Contractors are artisans who take great pride in their workmanship. There are lots of different types of contractors out there, and all apply their skills towards projects that often have very visible results. General contractors manage building or renovation projects. Carpenters provide their custom woodworking services. Electricians wire up homes and businesses. Drywallers provide wall-building expertise, and painters have the talent to colour them beautifully.
The list goes on, but contractors are often solitary or small-business workers who have to find their own jobs, buy their own tools, and spend money to fund projects before they are paid. Provincial employment law is very clear on the difference between an employee and a contractor. You are considered a contractor if:
- You are hired to perform a specific task within a discrete time frame.
- You work independently within the bounds of a formalized understanding of when and how the job is to be completed.
- You use your own tools or equipment to perform the work.
- You cover operating costs while the work is being completed, with the expectation of being reimbursed through your negotiated compensation.
- You assume risks due to work delays, damage to equipment or loss of compensation.
The final point in this list is where many Alberta contractors have been calling on the provincial government for assistance for the past several years. The complaint has been that there is not much protection for contractors whose clients refuse to compensate them, and contractor’s insurance does not cover for non-payment. This has changed in the recent past, however, and contractors should be aware that there are more supports available to them when fighting to be paid.
Bill 37, the prompt payment act
Bill 37, the Builders’ Lien (Prompt Payment) Amendment Act, was created to assist contractors in receiving payment in a timely manner. The changes set a clear timeline of 28 days for general contractors to receive their payment, who then have seven days to pay their sub-contractors. Parties have 14 days to dispute an invoice.
Additional changes set out in the bill include:
- More time to register liens (from 45 days to 60 days).
- Dispute resolution now goes through adjudication rather than the courts to speed up the process.
- Large projects that take several years now must be paid at preset times throughout the process.
- The minimum amount owed that can be subject to a lien has increased from $300 to $700.
These changes are the first to the Builders’ Lien Act in 20 years and were welcomed by those in the contracting industry. When a payment dispute happens, contractors can file a lien against the project. It is illegal to not pay for work performed under the Security of Payments Act.
Don’t forget that all contractors requesting pre-payments or progress payment for work must be licensed with the Government of Alberta. You can verify by contacting the Consumer Contact Centre at 1-877-427-4088 or visit Service Alberta.
Don’t forget a solid contract
Many contractors make the mistake of not having their clients or customers sign a contract with the thought that they can trust them to do the right thing. If anything goes wrong, however, verbal contracts are very hard to prove. Contractors should have a comprehensive contract ready for every job they do, and may want to consider having their paperwork looked over by a contract lawyer.
At the very least, all contractors’ contracts should include the following:
- Contractor’s name and all relevant contact information.
- A detailed description of the work being done.
- The type of tools and materials that will be used.
- Estimated cost.
- An understanding of how long the job will take, including start and end dates.
- A statement of any guarantees.
- Information about the contractor’s insurance coverage.
What does contractor’s insurance cover?
While contractor’s insurance does not protect contractors from non-payment for work, it is essential coverage for anyone in the industry. Contractors’ insurance provides three main coverage options.
- Liability insurance. This mandatory form of coverage protects you and your assets from perils like property damage, accidents and third-party claims. It can also include errors and omissions coverage for the unintended result of improperly negotiated or incomplete contracts. In the case of construction contracts, liability protections also safeguard you against problems resulting from design flaws and other planning issues that may inhibit your ability to complete the work according to the contract you negotiated. Additional forms of liability coverage also protect your equipment, including rented equipment, and contract employees who do not carry their own insurance.
- Workers’ compensation. As a contractor, it is your responsibility to provide your own workers’ compensation coverage, for yourself (if you are the only contractor) and for your employees (if you maintain your own workforce). The workers’ compensation program offers wage and benefits reimbursements to workers who are injured on the job.
- Risk insurance. Also known as builders’ risk insurance, this type of optional coverage is usually used in construction. It provides temporary protection to a home or a piece of property which is being built or renovated, covering it during the work period. Builders’ risk insurance typically covers perils like fire, theft, natural hazards and vandalism.
Contact Lane’s with your questions about contractor’s insurance
If you have any questions about contractor’s insurance in Alberta, don’t hesitate to turn us. We are a full-service Alberta-based brokerage, offering a comprehensive selection of business insurance products at competitive rates, along with value-added service and claims support. Contact Lane’s Insurance directly if you have a situation you’d like to discuss with an experienced insurance broker who has your best interests in mind.