Canada: Quebec Construction Industry Sees Major Changes: What You Should Know About Bill 35 And Other Recent Legislative Amendments

An Act to prevent, combat and punish certain fraudulent practices in the construction industry and make other amendments to the Building Act1 (Bill 35) received unanimous consent in the Quebec legislature on December 9, 2011.

Bill  35 results in significant changes within the construction industry to prevent, combat and punish fraudulent practices. It also increases the fines assessed under certain legislation and introduces significant amendments to the Building Act and An Act respecting contracting by public bodies as regards the register of enterprises ineligible for public contracts.

Most provisions of Bill 35 came into force on the day the bill was passed; others, in particular those amending An Act respecting contracting by public bodies, came into effect on June 1, 2012.

Issue, suspension and cancellation of a contractor's licence

Bill 35 tightens up the conditions that a contractor must meet before the Régie du bâtiment du Québec (RBQ) will issue a contractor's licence. For example, a legal person can no longer obtain a contractor's licence if:

  • An officer2 of one of its shareholders has, in the five years preceding the application for a licence, been convicted of any of the offences referred to;
  • Issuing the licence would be contrary to the public interest because, for example, the legal person or any of its officers is unable to prove good moral character and a capacity to exercise activities as a contractor with competence and integrity, given past conduct;
  • The legal person is, in actual fact, directly or indirectly under the direction or control of a person who does not meet the conditions set out in the Building Act.

The other conditions in effect before Bill 35 was passed remain in effect today, including the requirement that the applicant demonstrate its solvency and furnish security before a licence is issued.

In addition, as before, a contractor's licence can be suspended or cancelled if at any time the licence holder fails to meet any of the conditions for issue of the licence, including the ones described above. Other situations that could result in a contractor's licence being suspended or cancelled include:

  • The licence holder enters into a contract for the loan of money with a lender even though he was notified by the RBQ that the lender or an officer of the lender was convicted of an offence provided for under the Building Act;
  • The licence holder has acted in such a manner that, in the opinion of the RBQ, he no longer merits the public's trust;
  • The licence holder commits an offence under a public statute, if the serious nature or frequency of the offence justifies the suspension or cancellation. Such public statutes include An Act respecting occupational health and safety, Bill R-20, the Building Act and the Consumer Protection Act;
  • The licence holder has falsified or misrepresented facts related to his application for a licence. Anyone applying for a licence or providing information to the RBQ for the purpose of maintaining a licence should therefore make sure that the information provided is precise and accurate.  Anyone making a false statement will, in addition, be fined an amount of no less than $7,000;
  • The licence holder does not inform the RBQ of a change to the corporate structure of its business within 30 days of that change (merger, sale or transfer of a partnership or legal person, change in name, change to its board of directors or its officers).

Restricted licence for the purposes of obtaining a public contract

Bill 35 also creates new situations requiring the RBQ to indicate on a contractor's licence that the licence contains a restriction for the purposes of obtaining a public contract.

Before the coming into force of Bill 35, the legal framework of the Building Act and the related regulations already specified that a holder of a restricted licence could not obtain a public construction contract and also that no contractor could retain the services of a contractor holding a restricted licence for the performance of any subcontract related directly or indirectly to a public construction contract.

Bill 35 introduces additional situations for which a contractor will be prevented from entering into a public construction contract as a result of a restricted licence, including:

  • The licence holder has been convicted, in the last five years, of any of the offences referred to;
  • An officer or a shareholder of the contractor has been convicted in the last five years of any of the offences referred to;
  • An officer of the licence holder is also an officer of a business whose licence is restricted, unless the licence holder proves to the RBQ that the offence resulting in the restriction was not committed in the exercise of the officer's functions within the business.

Prior to the coming into force of Bill 35, contractors holding a restricted licence for the purposes of obtaining a public contract could not do business with Quebec government departments and public bodies for construction work. Since December 9, 2011, the concept of "public contract" has been broadened to cover any contract directly or indirectly involving government departments and public bodies, bodies in the healthcare and school networks as well as municipalities and municipal bodies.

Unlike in the past, any person who has his or her licence restricted pursuant to the new provisions of Bill 35 must cease to perform any public contract and may not complete work that has been started. The Building Act provides an exemption, however, for contractors that obtain special authorization from the RBQ to continue to perform a public contract when the public client who contracted with the contractor applies to the RBQ for such authorization.

Penal sanctions strengthened

As stated in the introduction, fines under the Building Act were increased significantly with the passage of Bill 35. For example, a business that performs construction work without a licence is liable to a fine ranging from $15,000 to $75,000.

New administrative rules for public construction contracts

In another vein, to comply with the new rules for public construction contracts, a general contractor interested in entering into a contract of $25,000 or more with a government department or public body must now provide an attestation from Revenu Québec (Attestation), which is a certificate confirming that the general contractor has filed the returns required under Quebec tax legislation and has no overdue account with the Minister of Revenue or, if it has an overdue account, that it has entered into and is in compliance with a payment agreement or the collection of its debts has been legally suspended.

Like general contractors, subcontractors interested in receiving work under a public construction contract will have to obtain an Attestation when they contract directly with a general contractor.  The subcontractor's Attestation will have to be provided to the general contractor before the subcontract is entered into, but no earlier than 90 days before the date fixed for the closing of tenders related to the primary contract. General contractors are therefore advised to require subcontractors to attach an Attestation as an appendix to their tenders. A holder of a contractor's licence may have its licence restricted if the rules regarding obtaining an Attestation are not followed.

Register of enterprises ineligible for public contracts

Finally, the amendments made by Bill 35 to An Act respecting contracting by public bodies are expected to result in major changes for all entities doing business with public bodies, not just building contractors. The register of enterprises ineligible for public contracts, also called the RENA, has been in place since June 1, 2012. Businesses convicted of certain offences will be entered in the register and will be prohibited from bidding on any public contracts, whether or not those contracts relate to construction work, for a period of up to five years.

Conclusion

Bill 35 introduces many major changes affecting players in the construction industry. The consequences of not complying with the new rules arising from the passage of Bill 35 are huge.  It is important for every industry player to thoroughly understand and strictly apply the provisions of this legislation.  Obviously, the courts and tribunals will undoubtedly have to interpret the new Bill 35 provisions. It will be interesting to see what guidelines they set down.

Footnotes

1 An Act to prevent, combat and punish certain fraudulent practices in the construction industry and make other amendments to the Building Act (2nd sess., 39th leg., Québec, 2011- assented to on December 9, 2011), SQ 2011, c 35. – Introduced by the Minister of Labour  Lise Thériault on October 26, 2011 as Bill 35.

2 A "director, officer or shareholder holding 20% or more of the voting shares or, as the case may be, the person authorized to apply for a licence on behalf of a partnership or legal person in the cases determined by regulation of the Board" is deemed to be an officer within the meaning of the Building Act.

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