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Defending Against Independent Contractors’ Claims for Lack of Payment
As a general rule, the relationship between an independent contractor and a company is governed by a written contract. A quality contract will specify the exact amount that the contractor is supposed to be paid, when he or she will be paid and how payments will be made. Let’s take a look at the various ways that you can defend yourself against an independent contractor’s claim that he or she wasn’t compensated in a timely manner.
Did the Contractor Fulfill His or Her Contractual Obligations?
Companies are generally allowed to withhold payment from an independent contractor if that person failed to live up to the terms of a valid contract. For instance, an agreement might stipulate that a product is to be delivered within 30 days of the deal’s effective date. If that product is delivered 45 days after the pact went into effect, it may be possible to withhold payment for breach of contract. The same may be true if a product failed to meet quality requirements or was otherwise unusable.
Did the Contractor Provide Proper Payment Information?
If a contractor is being paid by direct deposit, he or she needs to provide the company making the payment with the correct routing and account number. If that person is being mailed a paper check, he or she needs to provide a valid mailing address where it can be sent. Otherwise, the payment will be labeled undeliverable and returned to the sender. In such a scenario, obtaining updated information from the independent contractor should allow a company to pay that person and put an end to a proposed lawsuit.
What Were the Payment Terms?
It’s not uncommon for companies to pay for goods or services 30, 60 or 90 days after they are received. Generally speaking, payment terms are included as part of a standard contract. However, it’s possible the contractor assumed that he or she would be paid for goods or services on the date that they were delivered or provided. Therefore, a contractor may take legal action demanding compensation that he or she isn’t entitled to receive for several weeks or months.
Did the Contractor Violate a Gag Order?
Organizations often include clauses in contracts that forbid independent contractors from talking publicly about their compensation packages. Standard contracts might also prevent them from revealing details about a project that might be exploited by a competitor for its own gain. Depending on the terms of the deal, violating a nondisclosure agreement could result in financial penalties that a court would likely uphold.
Was Payment Fully Guaranteed?
It’s unlikely that a contractor would agree to work for free. However, it’s not unusual for contracts between companies and independent contractors to include kill fees if a product is not accepted. For instance, let’s say that a company hired a writer to provide content for its blog. Let’s also say that the writer agreed to be paid $50 for each post that was published and $10 for each post that wasn’t published. If that writer later claims that he or she was owed $50 a post, you can reference the section of the deal stipulating that full payment is based on the work being published.
Does a Written Agreement Exist?
State law requires that most business agreements be codified within a written agreement. However, if no written agreement exists, it can be extremely difficult to prove who is telling the truth in a business dispute. This is because a judge can’t know what the parties intended to happen when they decided to enter into a working agreement. Even if a judge believes that the independent contractor is telling the truth, this generally isn’t enough to enter a judgement on that person’s behalf.
An Attorney May Be Able to Help Your Firm Obtain a Favorable Outcome
If an independent contractor is taking action against your firm, it’s generally a good idea to hire an attorney. A legal professional may be able to get the claim dismissed before it has a chance to go to trial. It’s also possible that your legal adviser will be able to negotiate a settlement that allows the case to end in a timely, discrete and affordable manner.
In some cases, reaching a settlement may be better than taking a case to trial as it minimizes the amount of negative attention that your company might receive. In addition, it can mean spending less time and money in court that could be used to make life better for your customers.