I’ve written previously about how important contracts are when you’re doing work as a 1099 contractor. Here is a personal example of why, in a “client refuses to pay contractor” situation that happened to me.. with a happy ending.
Landing the side gig felt great! But I didn’t know what I was in for.
In early 2016, I came across an opportunity to do some work for a healthcare-related company as an independent contractor. My due diligence prior to agreeing to the work wasn’t negligible:
- I talked at length with a leader in the company about the organization and the work they needed done.
- I spoke with another physician who had done contracting work for the company.
- I researched the company online, including reading their website, Linkedin page, and Glassdoor reviews.
After coming to a verbal agreement about the scope of work and compensation, I carefully reviewed the independent contractor agreement that they provided me.
As a side note, ideally, the contractor provides the contract. But I’ve found this to be rare as a physician working as a contractor. Many companies in healthcare fields frequently hire multiple physicians, all for similar 1099 work, and prefer to have a standard template contract for all of them. I’m accepting of this, but am generally skeptical if they are not open to modifying the details and negotiating the terms of the contract.
I then had several email exchanges with the company regarding contract modifications until we came to an agreement. I signed the contract and kept a digital copy of the fully executed agreement in my files.
The actual work was the easy part
Then, I completed the work. Looking back, this was the easy part.
My communications with everyone at the company were productive. They were professional, though somewhat informal – but I attributed this to it being a small company with a bare-bones staff. They indicated that they were pleased with my work.
They told me that I didn’t need to invoice them. So I just waited to be paid. And waited.. and waited..
“The check’s in the mail”
A little over a month later, I hadn’t received a payment, so reached out to inquire about it. They company’s initial response was friendly. It initially seemed like my payment had just fallen through the cracks.
Here’s s snippet from one of my emails with the company asking about my compensation:
A few more weeks passed and a few more email exchanges took place. Then one of my nagging emails was met with a mail delivery failure notification. My main contact had left the organization.
I had the cell phone number (but not the email address) of a higher-up within the company. So I began having text message exchanges with him. The screenshots that follow are just a sampling of the many back-and-forths we had about my unpaid work.
Again, the initial replies seemed promising:
As you’ve probably guessed, the payment didn’t go out that week. Here’s the conversation we had a few weeks later, which was about three months after completing the work.
Was the check processed on Thursday? No. But I thought I’d given them the benefit of the doubt when I asked about it again:
Finally, they admitted they were having financial problems.
Out of the $7000 they owed me, they asked to send $2000 at that time the rest at a later date. And they actually did send me $2000! Things were moving in the right direction. But I was still owed $5000, which they said they’d send within the next 10 to 12 days.
Shocker – I didn’t receive the $5000 within the next 10 to 12 days.
So it was back to the text message exchanges:
I was starting to get pretty frustrated at this point. This executive leader of the organization was being blasé and thanking me for “being cool.” Not okay.
I was told they’d send another check the next week. The line “I will let you know for how much” made my jaw drop. They actually thought it was acceptable to keep sending me portions of the total payment?!
Despite the reply of “Understood” when I stated that they needed to send me $5000 the following week, it – surprise, surprise – didn’t arrive.
Beginning the legal process for a client who refuses to pay a contractor
I’d had enough of paying their games. I decided to move forward with formal demands and then, if needed, taking them to small claims court. I hated the thought of what a hassle this would be; however, it was worth it to me for a combination of two reasons:
- I’m a HENRY. $5000 isn’t pocket money.
- The principle of it.
Regarding reason #2, I had heard through the grapevine that the company was also refusing to pay other physician contractors. I never verified whether this was true, but the thought of it infuriated me. I hated to think that they’d keep doing this to their contractors without ramification.
After the messages displayed above, my only communication with the company was through demand letters. I sent two of them, a few weeks apart.
Here’s the final one, sent by certified mail:
I didn’t receive a response to my demand letter by the date requested, so I moved forward in pursuing small claims court.
A complicating factor was that the company was located in a different state in another region of the country. I couldn’t go to the county office in person to file the paperwork. And, as it turns out, their online system was extremely complex and far from intuitive. I tried three times to file a small claims action, but it was rejected every time.
Despite ample reading about the process, phone conversations with county staff, and over 20 years of formal education, I could not figure out what I was doing wrong or how to fix it.
So, I hired a lawyer on contingency to assist.
(For a regular citizen to have to hire a lawyer to take someone to small claims court simply because the process is so confusing is unacceptable. But that’s outside the realm of this blog post.)
The lawyer got everything submitted and accepted. Soon after, I won my case.
Judgment for the plaintiff!
Getting a judgment is only half the battle
Winning in small claims court felt good, but it would still be over a year until I actually got paid. My lawyer took several actions to attempt to get the company to follow through with payment.
These actions culminated in a writ of execution. This means that the county sheriff was ordered to show up at the company’s place of business and let them know the county’s intent of possession of the company’s property in order to pay off the delinquency.
The day before their property was scheduled to be seized, they agreed to pay the amount owed.
This time I actually received a check in the mail!
Pulling this out of the envelope felt wonderful.
They could have just paid the $5000 they owed me. Instead, they paid what they owed me plus $3069.54 in lawyer and county fees that I had accumulated over the course of the 2-year ordeal.
Take-home messages for when a client refuses to pay contractor
Here’s what I hope you take away from reading about my saga.
Always have a contract for work that you do. Be sure you understand it and agree to the terms. Having a contract, in this case, made the small claims process a lot smoother for me than it would have been otherwise.
Take action. Looking back to the whole timeline of events, there was no need for countless follow-ups with the company while they delayed the inevitable. I could have sent demand letters much sooner than I did.
Hire help, but arm yourself with knowledge. I hate that I had to involve a lawyer for what should have been a simple small claims case. But the lawyer made things start moving much more quickly with a lot less frustration from my end. At the same time, I assisted him in moving the process along by providing him the right information. I felt confident in the actions he was taking because I read up on the process to the best of my ability.
Document diligently. I’m lucky that I took screenshots of my text message exchanges along the way because my phone broke before the process was over and I lost the original messages.