DUDE, WHERE’S MY MONEY?
Getting paid in the Gig economy
Today’s younger, connected, and mobile workers are managing their careers on their own terms and often outside categories that have defined the workforce for decades. There is a rise of open source talent: creatives collaborating to create products and services by sharing their skills, experiences, resources, and ideas and insights, sometimes without direct ties to a company or organization and sometimes with no remuneration.
Those growing up in this nascent environment face age old abuses, the most common one, getting stiffed for their work completed. Unfair as it may seem, there are many possible reasons.
In most cases where businesses don't pay, it's because they don't have the money. This may be a temporary cash flow shortage or a more permanent situation such as a bankruptcy. In these cases, employees and contractors are not paid because there might be more pressing needs for their cash. Regardless of these reasons, the contractor feels that they are being treated unfairly and more importantly, the companies not paying for these services rendered are doing so illegally. It may take a super-heroic effort to collect what is justifiably yours.
It starts with a Contract
We need to start by defining the word “contract.” It’s an exchange of promises among two or more persons or entities (the “parties”), whereby each party agrees to do (or not to do) something.
In forming a contract, there are some limitations. The agreement cannot be for an illegal purpose — it must have a lawful objective. The parties involved must be competent persons who have “capacity,” which is the legal ability to enter into a binding contract. This means they must be of legal age (18 or 21, depending on the jurisdiction) and they must be of sound mind. In a business context, if an individual is representing a company he or she must also have “authority,” which is legal permission to act on behalf of that company.
The contract comes into existence when one party accepts another’s offer, provided that there is “consideration.” Consideration is an important legal term. It means something of value that is provided by each party — for example, one provides services and the other pays. Consideration must have value that can be objectively determined. It cannot be something subjective, like love. If there is no consideration, or if the consideration is not legally sufficient, you do not have a contract can go like this: You make an offer to the client (“I would love to provide creative services) the two of you negotiate back and forth on the consideration (the exact scope of work that you will perform for the client and the fee that will be paid to you, by project or monthly, in return) and eventually the client accepts (“Yes, please do the work”). Offer plus acceptance plus consideration equals a contract. It is legally binding. The AIGA is a great source for sample contracts. Visit www.AIGA.org
Paper. Paper. Paper.
At this point, let’s assume you have completed and delivered the work (deliverables) per the contract and properly invoiced. For whatever reason, beyond the terms set, you have not been paid and it is now past 90 days. Do you contact a collections agency? Before you decide to take your collections to an outside company, you should have done as much as you can to collect, using your own internal processes.
· You should have a billing system in place to keep reminding non-payers of their obligation to pay.
· You should have run an accounts receivable analysis, so you can see who hasn't paid and how long the money has been outstanding.
· You should have stipulated definite terms for payment and corresponding penalties for non and late payment.
· You might want to consider filing a complaint against the company first.
You can always file a complaint with the Better Business Bureau (BBB). Visit www.bbb.org
They handle disputes that relate to marketplace issues with the services or products a business provides. BBB reserves the right to reject complaints that use abusive or foul language, so keep it clean and back it up with your paper trail. Everything you submit will be forwarded to the business within two business days. The business will be asked to respond within 14 days, and if a response is not received, a second request will be made. You will be notified of the business’s response when we receive it (or notified that we received no response). Complaints are usually closed within 30 business days.
What the BBB does not handle:
· Employee/employer disputes;
· Discrimination claims;
· Matters that are/have been litigated/arbitrated;
· Complaints against individuals not engaged in business;
· Issues challenging the validity of local, state, or federal law;
· Complaints against government agencies, including the postal service;
· Matters not related to marketplace issues.
What they do handle must meet the following criteria:
· The complaint includes the complainant’s name, a postal address, and an email address
· The complaint includes the business’s name and provides sufficient information to determine the business’s location
· The complaint seeks assistance from BBB
· The complaint is from a person (or a person’s authorized representative) or entity (business-to-business) that had a marketplace "relationship"
· The complaint relates to a marketplace issue. Typically, the issue complained of must have arisen within the previous 12 months (Note: warranties/guarantees or other extenuating circumstances may supersede this criteria.)
· The complaint must allege a deficiency in the company's marketplace performance with regard to the services or products at the business provided or allegedly agreed to provide
· The complaint is not in litigation when filed with BBB and has not been resolved by a previous court action, arbitration, or settlement between the parties.
· The complaint contains no abusive language.
If you have had enough patience to wait for the BBB’s outcome and there is still no result, move on to the next level. Collections agencies are companies that attempt to collect debts. They receive a percentage of the amount collected, which could be as much as 25% to 45% of the debt. Collections agencies use phone and mail to contact non-payers. In situations when a debtor is difficult to contact, they might use a private investigator or internet searches. These agencies must obey all debt collections laws and should not use abusive tactics to collect.
Some collection agencies are connected with attorneys; having the advantage of being able to send a letter from an attorney to debtors.
Advantages and Disadvantages of Collections Agencies
· Collections agencies are a good choice if you can't locate the customer, if this person has moved or is no longer a customer.
· Some collections agencies use more forceful tactics, so check a potential agency by contacting previous clients.
· Collection agencies may be a possibility if a non-paying customer is still active, because you can continue with the customer on a cash basis, while distancing your business relationship from the collections process.
· If you do get paid through the effort of a collections agency, you will only get a portion of what is owed. That's still better than nothing.
See You In Court
If your collections agency is not using their lawyers, consider using Small Claims Court to get paid. The small claims process is for the express purpose of bringing two parties together without the need for attorneys or a lengthy trial. Your company files a claim, and you and debtor appear before a judge who hears both sides. The judge then makes a judgment (a court order).
If you are proactive in your contracting, you might want to add this clause…
Any controversies arising out of the terms of this Agreement or its interpretation shall be settled in the (Your City) in accordance with the rules of the American Arbitration Association, and the judgment upon award may be entered in any court having jurisdiction thereof.
If you find yourself getting nowhere with accounts payable, take the time to reach out to fellow contractors, vendors and suppliers to see if they are experiencing similar difficulties. Some, you may find, are involved in suits themselves and joining forces might make sense. You can also warn trade organizations or board members of the unfair practices.
The presence at an employer's business of one or more employees and/or other persons who are publicizing a labor dispute, influencing employees or customers to withhold their work or business, respectively, or showing a union's desire to represent employees; picketing is usually
accompanied by patrolling with signs. Unfortunately, most workers in the new Gig economy are not unionized. So picketing would be ineffective. No matter how fun you make it.
It is always an unfair situation for one to go through, especially when this generation of workers are not backed by a corporation. Hopefully some or all of these solutions will get you your money. If not, ask your accountant about writing off uncollected or bad debts. Since bad debt hurts your business’ bottom line so much, you should take every precaution to avoid it. Here are some ideas:
· Start with a signed contract
· Follow up on all past due invoices immediately
· Keep communications open with late-paying clients
· Offer discounts for early payments
· Don’t be afraid to use collection agencies as a last resort
By Jean Murray
April 10, 2017
How Contracts Work
Article by Shel Perkins
October 08, 2014
When and How to Write Off Uncollectable Debt
By Suzanne Kearns