-sourcing by the owner. In some cases, where the entity retaining the construction professional is the government or a government funded entity, then there may be a legal requirement for a competitive procurement process to be used. This is the case in Ontario where, under the Broader Public Sector Procurement Directive 2011, engagements involving the use of public funds for goods and services, including professional design services over a threshold sum must be acquired through a competitive, open, fair and transparent process.

Depending on the scale of the project, this selection process can occur several years before the construction contractor is selected. However, in design-build or EPC/M contracts, the design professional is usually part of a joint venture or partnership with the contractor and is engaged at the time that the contract is awarded for both the design and construction of the project.

The following contractual provisions are often the subject of negotiations between the owners and construction professionals:

Typically, construction professionals seek to limit their liability to one or more of:

Construction contractors are typically paid through periodic "progress draws" based on the stage and completion of the project and the terms of the contract between the parties. A contractor submits a progress draw for a certain amount of completed work, and a third-party contract "payment certifier" or "consultant" (often the owner's design architect or engineer, in the case of the CCDC contract forms) verifies that the progress invoice represents the value of the work performed or supplied before payment is issued.

In Ontario, under the Ontario Construction Act, the condition that the work be subject to certification by a payment certifier or consultant is no longer permitted due to the competing prompt payment requirements of that legislation (see below, Securing payment: Prompt payment and adjudication).

In Ontario and the other common law provinces (which exclude Quebec), there is statutory lien legislation (which, depending on the province, may be referred to as "Builders", "Construction" or "Mechanics" lien legislation) that requires owners to retain a percentage of the earned fee because of "holdback" for the benefit of the subcontractors and suppliers to the contractor. The statutorily-required holdback is held until the contract reaches substantial completion/performance, following which it is released to the contractor provided there are no liens against the project. Subject to the governing provincial legislation, holdback funds might also be released following a termination or abandonment of the construction contract provided no liens are registered against the project.

Lien statutes. Contractors can advance construction liens for any work that provides a "benefit" to a property. The construction lien is typically initiated by registration against the project lands, thereby securing payment against the holdback.

In most provinces and territories, liens are governed by a statutory lien regime, such as:

In Ontario, Alberta and British Columbia, among other provinces, subcontractor claimants must register or preserve liens within a prescribed period from the date that they last supplied work to the project (or in Ontario, from the earlier of the date of last supply, certification of completion of the subcontract, completion, termination or abandonment of the subcontract, or the publication of a certificate of substantial performance of the prime contract).

Bonds. Labour and material payment bonds are also common on Canadian construction projects. These are issued by the prime contractor's surety, who typically also issues a performance bond guaranteeing the prime contractor's work in favour of the owner. Labour and material payment bonds typically provide security for subcontractors who perform work and supply materials directly to the prime contractor. On federal and some other projects, the labour and material payment bond may extend to sub-subcontractors and suppliers who do not have direct privity of contract with the prime contractor. Recovery under these bonds is available to unpaid subcontractors and suppliers in addition to statutory lien remedies.

A recent Supreme Court of Canada case has created a fiduciary duty for owners and general contractors to notify subcontractors of the existence of a labour and material payment bond on a project. The court was not clear exactly how notification should occur, but owners and general contractors should think carefully about how best to comply, including potentially posting a copy of the bond at the project site.

Trust rights. In some of Canada's common law provinces and territories, the lien statutes may also include trust rights as a remedy for unpaid accounts. For example, in Ontario the Construction Act permits trust claims against not only the trustee corporation, but also against the officers, directors and any person in effective control of the trustee corporation. This statutory remedy permits payees to essentially pierce the corporate veil of the trustee corporation. Contractors doing business in Canada are well advised to check the applicable provincial lien legislation and to be aware that individuals within their company could be at risk of personal liability for "breaches of trust" (misappropriating project funds for purposes other than paying subcontractors or suppliers on the project).

Prompt payment and adjudication. Ontario's new Construction Act has brought about two significant changes to the payment framework on construction projects:

The prompt payment regime introduces timelines for amounts payable by owners to contractors, contractors to subcontractors, and subcontractors to sub-subcontractors. In addition to the requirement to pay a "proper invoice", payers are required to issue notices of non-payment explaining any amounts that they intend not to pay towards an invoice. If the timelines are not adhered to by payers, interest will accrue at a specified rate and parties can opt to proceed to adjudication for resolution of the non-payment.

Adjudication under Ontario's new Construction Act is the first such legislation in Canada following the UK's model. It provides a statutorily-mandated interim alternative dispute resolution process. Parties can access a relatively fast (30-45 days) and simple dispute resolution that is interim binding. Adjudicators are available through a government-appointed organisation that monitors the qualifications and availability of adjudicators to hear disputes (see Question 34).

Despite the fast-track and simple dispute resolution mechanism provided for in Ontario’s Construction Act, to date, relatively few adjudications have been commenced in Ontario. The Ontario Dispute Adjudication for Construction Contracts (ODACC), the entity responsible for administering Ontario’s adjudication regime is required to release annual reports containing (among other things) the number of adjudications commenced and completed in each fiscal year. In fiscal year 2022 (concluding 31 July 2021), 121 adjudications were commenced (relative to the 50 commenced in fiscal year 2021) and 67 adjudications were completed (relative to the 34 completed adjudications in fiscal year 2021).

Other provinces have instituted prompt payment and adjudication legislation. Alberta enacted the Prompt Payment and Construction Lien Act, and associated regulations on 29 August 2022 and Saskatchewan revised The Builders’ Lien Act, SS 1984-85, c B-7.1 on 1 March 2022. Other provinces are considering similar legislation and legislative amendments.

While each of the provinces and territories in Canada has its own construction lien legislation ("legal hypothecs" in Quebec), provincial statutes do not apply to construction on federal lands. At the federal level, the Government of Canada has recently established an initiative to improve the timeliness of payments on federal construction projects under the Federal Prompt Payment for Construction Work Act, which received royal assent on 21 June 2019 but has not yet come into force.

Once that legislation comes into force, it will impact the construction industry stakeholders who supply or contribute to public construction projects with federal connections including military bases, airports, fisheries, and work performed on other federally owned ("Crown") lands. While the federal legislation does not provide for lien rights, its focus is on both prompt payment and adjudication like the reforms adopted under the Ontario Construction Act.

Owners and contractors typically manage their relationships with subcontractors through written subcontract agreements. These can either be the contractor's customised form or a standard form, such as those published by the CCDC. It is not common for owners to prescribe the form of subcontract to be used by contractors, outside of construction management arrangements where the owner remains directly liable to certain trade contractors.

The following are typical provisions in subcontracts.

Subcontracts can stipulate that all of the obligations required of the contractor in its contract with the owner, flow down to the subcontractor to the extent of the scope of their work on the project. For this to be effective, however, there must be clear language and an acknowledgement from the subcontractor that it has received and reviewed the "prime" construction contract between the contractor and owner.

"Pay when paid" or "pay if paid" provisions link the timing of payment to the subcontractor to payment from the owner to the contractor. Depending on the province or territory, such provisions may or may not be enforceable. For example, under Ontario's Construction Act, the newly enacted prompt payment regime renders "pay when paid" or "pay if paid" clauses unenforceable.

Owners can require contractors to carry labour and material payment bonds as part of the contract security for a project. These bonds not only provide security to the subcontractors, in the event of a default by the contractor, but can assist owners in getting subcontractors to continue with their work. Depending on the size and complexity of the project, contractors can also require certain subcontractors to provide their own performance bonds as security for the performance of the subcontract.

Subguard is a relatively new insurance product that provides general contractors with protection from the costs and delays that may arise when a subcontractor or supplier defaults. From an owner's perspective, subguard may not be a substitute for a surety performance bond, since subguard does not protect the owner against the contractor's default, but subguard does protect against the bankruptcy or default of major project subcontractors.

To protect against the non-payment by subcontractors to their sub-subcontractors, suppliers and other creditors, contractors can request certain documents from their subcontractors as part of their applications for payment, including:

In Ontario, in the absence of privity of contract, an owner is typically only liable to a subcontractor for the 10% holdback under the requirements of the provincial lien legislation. The holdback must be withheld by the owner until the expiry of the time for all subcontractors and suppliers to register liens against the project.

Some lien statutes (such as Ontario's statute) also provide a mechanism for subcontracts to be separately certified as complete, so that the subcontractor's share of the holdback retained by the owner from the contractor can be released before the contractor attaining substantial performance of the entire contract scope of work. This mechanism may be appropriate in circumstances involving long duration contracts, where the subcontractors performing the earliest project work would otherwise have to wait until the substantial completion of the project to receive their share of the holdback.

Architects, engineers, plumbers and electricians must be licensed by their respective professional organisations. Typically, these organisations operate at the provincial level. General contractors are not typically required to be licensed at the provincial level (British Columbia, however, does require a licence for general contractors, developers, and/or renovators).

Municipalities can require business licences. Contractors intending to perform work on municipal projects should check with the relevant municipality to determine the business licensing requirements. See Question 20 for more information. In addition, contractors intending to build new homes should review the relevant province or territory's applicable new home warranty insurance programme to determine whether coverage is required.

General contractors must be registered under the applicable workers compensation regimes, which is a mandatory publicly funded insurance programme in each of the Canadian provinces and territories. The applicable workers compensation legislation for Alberta, British Columbia, Ontario and Québec can be found at the links below:

Canadian municipalities may require a municipal business licence for anyone carrying on a trade, calling or business within the boundaries of the municipality (see Question 19).

Before commencing a project, local land use planning and zoning permissions must be obtained. Environmental approvals may be required in certain circumstances before construction can commence. Federal licences or permits may be required for federal government properties or for projects within federal jurisdiction. Building permits are typically required by municipalities, and construction must generally conform with provincial building code legislation.

Inspections are required throughout construction, either by:

Municipal authorities typically require approval for final occupancy permits to be issued. This includes building code compliance and safety system approval, such as water sprinklers and fire safety necessities. The professional staff engaged to oversee the project are also required to certify progress and completion of various aspects.

The industry benchmark insurance policy forms are provided by the Insurance Bureau of Canada (IBC). The IBC forms are developed by technical committees comprised of member insurance companies.

Any party employing workers in Canada must participate in the workers' compensation plans, which are governed by the provincial governments.

The CCDC 2 2008 Stipulated Price Contract (the most common form used on construction projects) prescribes the following basic insurance requirements for projects:

The specific insurance limits and coverage are often the subject of negotiation between the owner and contractor.

Most businesses, including nearly all businesses in the construction industry, must register with the mandatory provincially-operated workers' compensation regime. The workers' compensation board in each province and territory is responsible for the applicable legislation and has broad powers of enforcement. As an example, in British Columbia, the Workers Compensation Act is administered by WorkSafeBC. Under the Workers Compensation Act, a contractor may be liable for premiums owed by a subcontractor, so it is prudent to request a "clearance letter" which will confirm if the subcontractor's accounts have been paid up. This approach is typical for most provinces and territories.

There are a variety of vehicles available to adequately insure construction projects. Below are some of the commonly used forms of non-compulsory insurance:

The owner can stipulate that certain non-compulsory insurance policies must be maintained under the contract, for example, errors and omissions insurance for design professionals.

In addition, depending on the size of the project, the owner may utilise an owner-controlled insurance programme, to ensure that there is adequate coverage in place, without gaps, for all project participants.

Provincial and territorial governments have established minimum age requirements for employment on construction sites in their respective jurisdictions. For example, the minimum age for working in Ontario on a construction site is 16 years. Whether hiring a local or foreign worker, employers should be aware of the applicable minimum age requirements as well as the specific rules relating to the employment of minors in each jurisdiction, which include special limits on hours of work and special record keeping requirements.

All employers must request each new employee's social insurance number (SIN) within three days after the day on which their employment begins. If the SIN begins with a "9", the worker is a foreign national and the employer must take additional steps to ensure the worker's immigration documentation is valid and that it permits the foreign national to work for the employer in the respective role and location.

Canadian citizens and permanent residents can legally work in Canada. Apart from the minimum age requirements and obligation to request a new employee's SIN (see above, General requirements), there are no labour law requirements or restrictions relating to the hiring of local workers for a construction project. However, the workers must have the requisite government qualifications and/or certification for the specific job being performed.

If a project is taking place in a territory held by the Canadian First Nations peoples, the agreement reached for use of the land will almost always include a requirement that First Nations peoples must be employed on the project.

A foreign party seeking to commence a Canadian construction project may wish to engage a local firm to conduct certain aspects of the work. For example, engineering work can be subcontracted to a Canadian engineering firm to ensure compliance with all necessary licensing and qualification requirements. However, if the foreign entity wishes to perform some of the engineering aspects, further licensing requirements must be considered.

Foreign nationals can only work in Canada if they have temporary immigration status authorising them to work in Canada, usually under the terms of a work permit.

If, after reviewing a foreign national's SIN and immigration documentation, the employer determines that the foreign national is legally eligible to work in Canada for the employer in the applicable jurisdiction and position, there are no labour law requirements or restrictions relating to the hiring of the worker (other than the minimum age requirements noted above).

Effective October 1, 2022, the Government of Canada announced the removal of most COVID-19 entry restrictions, testing, quarantine and isolation requirements for anyone entering Canada.

Employers should familiarise themselves with the most up to date IRPR requirements when hiring a foreign worker. Like local workers, foreign workers must have the requisite government qualifications and/or certification for the specific job being performed.

If an employer determines that a foreign national is not legally eligible to work in Canada (either because the foreign national's current immigration documentation does not authorise the type of work the foreign national is seeking to perform for the employer or because the foreign national does not have work authorisation), the employer can support the foreign national in obtaining legal authorisation to work for the employer through various immigration programmes, including the following:

There are no labour laws that specifically address construction projects. Labour and employment law is a matter of provincial jurisdiction and, as such, all the governing labour legislation is unique to each province and territory. It is mandatory for all employers to participate in applicable provincial workers' compensation programmes.

The relevant provincial legislation for Ontario, Alberta and British Columbia is as follows:

The legislation also imposes mandatory standards and governs issues ranging from maximum working hours to termination notice and pay. Certain regulations under provincial legislation have special rules and exemptions that apply to construction workers, typically relating to entitlement to overtime and leaves of absence. Not all employees engaged to work on a project will meet the statutory definition of "construction worker".

In Québec, which is a civil law jurisdiction, the Civil Code of Québec is the governing legislation.

Statutory redundancy and other payments depend on provincial legislation and any applicable collective agreements. Many provinces, including Ontario, exempt construction workers from legislated entitlements to termination pay and, where applicable, severance pay. A "construction worker" is a defined term in the legislation that does not necessarily include all employees engaged in the project. Certain off-site employees may still be entitled to termination pay.

Each province and territory has occupational health and safety legislation and regulations of general application that set minimum health and safety standards, including protections against workplace harassment and violence and taking steps to prevent the spread of COVID-19 in the workplace. The legislation and regulations also contain health and safety standards specific to the construction sector. Worker health and safety is generally a high priority. As such, it is important that project participants understand the extent of the responsibilities which may be imposed upon them by the relevant legislation and regulations.

In Ontario, the relevant legislation is the Occupational Health and Safety Act (OHSA) . Any party that qualifies as a "constructor" under the OHSA is responsible for ensuring that everyone on site, whether or not they are the constructor's employee, is provided with a safe workplace and complies with the requirements of the OHSA. The constructor is also responsible for providing appropriate notices to the Ministry of Labour, including notice of on-site accidents. A joint occupational health and safety committee may need be established and governed in accordance with the OHSA.

The OHSA Regulation for Construction Projects contains comprehensive and specific guidelines for ensuring the safety of all workers on a construction site. Constructors are responsible for ensuring that the work site is managed in accordance with these guidelines.

Corporations that fail to abide by the requirements of the OHSA face fines of up to CAD1.5 million per contravention. Individuals that violate the provisions of the OHSA face fines of up to CAD100,000 or up to 12 months' imprisonment. The Ministry of Labour advocates for the Provincial Crown Counsel to seek high fines and jail time for repeat offenders and in the event of a workplace fatality.

Canada's Criminal Code provides for the prospect of criminal charges for senior managers, officers and directors of corporations for health and safety violations. A criminal conviction may result in a jail sentence.

In recent years, there has been a move towards more serious penalties for workplace negligence. In 2016, a supervisor on an Ontario construction project who failed to enforce safety guidelines and failed to take reasonable steps to prevent several workplace fatalities was found guilty of the Canada Criminal Code offence of criminal negligence causing death and sentenced to jail for three and a half years.

The general rule is that the environmental laws in the province or territory where a project is located apply unless no provincial environmental law exists. The exception to the rule is for projects on federal lands or matters within federal jurisdiction, such as:

Applicable federal legislation includes the Canadian Environmental Protection Act and Canadian Environmental Assessment Act. Each provincial regime is generally similar. The general rule is that an approval is required for any emissions released unless there is a regulated exception, for example, for driving vehicles.

Air emissions into the air are regulated by the provincial governments. Approvals are required to release contaminants into the air if there is no exception.

Water regulation includes:

Permission is required to release contaminants into the water.

Waste is primarily regulated by provincial governments. Federal law applies to cross-border transportation of waste. Regulations are expected to come into effect soon under the Environmental Protection Act that will regulate the movement of waste across international boundaries.

Federal and provincial governments sometimes require environmental assessments, typically applicable to public projects, with some exception for large scale infrastructure projects (that is, waste management or nuclear facilities).

Many building codes incorporate performance standards that must be demonstrated before occupancy. Municipal regulations should be carefully reviewed. For example, the City of Toronto in Ontario has introduced a tiered Green Standard that requires all new construction to meet a Tier I standard, with a voluntary Tier II standard that comes with certain tax incentives. The City of Vancouver in British Columbia also has specific green building regulations in place.

There are currently no requirements for buildings to meet carbon emission or climate change targets unless it is a facility (for example, a power plant) that emits a significant volume of greenhouse gases. In these cases, regulations under the Canadian Environmental Protection Act or similar provincial environmental protection statutes apply (several provinces have legislation similar to the Canadian Environmental Protection Act). Some provinces impose reporting requirements, but only relating to facilities generating sizeable emissions. This area is evolving, And it is expected that many municipal governments will attempt to introduce similar regulations.

Canada strengthened its legislation governing corrupt business practices and bribery of its officials in 2013. The government extended the reach of the following statutes:

These Acts seek to combat corruption of officials in the domestic market, as well as attempts at corruption or bribery of foreign officials by Canadians involved in projects.

Canada also recently passed the Proceeds of Crime (Money Laundering and Terrorist Financing Act, which was established to fight money laundering and terrorist financing both domestically and internationally. Certain industries are required to report to the body in charge of enforcing this legislation and are required to "know their clients" by requesting identification.

In addition to common safeguards, the Criminal Code of Canada and the amended legislation have created offences for the following acts, if they are deemed to be for the purpose of bribery or to hide bribery:

Government contracts frequently include a list of prohibited activities for all those parties interested in bidding.

Québec passed the Anti-Corruption Act in 2011 to deal with rampant corruption in the construction industry, particularly relating to the awarding of various public sector contracts. The Act established an Anti-Corruption Commissioner empowered to receive, record and investigate any wrongdoing and to recommend appropriate sanctions.

The penalties associated with the various offences related to procuring a construction contract or obtaining a benefit in the bidding and execution of a project include:

In most construction contracts, the owner and contractor usually agree that the contractor's bankruptcy or insolvency is a ground for termination. This clause is found in most standard construction contracts, including the CCDC various forms of contract.

Depending on the type of insolvency proceeding chosen and whether the court has granted a "stay" of the exercise of remedies, an owner cannot be permitted to terminate its contract with the contractor or to exercise any other contractual remedies. Such contractual terms are overridden in most cases by Canada's two main insolvency statutes, the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act.

In general terms, if the owner wishes to take remedies against the contractor, it must bring a motion to the court that is overseeing the insolvency proceedings for permission to lift the statutory or court-ordered stay and to permit remedies to be exercised.

Insolvency law does not affect the right of set-off, so the owner may attempt to set off claims that it has for deficient or unperformed work against claims that the contractor has for payment of invoices. However, set-off as between pre-insolvency and post-insolvency debts is generally not permitted.

In certain circumstances, the contractor can assign its rights and obligations under the contract to a new contractor, including one that purchases the business of the contractor as part of the insolvency proceedings. It is common for courts to approve the assignment even if the owner objects.

Recently, there has been some controversy about the effectiveness in bankruptcy of "deemed trust" type mechanisms designed by the provinces as a means of securing payment for project suppliers. Although the issue has not been determined at a national level, the preponderance of judicial authority is to the effect that provincial deemed trusts that do not bear all characteristics of a common law trust cannot be effective in bankruptcy so as to alter the prescribed scheme of distribution.

Owners often also use the following rights in the event of the contractor's insolvency:

Parties providing funding to contractors that have obtained security will not have their substantive rights affected, although they may be stayed from enforcing their security while the insolvency proceedings occur. Funders that have not obtained security from the contractor are treated as unsecured creditors and their claims rank pari passu with claims of all other unsecured creditors.

To the extent that funders hold letters of credit obtained by the contractor, funders' rights to draw on such letters are not affected by the insolvency proceedings because letters of credit are seen as independent obligations of the bank that issues the letter of credit, rather than obligations of the contractor.

Contractors can initiate insolvency proceedings themselves (assignments into bankruptcy and proposals under the Bankruptcy and Insolvency Act, or proceedings under the Companies' Creditors Arrangement Act) or such proceedings can be brought by creditors that wish to enforce their rights (a bankruptcy application or a secured creditor's application for the appointment of a receiver).

Once any proceedings begin, creditors are generally prevented from exercising their remedies against the contractor except with leave of the court. Contractors can initiate insolvency proceedings to obtain the benefit of the stay and thereby obtain time and breathing room to deal with their liabilities, such as through the sale of active businesses or assets or a compromise or restructuring of debts. To the extent that the contractor delivers a proposal to creditors or a plan of compromise or arrangement, creditors are entitled to vote on such a proposal/plan, which only becomes effective if approved by the specified margin.

Consultants are normally treated as unsecured creditors of the contractor, although they may have lien rights. They are also subject to the general stay of remedies against contractors and thus they cannot terminate their contract with the contractor during the insolvency proceedings. To the extent that the contractor requests the consultant to provide further services after insolvency proceedings begin, the consultant is entitled to insist on COD payment or prepayment for work since the consultant is not required to advance further credit to the contractor.

The Canadian PPP market is among the most stable, sophisticated and robust markets in the world. Governments at all levels across Canada are committing considerable resources and embracing the PPP project delivery model to close the "infrastructure gap". Crucial public infrastructure, particularly in the areas of social, health, education, and transportation infrastructure, is now being delivered using PPP. All the provinces are expanding the sectors in which the PPP delivery method is being employed.

Significant projects across all sectors have attracted global participants from the construction, design and lending sectors. Where federal funding is available, there has been significant interest in PPP projects at the municipal level, most recently in the area of transportation upgrades.

The Canadian Council of Private Public Partnerships tracks all ongoing PPP projects in Canada. There are currently 37 PPP projects under construction, with a further 31 projects in various stages of pre-construction (www.p3spectrum.ca/).

There is no specific enabling legislation required at federal or provincial levels for Canadian PPP (PPP) projects. The laws that govern PPP projects are the same laws applicable to other regional and multi-jurisdictional construction projects within Canada. In lieu of legislation, specialised federal and provincial government agencies have been established to promote the use of PPP project delivery. The following government agencies exist to oversee and facilitate PPP projects:

The procurement process for a typical PPP transaction is as follows:

Once the financing of the successful bidder is secured, the parties (the authority, the successful bidder and each of the successful bidder's team members) execute all the necessary agreements and complete any other outstanding requirements. At that point, the transaction closes and work on the project starts.

PPP projects can be structured in many ways. Subject to variation by the parties, typical PPP models include:

In Canada, the DBFM model is common. Following construction and commissioning of the project, ongoing maintenance remains the constructor's responsibility throughout the term of the project agreement, which in some cases can be for 20 years or more.

The form of project agreement and related contracts will be influenced by the chosen PPP model. While there is no standard form of project agreement, each PPP project has, in addition to the project agreement, a series of lending and security agreements that support the financial model. Because of the private financing component, PPP contractual matrices tend to be more complex than traditional models, requiring layered and multi-party agreements that govern the relationship between the public owner, the constructor and other parties.

Before closing a PPP deal, the public owner and the constructor spend a significant amount of time trying to fairly allocate risk under the project agreement. Generally, parties to a PPP project create comprehensive and detailed risk analysis to assign a value to all identified risks and then allocate the party responsible for taking on that risk.

Construction disputes are governed by the framework set out under provincial and territorial construction lien legislation (see Question 17). Generally, construction lien legislation specifies the rights and obligations of a party with respect to their lien rights, holdback/retention rights, trust obligations, priorities and in Ontario, prompt payment and adjudication.

The purpose of such legislation is to provide contractors and subcontractors with a right to recover payment for the supply of services and materials to a property by way of registration of a construction lien against title.

On the registration of a construction lien, the lien claimant can commence an action against the registered owners of the property and the party(ies) in which it seeks payment. Actions are governed by the summary procedure provided for under the applicable provincial or territorial construction lien legislation.

Construction lien legislation provides the courts with the power to find a party liable to make payment. In some cases, courts can also order the sale of the interest in the property.

Alternatively, under Ontario's Construction Act, in-project disputes can also be resolved through adjudication (see Question 34).

Dispute resolution in construction matters is most commonly addressed through:

Dispute resolution boards and project mediators are also used on some larger projects.

Although arbitration has long been a common clause in standard form construction contracts used throughout the industry, the courts have typically been the venue of choice for Canadian domestic construction projects. However, arbitration is becoming a more regularly used dispute resolution option, particularly on larger projects and projects involving international participants.

Under the new Construction Act, Ontario is the first jurisdiction in North America to introduce a mandatory statutory adjudication regime. As an interim dispute resolution process, Ontario's adjudication is intended to address single issue disputes that develop during a project, without impacting the jurisdiction of the courts or arbitrators. In addition to issues triggered by non-payment under the prompt payment regime, adjudication under the Ontario Construction Act provides for the resolution of the following disputes that can arise throughout the duration of a construction contract:

The Ontario Construction Act specifically identifies the issues that can be resolved relating to adjudication, along with the process to be employed by the participants. The goal of adjudication is to encourage a quicker and cheaper resolution of disputes, so that project work can continue (as uninterrupted as possible) on site (see also Question 17).

Nationally, there are a wide range of arbitration organisations and institutions used for the resolution of construction disputes in Canada. These include the:

However, it is not uncommon in construction arbitrations for reference to be made to international rules, such as those of the International Chamber of Commerce (ICC) or the Arbitration Rules of the ADR Institute of Canada (ADRIC).

In Toronto, Ontario, there is a specialised construction lien court, presided over by case management associate justices (provincially-appointed judicial officers). These associate justices have the authority to adjudicate construction lien actions and trials by way of a reference order from a judge of the Ontario Superior Court. However, their jurisdiction does not extend to projects beyond Toronto's borders. Administration of construction litigation varies from province to province, and even region to region within the provinces.

Arbitration proceedings are provincially mandated and are subject to the arbitration legislation enacted in each province and territory.

Typical arbitration rules that the parties can agree to before entering into arbitration are provided by the ADR Institute of Canada Inc, which can be found at: http://adrcanada.ca/resources/PubUploadFiles/Website/ADRIC_Arbitration_Rules.pdf. The Canadian Arbitration Association also provides suggested rules for arbitration proceedings (https://canadianarbitrationassociation.ca/?page_id=17).

Perhaps the most widely used alternative dispute resolution method in Canada is neutral, non-binding mediation, which is a well-established, cost-effective manner and successful means of settling disputes that can be utilised during construction, after project completion, before the commencement of formal action or arbitration, or after the commencement of formal action or arbitration, but before trial.

Mediation is also included in, and sometimes mandated by, standard form contracts as a precursor to litigation or arbitration. For example, mediation is expressly included in the commonly used CCDC 2 2008 Stipulated Price Contract. Mediation of litigation disputes is also mandated in several jurisdictions. In Ontario, the provincial court rules mandate mediation before trial for all actions commenced in Toronto, Ottawa and the Windsor area.

As of 1 October 2019, statutory adjudication is now in force under Ontario's Construction Act (see Question 34) and as such, there will be an increase in adjudications as new construction projects become subject to the prompt payment and mandatory adjudication provisions of the that Act.

Arbitration is increasingly being used in larger construction disputes, either on narrow issues or in lieu of litigation.

Although not yet common in Canada, dispute resolution boards (DRBs) are gaining attention as a potentially cost-saving method of dispute resolution during construction. A DRB is essentially a panel of independent experts or individuals appointed at the outset of a project, whose purpose is to regularly attend the project site and be available to mediate or otherwise address project disputes as they occur.

Project mediators and project arbitrators are contemplated under some standard form contracts, but rarely appointed before disputes arising on the project.

Generally, a person's liability for income tax depends on its residency. Persons who are residents of Canada within the meaning of the Income Tax Act (Canada) (the Tax Act) are liable for tax on their worldwide income. A person that is a non-resident of Canada is subject to Canadian tax on income or gains from a Canadian source, which includes a business carried on in Canada. The amount of tax payable might be reduced or eliminated via a tax treaty that Canada has entered into with the person's country of residence. Generally, under Canada's tax treaties, only business profits earned by a non-resident that are attributable to a "permanent establishment" situated in Canada are subject to Canadian tax. For these purposes, a permanent establishment is generally defined to include a construction project in Canada that lasts 12 months or more.

Taxpayers are generally subject to income tax at both the federal and provincial level. Depending on the province, the top marginal tax rate for active business income is:

In addition, a branch tax of 25% (subject to reduction under a tax treaty) is generally levied on the after-tax business profits of a non-resident corporation that carries on business in Canada directly through a branch.

Non-residents are generally subject to Canadian income tax on gains from the disposition of "taxable Canadian property", including Canadian real estate and shares of corporations that derive their value principally from Canadian real estate. A buyer may be required to withhold and remit a portion of the purchase price otherwise payable to a non-resident seller unless the seller has obtained a clearance certificate from the Canada Revenue Agency (CRA).

The Tax Act generally requires every person, including a non-resident, to withhold and remit 15% of each payment to a non-resident person in respect of services physically performed in Canada on account of the service provider's Canadian income tax liability. A waiver from this withholding tax is available in some cases. A non-resident can generally claim a refund of any excess of the amount withheld over its ultimate tax liability by filing an income tax return.

A resident is also required to withhold and remit to the CRA 25% of the gross amount of certain payments to a non-resident, subject to tax treaty relief. The principal payments that might attract withholding tax include:

The federal government levies a VAT-like 5% goods and services tax (GST). Several provinces have combined the GST and their respective provincial retail sales tax to form a harmonised sales tax (HST) with combined GST or HST rates ranging from 13% to 15%. GST or HST is charged on the:

Generally, businesses can claim input tax credits to recover the GST or HST paid on goods and services that were acquired in the course of their commercial activities.

Most of the "non-HST" provinces impose a retail sales tax (ranging from 6% to 9.975%) on personal property and certain services purchased for consumption.

Some provinces and municipalities impose a land transfer tax on a purchaser of real estate at graduated rates, based on the value of the consideration paid.

The choice of entity structure can be a critical factor affecting the tax efficiency of a project. Common ownership structures include:

Non-residents must also decide whether to carry on Canadian activities directly or through a Canadian entity. Each structure has its own relative benefits and costs that must be evaluated, taking into account relevant non-Canadian tax considerations. The mix of debt and equity used to finance a project can also play a key role in managing tax liability.

Federal, provincial and municipal governments grant tax incentives to taxpayers that undertake certain types of projects, or projects in certain regions. These include:

There is no specific requirement that a party seeking to engage in a construction project in Canada be a member of a certain organisation in Canada. However, all the requirements associated with Canadian labour laws and tax laws must be considered.

In the Province of Québec, parties that will be competing in a call for tenders or an awards process for contracts and subcontracts with the Québec government and Québec municipalities must obtain an authorisation from the Autorité des Marchés Financiers if the value of the contract exceeds certain thresholds. For contracts with the Province of Québec, the threshold is set at expenditures equal or greater than CAD5 million. For contracts with the city of Montréal, the threshold is set at expenditures equal or greater than CAD100,000.

A foreign party is recommended to have a representative on the ground to ensure compliance with the legislation, as well as with Canada's specific requirements for each construction professional or subcontractor particular to the job being performed (for example, an electrician).

Engaging local counsel with expertise in construction projects is encouraged, to ensure compliance with all local laws.

The Ontario Construction Act established a system of holdbacks and trust obligations to protect the flow of monies to those who are lower in the construction pyramid.

Following an independent review commissioned by the Province of Ontario, the first half of the changes enacted by Construction Act took effect on 1 July 2018, including:

The second tranche of legislative changes came into force on 1 October 2019, including the revolutionary new prompt payment and adjudication systems designed to expedite payments on construction projects and avoid unnecessary payment disputes.

The prompt payment regime in Ontario now requires that a contractor deliver to an owner a "proper invoice" for payment of services and materials rendered. This is defined in the Construction Act.

Alberta recently enacted similar amendments under their Prompt Payment and Construction Lien Act.

Prompt payment and adjudication law reforms are currently also being considered or addressed by the following six Canadian provinces: Nova Scotia, Saskatchewan, Manitoba, British Columbia, New Brunswick and Quebec.

As discussed in Question 17, federal prompt payment and adjudication legislation received royal assent on 21 June 2019 and is meant to address disputes arising on federal lands through reforms similar to those under the Ontario Construction Act's prompt payment and adjudication regime.

PPP Projects. PPP projects continue to be a popular approach to major infrastructure projects in Canada. Across the country, large scale infrastructure projects are under way. Despite an economic slowdown in recent years, the construction industry in Canada continues to grow and evolve. PPP projects have been used for over a decade in Canada. While the first projects mainly involved hospitals and other social infrastructure, PPPs are now being used for a variety of projects, including highway construction.

Technology. The rapid growth of technology continues to extend into the construction industry. In the light of the increased shutdowns and restrictions due to the COVID-19 pandemic, the industry was forced to adapt to managing projects remotely to ensure safe social distancing. In addition to the increased use of project management and administrative software, data continues to improve on projects, modernising procurement by using online bidding platforms.

Building green. Both public and private sectors continue to heavily invest in sustainable and green projects. There continues to be a growing trend towards constructing projects that are energy efficient, sustainable and use eco-friendly materials.

Throughout Canada, commencing in March 2020, the federal, provincial and territorial governments declared states of emergency in response to the COVID-19 pandemic. Each province and territory implemented its own measures to address COVID-19, which have since been lifted. During that time, some provinces established lists or categories of construction projects deemed "essential" and permitted to continue, rendering other project non-essential and subject to mandatory closure.

During the pandemic, to address the impact of court closures and the other impediments created by the pandemic, provincial and territorial governments temporarily suspended statutory limitation periods for the commencement of actions and timelines for procedural steps within actions.

It continues to be important for litigants to check the legislation and past government emergency orders for each province or territory to ascertain which limitation periods have been suspended or have now been lifted.