Should We Name and Shame Companies Who Do Not Honour Their Payment Obligations?

By Coba Pekaj, MAIQS CQS - Director, Pekaj Group

Payment delays remain a critical challenge for contractors and subcontractors in Australia’s construction industry. These delays disrupt cash flow, strain relationships with suppliers, and jeopardize business sustainability. While naming and shaming delinquent clients might seem like a solution, is it the right approach? Let’s explore the latest industry insights and practical alternatives to protect your business.

The Reality of Payment Delays in Australia

Payment delays continue to affect contractors significantly. According to the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), many subcontractors endure delays exceeding 30 days, with a concerning portion waiting over 60 days for payment. This trend creates a ripple effect, impacting cash flow, project timelines, and relationships with stakeholders.

Recent Developments:
In 2024, industry bodies like the Master Builders Association (MBA) reported efforts to enforce stricter adherence to payment terms. However, many contractors still face uphill battles, underscoring the need for robust financial safeguards.

Naming and Shaming: Risks vs. Rewards

Publicly naming companies that fail to honour payment obligations can shine a spotlight on unethical practices. For instance, campaigns like the 2018 Australian Subcontractors Alliance’s ‘Name and Shame’ initiative aimed to pressure delinquent clients into paying their dues.

However, consider the risks:

• Legal Repercussions: Defamation claims can result in costly legal battles. A 2019 Victorian case exemplified this, where a contractor was sued for naming a client publicly.
• Reputation Damage: Smaller businesses facing temporary financial hardship could be unfairly targeted.

Alternatives to Naming and Shaming

Instead of risking legal complications, contractors can adopt these proven strategies:

1. Leverage Security of Payment Laws (SOPA):
   SOPA allows contractors to issue payment claims and seek adjudication for non-payment disputes. This legal framework can resolve issues without public confrontations.
2. Engage in Mediation or Arbitration:
   Structured dispute resolution methods offer non-adversarial ways to address payment delays.
3. Utilise Credit Registries:
   Platforms like CreditorWatch or Equifax help assess a client’s payment history before entering agreements.
4. Advocate for Legislative Change:
   Collaborate with industry bodies lobbying for tighter regulations to safeguard subcontractors’ payments.

Proactive Measures for Contractors

To reduce the risk of payment delays:

• Document Thoroughly: Maintain records of contracts, communications, and invoices.
• Set Clear Payment Terms: Ensure all agreements outline payment schedules and penalties for delays.
• Send Timely Reminders: Polite reminders can nudge clients without escalating disputes.
• Consider Payment Plans: Flexible terms can facilitate smoother debt resolution.
• Seek Expert Advice: Legal counsel or quantity surveyors can provide tailored solutions for complex disputes.

What the Law Says in Victoria

The Building and Construction Industry Security of Payment Act 2002 (Vic) gives subcontractors and consultants the right to pursue payment through adjudication if a progress claim is not paid within the statutory timeframe. This legislation exists because late payment is endemic in the construction industry and voluntary compliance was not working.

If you are owed money on a Victorian construction project and the payment terms in your contract have been exceeded, you have legal options beyond waiting and hoping. Speak to a construction lawyer or contact the Victorian Building Authority for guidance on your rights.

‍Balancing Ethics and Practicality

While naming and shaming may deter repeat offenders, it’s not a one-size-fits-all solution. Contractors must balance ethical considerations with practical outcomes, ensuring their actions align with legal frameworks and industry best practices.

Navigating payment disputes in construction requires a blend of strategic planning, legal knowledge, and proactive measures.

At Pekaj Group, we specialise in estimating and quantity surveying services that help contractors mitigate financial risks.

Need help with your Melbourne project?

Call 1300 420 227 or email info@pekajgroup.com.au for a fixed-fee proposal.