Collecting an unpaid invoice from a sleazy client.
November 23, 2012 3:24 PM   Subscribe

Collecting an unpaid invoice from a sleazy client. Is it better to pursue and get dirty or to let go and go unpaid?

In January, I was offered a job by a small-business owner under the following terms. I would would work as a contractor for 90 days, invoicing bi-weekly, getting paid one week later on the following Friday. After this time, assuming everything went well, I would become an employee.

I accepted this offer at about half my standard contracting hourly rate, both needing the money and knowing that my work and skills would prove my worth and that I could then become an employee, with standard benefits and protections. After the 90 days, I was told that I had become "indispensable", but when I brought up changing my status, he told me we should "just keep things the way they are."

Obviously, I wasn't happy with this arrangement, but the work was steady, and I was able to take in additional work from other clients to make up the difference. I simply wasn't in a position where I could afford to walk away. I figured that I would stay until I found not just a better position, but one I would want to sway in long-term.

The longer I worked for this individual, the more uncomfortable I got. My office was next door to his, so I have direct knowledge of his business practices which are shady and deceitful. Not paying vendors is the status quo. Collectors call literally all day, every day. I have heard him lie and cheat day after day. The atmosphere there is toxic.

Getting paid was always a chore. They started out writing checks, but soon switched to paying via credit card. I always had to bring up that it was payday. If I didn't, they "forgot". I would often have to try two or three cards before one was accepted.

Obviously, they're running on fumes. I always knew it, but, again, I needed the money.

Three weeks ago, on a Monday, the owner said he was calling it quits. That would be my last week. He was going to let the lease on the building expire at the end of this year and was moving to a cheaper location (yeah, right). The kicker was that he said he was going to withhold his final payment to me, so he could "review my work". When satisfied with everything, he would pay me. After a three hour discussion, I got him to change his mind about this ridiculousness. I worked through that Friday and was cut a check immediately ( well, after another hour-long meeting).

He then asked if I would be able to come in the following week to "finish up some other stuff". We agreed that I would come in at my standard contracting rate, not the rate he had been paying previously.

Well, after all that, he snookered me after all. I worked for over twenty hours, made a detailed list of all thing accomplished and sent out a bill for a little over $1500. After a few emails from him saying he was busy, then that he was reviewing everything, communication has stopped.

Am I surprised? Not at all. Kind of expected it actually. I figured, though, it was worth a shot to see what would happen. The question now is, what do you think I should do?

Let it go? Would this be best for my soul? Just let the whole unpleasant experience float away?

Threaten him with the state labor board? As far as I've been able to discern, legally, I was actually an employee the entire time, just not labeled by the business as such. I worked on-site, in their offices, on their equipment, with their employees. The possibility of a sudden bill for unpaid employment tax should scare him.

Have a lawyer write a letter to him? This seems pretty simple and might be kind of fun.

Post his name, business and my experience with him all over the internet? This, too, could be fun, but seems kind of distasteful. I don't want any of the smell to attach itself to me.

Fortunately, I have had no shortage of interviews and meetings the past couple weeks. Last week I accepted an offer with a company that I like and respect and am looking forward to starting there very shortly. Things have worked out well. I just have this lingering irritation with the sleazebag just sitting there, festering.

What do you think is best, not just for my wallet, but for career as well?
posted by nedpwolf to Work & Money (19 answers total) 1 user marked this as a favorite
For your career?? Walk away.
posted by Namlit at 3:32 PM on November 23, 2012

I certainly believe in being paid. Go to small claims court if you have to. On the other hand you might need an endorsement from him. If you are truly done with him insist on being paid.
posted by pdxpogo at 3:34 PM on November 23, 2012 [5 favorites]

The question now is, what do you think I should do?

Things have worked out well.

Don't spoil it with spite.
posted by carsonb at 3:35 PM on November 23, 2012 [1 favorite]

Legal. (1) To get your money back, as there sounds like zero chance of getting it back otherwise. (2) For your personal satisfaction. (3) To get closure and stop the festering. (4) To bring him a little down to earth, that he doesn't get away with screwing everyone. It probably won't change him, but you never know.
posted by Wordshore at 3:35 PM on November 23, 2012 [5 favorites]

I've been through this a few times over the last couple of years, and I hate to tell you this but you're most probably squeezing blood from a turnip here. If their business was so far into the crapper that they were doing the credit card shuffle trying to pay you before, what makes you think they have the money now? Talk to a lawyer by all means, but don't get your hopes up. Yes, this sucks, but that's reality for freelancers these days.
posted by deadmessenger at 3:40 PM on November 23, 2012 [2 favorites]

If you can't reliably collect payment from him, I doubt you can also reliably collect a recommendation.

Supposing the worst happens and he gives a negative recommendation - how will you explain that? Say his nose is out of joint because he owed you money but you didn't take any action to get it back? Wouldn't it make you look more credible if you took an action against him?

After you start your new job, of course.
posted by tel3path at 3:42 PM on November 23, 2012 [1 favorite]

IAAL, IANYL. I have a credtor's rights practice.

I can count on one hand the number of times a demand letter has got my client paid. Usually, one has to file suit. I am sure that $1,500 is small claims jurisdiction in your state. You'll have to pay a filing fee and have it served, but those costs should be recoverable by you. You could hire a lawyer, but this is the sort of case that pro se small claims is made for.

Based on your narrative, I question how successful you would be in collection on your judgment. Good luck.
posted by Tanizaki at 3:45 PM on November 23, 2012 [3 favorites]

How long did you work for him in total? You mentioned working as a contractor, which suggests that he mkost likely planned to screw you with a 1099 rather than a W2. The IRS, however, does not look kindly on single-client contracting - By which I mean they'll hound him, not you.

That might not improve your own situation by much (really, it only changes who pays the payroll tax, you still need to deal with having zero withholding for income tax purposes), but it may give you just one more dagger to threaten to stab him with - And then to do so just out of spite if he still screws you in the end.
posted by pla at 4:06 PM on November 23, 2012 [1 favorite]

Labor board. A carefully worded letter should do. Something like, "As per our agreement on X date, you owe me $1500 for the work I completed on Y date. Blah blah...and I have been looking into my rights in this matter via the state labor board." Nothing explicit. Just, the truth - you are rightfully owed funds and you are exploring your options to guarantee payment for services rendered. Be very very polite, yet matter of fact. I'm pretty sure he will put 2 + 2 together in his own mind and realize it is cheaper to pay you then face and investigation an the possibility of additional taxes on top of the $1500 he already rightfully owes you. Likely, this will lead him to pay you the $1500 to be done with it.

It's really that simple. I've done similar before and it works. You need to make it his priority to pay you before the others he owes money to. The labor board tax thing is how you do it.

PS - Screw his recommendation! I can't believe anyone would worry about that. "I worked for X establishment. Here is a portfolio/sample of my work there." And if pressed further, "They went out if business on Y date. The owner skipped out on a lot of bills and disappeared. Since that experience, I've been more discerning when choosing clients to work with."
posted by jbenben at 4:08 PM on November 23, 2012 [12 favorites]

jbenben's script is worth a try. But given that the business has tanked, I doubt it will work.

Even if you take him to small claims court and obtain a judgment, you would still have to collect, which is by no means guaranteed. The whole rigamarole would probably cost you more hours than you're already down.

Do not trash-talk him on the Internet. It just makes you look bad.

My recommendation? Walk away.

If it's any consolation, I got stiffed for WAY more than this, and also decided to walk away. My motto for moments like this is FISHDO: Fuck It, Shit Happens, Drive On.
posted by ottereroticist at 4:27 PM on November 23, 2012 [4 favorites]

Focus on the positive- you've got a great job ahead of you. Don't carry this baggage with you into it.
posted by mkultra at 4:36 PM on November 23, 2012

Some excellent answers here, exploring exactly the issues I've struggling with. I'm a little surprised how evenly divided the opinions are between dropping it and pursuing it.
posted by nedpwolf at 4:56 PM on November 23, 2012

Of course you should collect that money! You don't need to worry about him or his recommendation. An easy demand letter, followed by (slightly less easy but not too hard) small claims court filing. Why wouldn't you?
posted by RJ Reynolds at 4:57 PM on November 23, 2012 [3 favorites]

this man sounds like he might have a lot of tricks up his sleeve. i would walk away, one week isn't worth the pain. and plus it sounds like you knew he was shady business- take it as a lesson learned.

of course, you are ENTITLED and definitely IN THE RIGHT if you do pursue this further (hope those caps weren't too obnoxious).

Of course if this means you or your child won't eat or won't be able to pay crucial bills, go after it with all you have.

Last word to the wise- if you battle this, you'll be immersed in a whole lot of negative vibes until the situation resolves. You have a new offer and job that you might want to give your all and you want to attract as much strength and positivity right now. That sounds hokey but I'm serious.

Good luck!
posted by saraindc at 5:19 PM on November 23, 2012

FWIW, I make the decision to chase or not chase based not only on my cashflow but on my tax position. Here at least, I can write bad debtors off and some years that's a real advantage.
posted by DarlingBri at 7:22 PM on November 23, 2012 [2 favorites]

As far as I've been able to discern, legally, I was actually an employee the entire time

Yes, you were. Treating you as a contractor was a way for him to avoid paying his share of the payroll taxes, workers comp and unemployment. If he sends you a 1099 (and why wouldn't he?) you're on the hook for the full amount of SS/Medicare and self-employment taxes, plus income tax -- a big chunk of what you've invoiced.

Fortunately, the amount he owes isn't huge (I know, perspective) and you've moved on and have employment. But you're still likely faced with a tax bill that could be pretty hefty.

Suing for the unpaid invoice may be more trouble than it's worth. As DarlingBri said, if you're keeping your books properly you have a valid Bad Debt that you can expense, which reduces your overall burden. I don't see how chasing this guy to pay the invoice is in your best interest in terms of time and hassle.

What you can do, though, is bring his behavior to the attention of the regulatory agencies. This is where you can put the hurt on the guy.

I would absolutely contact your state labor board. This is why they exist -- to protect people from being taken advantage of by situations like this and be sure employees are covered for workplace injuries and whatever protections your state has in place. If this company did this to you, they've maybe done it to others. They need to know what happened, if only to flag the company / individual for closer scrutiny in the future.

Absolutely do contact the IRS. You may be a one-off "contractor" situation but I doubt it. If this guy played you as a "less than standard rate with promise of employment" non-employee, he's probably done it before and will probably do it again. pla said it above, they will not let this lie. I encourage you to just pick up the phone and call them. IRS agents are really very helpful and if you need to document anything they'll tell you what to do.

Document these actions. Did you have any kind of written agreement or was it all verbal? I'm talking off the cuff here but you may wind up with enough evidence that he should've paid those taxes. This is where a tax accountant or advise from an IRS agent comes in, but if he wound up with an unexpected letter demanding payment for unpaid taxes and a shitload of penalties -- wouldn't that be more satisfying than a small-claims suit?
posted by wallabear at 8:23 PM on November 23, 2012 [3 favorites]

I would first go for a demand letter, then small claims. And I would make sure that his reputation for nonpayment is spread far and wide--Better Business Bureau, Yelp, anywhere you can--sometimes the mere suggestion of shaming gets them to cough up the dough. Fuck you, pay me is my favorite song.
posted by Ideefixe at 5:36 AM on November 24, 2012

People here are pretty divided between perusing it and dripping it because they have a different cost evaluation of bullshit. This is why you're the only one who can really answer the question.

As a freelancer for around 20 years I'm big on letting it go if at all possible. It's not like you make it a habit that people can exploit. (After all, you're not going to work for this guy again, right?) Small claims, legal remedies, etc, etc is all a giant pain in the ass. And all the time that's going on you're busy spending lots of energy being hangry. Let it go, move on. Spend that time and energy doing positive things that make you a more valuable person/employee and finding a valuable employer/client. Leave this guy and his drama well behind. Money well spent.

That's what I'd do. You? You might have a might higher tolerance for dealing with shits who don't pay their bills, or would like the adventure of trying to resolve it or get some other joy from pursuing this (quite likely fruitless) money.

Here's a good way to tell. Take all the advice above and in other threads on collecting from deadbeat employers. Figure out how likely it is that the process will work and you'll get 100% of what's owed to you. (From experience I'd put it at around 20%) So your potential upside could be considered $300 (20% of the $1500 owed). If someone offered you $300 to file small claims/etc/etc/ would you take the job?

I will say this quite unequivocally: You do not want this guy's recommendation, period. He's skeevy and he's not even in business any more. He probably doesn't have the money, not is likely to get it. Even if you do win in small claims or through other efforts, you might face an equal or larger pile of bureaucracy actually getting it or a portion of it.
posted by Ookseer at 10:53 AM on November 24, 2012 [2 favorites]

I'm of the belief that scammers who won't pay should at least be outed on the internet, so the next "you" has the opportunity to avoid being ripped off, can demand pre-payment, not be patient about late invoices, etc. True, you're not likely to get paid, but is it worth it to you to help protect someone else? That's just another factor to toss into the equation.
posted by Scram at 3:18 PM on November 24, 2012

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