What are my options in dealing with an employer who has put a stop payment on a paycheck for work completed?

August 19, 2006 10:59 AM

What are my options in dealing with an employer who has put a stop payment on a paycheck for work completed?

The details are pretty straight forward. I received payment on 08/17/2006 for work completed between 08/01/2006 and 08/15/2006. The check was deposited on 08/17/2006. I logged in to my bank account this morning to find a hold was placed on that check. A quick call to customer service yielded that the likely culprit is a bounced check, but several other scenarios were possible. Given that the hold status appeared within hours of my call, further information was unavailable.

I called the issuing bank to see if they could verify the status of the check. After a short verification process, the customer service representative informed me that a stop payment had been put on the check that morning by the account owner. She also verified for me that the account was a business account, though I'm not sure that's particularly useful information.

I work for this company as a 1099 contractor. I am the companies only employee. I have received three other payments from this company that have all cleared. I keep copies of all checks from clients. This check, in particular, clearly states in the memo field: "Full and through 08/15". I do not have a written contract with this client, however the deal was brokered through a third party, which yielded email copies of the details of the working arrangement.

What recourse do I have in the matter? For the sake of clarity, I do not wish to maintain a relationship with this client. At the very least, I'd like this paycheck to clear. I am willing to write off work done during the current pay period to accomplish this, though I'd obviously rather be paid in full. I do not wish for any such payment to be stipulated on further work considering this paycheck is for work already successfully completed. Lastly, that the work was completed is not in question. The stop payment was done clearly in response to notifying the client that I would be terminating our working arrangement immediately for other breaches of trust, for which there is no penalty in accordance with the arrangement.

It may be useful to know, in case you have had such an experience, that the employer is based in Massachusetts and I am based in Connecticut. I'm interested in learning what my legal rights might be, but I'm primarily interested in hearing what tactics others have used to successfully resolve similar situations.

Thanks for your help.

posted by sequential to work & money (16 answers total)

Ok, first: You Are Not An Employee. An employee has certain rights and priviledges that you, as a contractor, do not.

As a contractor, your options probably are:
1) Talk to them about why they stopped payment. That's a $25-50 charge to stop a check, depending on their bank's fees.
2) Invoice them again and charge them extra. Let them know that you will be charging them interest.
3) File a small claims court case against them to collect on the debt.

A lot of the above depends on what's in your contract of course.
posted by SpecialK at 11:10 AM on August 19, 2006

Lawyer it up.
posted by dirtynumbangelboy at 11:19 AM on August 19, 2006

sequential, how sure are you about this:

"The stop payment was done clearly in response to notifying the client that I would be terminating our working arrangement immediately for other breaches of trust, for which there is no penalty in accordance with the arrangement."

is this a truth, or an assumption?

As to how to proceed next: option 1. don't just call them, talk with them in person to resolve this situation. Find out why the cheque was stopped.

If their response is not satisfactory, then proceed with legal means. But first, meet and talk - unemotionally if at all possible.
posted by seawallrunner at 11:19 AM on August 19, 2006

I'm not a lawyer, but I always thought that stopping payment on a check for a purchase like this was a criminal offense. If that's the case (and I'm sure someone here can verify that), you might want to suggest to your client that he pay you unless he wants to have the police come and arrest him for check fraud.
posted by MegoSteve at 12:31 PM on August 19, 2006

Well, I'm not a lawyer either, but I have done contracting on a 1099 basis. This was not a "purchase" as that word is typically used. It's a contract. The employer has breached the contract. Some stop-payments carry a triple-damage penalty in some places, but not being a lawyer, I have no idea whether that applies here.
posted by Kirth Gerson at 12:36 PM on August 19, 2006

Not positive, but I believe email counts as a written form of communication. As others have said, talk to a lawyer.
posted by spaceman_spiff at 12:52 PM on August 19, 2006

Write them a letter expressing dismay at the stop payment, and ask what the hell happened. (Er, politely, of course.)
posted by desuetude at 2:34 PM on August 19, 2006

seawallrunner, they're in different states so a face to face meeting is probably not feasible.

sequential, emails are admissable in small claims court. Talk to your third party and explain your problem. Don't threaten them. If they are unresponsive, contact a lawyer and seek damages (the bounced check plus whatever bank fees you incurred) plus legal fees from the company that stopped payment on your check.

Make sure you didn't violate any contract terms before going after them legally, by the way...and in the future try to make sure your payment clears before terminating a relationship. People get emotional.

When working for a contractor, I had the task a few times of cashing a check from a seedy company who had a reputation for handing out rubber checks. We would call their bank twice a day, and when the funds were available (sometimes immediately, sometimes not for a week), I'd go down to their bank and get a bank check (which would immediately withdraw the funds and get me a check from their bank.) Then I'd deposit the bank check, guaranteed to clear, in our business account. (They went bankrupt - I wonder why?)
posted by ostranenie at 4:58 PM on August 19, 2006

You're not an employee. It's probably illegal to stop payment on the check. You should get a copy of the contract from the 3rd party.

I'd consult a lawyer. You need a lawyer with common sense and good knowledge of small businesses. A common scenario is that the lawyer writes to the company, informs them of the applicable laws, and requires that they pay in full for all work completed, plus legal costs.
posted by theora55 at 6:45 PM on August 19, 2006

THIS IS NOT LEGAL ADVICE THIS IS NOT LEGAL ADVICE but you should know that, even without the e-mails, you may be able to make out a claim for breach based on the concept of contract-in-fact, or implied contract.
posted by palmcorder_yajna at 7:59 PM on August 19, 2006

For what it's worth at this point, the client has written me and explicitly said:

1) That he stopped payment not this morning as my bank reported, but within minutes of when I informed him that I would no longer be working for him.

2) That I have successfully completed the work for the period he stopped payment for.

3) That he canceled the payment on the advice of his lawyer.

4) That the purpose of canceling the payment was to gain leverage so that I'd continue to work for him.

The letter also inadvertently contained a copy of an email he sent to his lawyer less than thirty minutes after I gave my notice. At the very least, it's interesting to see the things people say about you when their acting exceptionally irrational.

Thanks for the advice. I'll contact a lawyer first thing on Monday.
posted by sequential at 11:24 PM on August 19, 2006

I am still not a lawyer, but I can't imagine a better position for you to be in for recovering your money. He can't withold payment for work already done, and he most definitely can't do that to force you to continue working for him. His lawyer gave him bad advice, if the lawyer actully did tell him to do that. If the employer has an ounce of sense, a letter from your lawyer should get you your money. If he doesn't, I'd bet some of my money that you'll win in court.
posted by Kirth Gerson at 4:41 AM on August 20, 2006

There has been an interesting development. In the response in which he accidentally forwarded me the communication with his lawyer, he also forwarded along two images of the online stop payment screens he used. According to his banks Deposit Account Disclosure Agreement, all online stop payment requests are only temporarily valid unless otherwise followed by written (not electronic or verbal) notice to the bank. After talking to my bank, they show that his bank has only placed a temporary hold on the check, not a full stop payment. Unless something changes, the check is still scheduled to clear at a future date.

Of course, it's the weekend and very little information is available to the customer service reps on the phone. I intend to further investigate this on Monday with a local branch manager. That said, I have continued to negotiate with the client and may still resolve the matter before I get a chance to contact a lawyer on Monday morning, but I am not holding my breath.
posted by sequential at 1:13 PM on August 20, 2006

I have nothing to add except that this person was exceptionally dense to admit and forward you the materials that they did and that they have an attorney who is dumber than a sack of hammers. I hope this works out for you...and the advice to get your money is the bank before terminating a relationship is good advice (says the guy out $12,000 in eight years from bum clients).
posted by maxwelton at 9:27 PM on August 20, 2006

According to his banks Deposit Account Disclosure Agreement, all online stop payment requests are only temporarily valid unless otherwise followed by written (not electronic or verbal) notice to the bank. After talking to my bank, they show that his bank has only placed a temporary hold on the check, not a full stop payment. Unless something changes, the check is still scheduled to clear at a future date.

Lawyer up and hold on to the check.

If the electronic stop payment order is not backed up with a written stop payment order, it will expire in exactly 14 days.

Since you already have a copy of the order, it should be quite easy to find out when it expires. Try cashing the check then. Who knows? You might get lucky.

If he does back it up with a written stop payment order, one little known fact is that many banks will purge the stop payment order from their system in 6 months or 1 year.

Try to cash it again. Very few people/companies renew stop payment orders.

Whatever you decide to do, lawyer up now and rake this deadbeat over legal (and financial) coals.

Best of luck.

P.S. You don't mention your state. Research your state's bad check laws. Some states have severe penalties for writing bad checks and I hope you live in one of them. ;)
posted by cup at 8:08 AM on August 21, 2006

After a consultation with a lawyer, a bank manager, and a bit of soul searching, I managed to resolve the situation. Essentially, I agreed to meet the client if he agreed to bring a certified check. I did about one hours worth of work, but it was all essentially knowledge transfer. The client then did something I had not expected: he apologized. In the end, all other options would not have met my goal of getting the money efficiently so I risked a days worth of time to resolved the matter immediately. In the end, things went better than I expected.

Thanks for your help.
posted by sequential at 7:52 PM on August 22, 2006 [1 favorite]