COVID-19 Construction Law Update

Below is a summary of important legal information for Ontario businesses in construction to keep in mind during the COVID-19 / coronavirus crisis.

Construction is an essential service

The Ontario government has deemed construction an essential service, so construction companies are not required to close. This includes projects and services associated with the following sectors: healthcare, critical infrastructure, industrial, commercial, institution, residential, health and safety, and environmental rehabilitation.

The list of essential services is adjustable. The premier has put the construction industry “on notice” that labour inspectors will shut down construction sites unless workers are protected. Construction companies should take all necessary steps to protect employees from being infected with the virus, including managing hygiene, sanitation, physical distancing, and illness in the workplace.

Delay notice requirements

Parties should assume they are required to perform their contractual obligations in the absence of a clear provision to the contrary, or unless the other party has released them from their obligations.

If a contractor or subcontractor needs extra time to complete their work, they must satisfy any notice requirements in their contract. For example, a standard CCDC-2 contract allows a contractor to obtain an extension of the schedule if they are delayed by something beyond their control, provided they give the owner timely written notice shortly after the delay event. A delay notice must be specific about the cause of the delay so the owner can mitigate any fallout. Parties should carefully review their contracts and speak to their lawyers before exercising such a provision.

In the absence of a contractual provision, parties should consult a lawyer to discuss their rights and obligations under the common law.

Payment obligations

Parties should continue to make timely payments wherever possible. As of October 1, 2019, there are mandatory “prompt payment” timelines under the Construction Act, as we discussed in a previous article.

Mediation, arbitration, and interim adjudication

The Superior Court of Justice has suspended all operations and adjourned all hearings indefinitely, except for emergency matters. It is unclear when proceedings will resume.

Parties may continue to mediate or negotiate their disputes. There are many videoconference platforms that allow parties to meet in real time.

Disputes may be referred to arbitration in cases where there is an arbitration clause. Even without an arbitration clause, parties may still agree to submit all or part of their case to an arbitrator to avoid court delays. Arbitration is versatile, and usually faster. For example, parties can exchange documents electronically and schedule hearings via teleconference or videoconference.

As of October 1, 2019, parties may take advantage of “interim adjudication” under the Construction Act, as we discussed in a previous article. Interim adjudication is like a mini-arbitration and offers a quick and flexible alternative to resolve construction disputes while a project is ongoing.

Lien Timelines

Although the Ontario government has suspended limitation periods and procedural deadlines, it is not clear this applies to construction liens. Contractors and subcontractors should meet the applicable deadlines to preserve and perfect their liens. Due to recent amendments, these deadlines differ based on when the project started, as follows:

IMPORTANT UPDATE:  On April 3, 2020, the Ontario government removed most construction work from the list of essential services. As of April 4, 2020 at 11:59 PM, the only essential construction activities allowed to continue are those required for:

1. Healthcare sector;
2. Critical provincial infrastructure;
3. Maintenance and operations of petrochemical plants and refineries;
4. Significant petrochemical projects where preliminary work has already started;
5. Construction and modification of industrial structures necessary to produce, maintain, or enhance personal protective equipment or medical devices related to combatting COVID-19; and
6. Certain residential construction projects that have already started.

Companies will also be permitted to continue to engage in activities to close construction sites to ensure public safety

Summary

Legal rights and obligations in the construction sector will continue to evolve as the province adapts to the pandemic. Perley-Robertson, Hill & McDougall LLP/s.r.l. remains fully operational and available to assist clients navigate these uncharted waters.