NCEPR: Contractor Payment Problem

[turkturkleton]

Sorry this is long, but I don't know who else might be able to help and I can't seem to find an answer by searching, so I'd really appreciate any input on an issue I'm having at work.

I'm an independent contractor that works primarily for a small consulting company (~20 people total, all contractors, no actual employees) based in the US.

I returned to work after my holiday break to an email from the head of the company I contract for saying that one of their clients has prepaid for their fiscal year. It included an invoice with an estimate of my portion of the hours, and the money I'm estimated to make was deposited in my account. I was not asked about this in advance and was given no say before the transfer was made. This has never happened in the 10+ years I've been working with this company.

I'm not okay with this for a lot of reasons, and I'm wondering if there's any way the company can force me to accept this. I don't want to be responsible for the extra money (it's a few thousand dollars). There are a lot of other reasons that I'm not okay with this, but the main ones are

-I have no way of knowing if I will take on enough projects for that client in the next nine months to cover the amount. My contract does not include any minimum amount of hours for any client.

-I am not an employee of the company the client made this deal with.

-I would rather not work for this client than have this money hanging over my head.

-I absolutely do not want to set a precedent that the company can change the way I bill my hours and get paid without my input.

Has anyone ever dealt with this? I've responded saying that I'd prefer to continue my payments as usual and that I want to return the money. I haven't heard back yet, and based on my history with the company owner, I would be shocked if there's no further pushback. If there's anything I can say or any precedents that support my stance, it would really help me here. Or if anyone could even point me in the right direction of terms/phrases I could search about this topic, that'd be great too. So far I haven't been able to find anything about this specific scenario.

I'm not usually able to be on here during the day, but I promise I am not posting and running and will come back to answer any questions.

TL;DR: I'm a contractor. I work for a company of all contractors who work on the company's clients' project. One client has decided to prepay the company for the year, and the company has in turn divied out the money in full to us based on projected hours. I don't want to accept this rather large lump sum and am expecting a good deal of pushback for trying to return the money. What (if any) legs do I have to stand on to make the company stick to our usual payment process?

[livinitup]

I am not putting myself forward as an expert or as someone with a lot of answers. To me, it sounds like a retainer that most lawyers require, mange, and bill. You get a lump sum, up front, and then you bill your hours against the account. Like it’s an escrow account?

Your first obligation is to pay taxes. Then, it’s to provide documentation of your work.

At the least, I would open a separate bank account for these funds and not co-mingle any other deposits or expenses against it. It does seem like extra work for each/every contractor but the upside is that you can guarantee that you get paid for your work.

[VillainV]

Not a contractor, and I don’t have any personal experience with this…but is it addressed in your actual contract with this company? Does your contract say how work is assigned and how you bill your hours? Give you power to turn down certain projects? Say anything about pre-paying for your work, or your responsibilities in such a scenario? I would imagine that if it’s not in your contract, then you have a good basis to push back on this.

[aurora]

Definitely not an expert, but I read Ask A Manager and she talks frequently about companies abusing independent contractor designations (so that the companies can avoid taxes usually). To paraphrase from memory, contractors should be able to decide what they do and don't work on, and if they don't have such choice, they should be classified as employees. It sounds like in your situation you aren't getting a choice if they have prepaid you without your input.

Not legal advice, but it sounds like you are right to question/find out more.

[turkturkleton]

Jan 9, 2023 11:00:17 GMT -5 aurora said:

Definitely not an expert, but I read Ask A Manager and she talks frequently about companies abusing independent contractor designations (so that the companies can avoid taxes usually). To paraphrase from memory, contractors should be able to decide what they do and don't work on, and if they don't have such choice, they should be classified as employees. It sounds like in your situation you aren't getting a choice if they have prepaid you without your input.

Not legal advice, but it sounds like you are right to question/find out more.

Yeah, this is pretty much the crux of why I'm upset. I don't have a guarantee that I'll work those hours off in 9 months (or if I'll even still be with the company that long), and I don't want to simply hold onto it and potentially owe them a few grand back in several months. I think I'm also a bit sensitive because there have definitely been other things that have annoyed me re: being treated like and employee with none of the perks or protections. I did forget about AaM, so thanks for the reminder to check her out!

livinitup I agree it's a standard retainer, but I would never agree to this type of contract if I had been asked. It's not enough money to deal with the hassle of opening another bank account overseas or dealing with the potential fees for me.

[turkturkleton]

Jan 9, 2023 10:04:23 GMT -5 VillainV said:

Not a contractor, and I don’t have any personal experience with this…but is it addressed in your actual contract with this company? Does your contract say how work is assigned and how you bill your hours? Give you power to turn down certain projects? Say anything about pre-paying for your work, or your responsibilities in such a scenario? I would imagine that if it’s not in your contract, then you have a good basis to push back on this.

No, my contract is pretty vague and hasn't been updated in about ten years beyond minor addendums about my pay rate. It definitely doesn't mention prepayment specifically. It also doesn't lay out specific projects/responsibilities, so by virtue of being a contractor I can't be forced to take on any projects if I don't want to without those clauses

I think the entire company is just BEC for me at this point. All I want to do is return the money, whether or not I lose the entire contract. But when I asked for bank details of where to return it, my questions were completely sidestepped and I got a verbal head pat and an assurance that this is standard practice in our industry. Which I know, and which is why I would never accept a contract of this scale on those terms. But until they actually tell me how to return the payment, I am at a complete loss on how to move forward.

[Deleted]

If you are consistently utilizing a billing system where you invoice and they pay on the hours worked (in a set time such as Net 10/15/30) then that is the mutually accepted practice. If you've never received prepayment then I would mention you are not set up for prepayment and the funds must be returned and your billable hours are to be paid as they have been the last 10 years. Keep a paper trail on requests. I would go so far as to send the company a certified letter with a certified check with a detailed letter on why you cannot accept these funds. Then the onus is on them.

[livinitup]

@turkturkleton Not to be obtuse, but you have the money in hand with no contract or specified obligation to complete work. Isn’t it on THEM to make the client whole if they are unhappy? What happens if you just … keep it?

It sounds like you are unhappy and on the brink of walking away anyway. Good work and record keeping is more about your long term relationship with them. Maybe you don’t want one anymore?

[turkturkleton]

Jan 10, 2023 9:07:28 GMT -5 livinitup said:

@turkturkleton Not to be obtuse, but you have the money in hand with no contract or specified obligation to complete work. Isn’t it on THEM to make the client whole if they are unhappy? What happens if you just … keep it?

I wish that was the case! But the reality is that if I try to keep it without earning it in the prescribed timeframe, they can sue for the amount owed back + fees + damages.

I know I don't want to keep working for them long term, but I also don't want to be jobless right now and wasn't planning to leave for a little while yet. Which is another reason I don't want to keep the money, since I might not even stay with them for the length of the pre-payment period.

[turkturkleton]

Jan 10, 2023 9:01:46 GMT -5 @lemonlover said:

If you are consistently utilizing a billing system where you invoice and they pay on the hours worked (in a set time such as Net 10/15/30) then that is the mutually accepted practice. If you've never received prepayment then I would mention you are not set up for prepayment and the funds must be returned and your billable hours are to be paid as they have been the last 10 years. Keep a paper trail on requests. I would go so far as to send the company a certified letter with a certified check with a detailed letter on why you cannot accept these funds. Then the onus is on them.

Thanks for this, a certified check never even entered my mind since everything has always been direct deposit. I hope it doesn't come to that, but it's definitely an idea to keep in my back pocket.