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What are the ways of protecting your income while working as a freelancer?

I did contract work for a company day and night for 4 months, full-time.

They were supposed to pay those 4 months of fees when everything was finished. I took care of every single detail on their website, a TV commercial, designing, SEO and social media. And it takes a while to do the final touches.

After 4 months, when I sent an invoice for $4000, they responded by locking me out of their FTP, cPanel and client portal and stopped responding to my emails.

I don't have any other way to generate my revenue. I am married, I have a family to support, and so on. I am under a great of stress.

We didn't sign a physical contract, but instead worked under spoken agreement; the company is from Arizona, USA and I reside in Pakistan. This company was introduced to me through an established contact.

What can I do here to defend myself, and get my funds from them?

I know I can always hurt their company reputation through google, reviews and probably launch a website against them but what I'm looking for are the funds which I worked for.

  • Launching a web campaign against them will certainly not have any other effect than make you spend time and energy. What's more, it can put you in a bad position to claim your due by legal means. Don't do that. – Harry Cover Oct 8 '15 at 15:31
  • then what can i do here? what is the solution ? – Learning PHP OOP Oct 8 '15 at 22:59
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    Unfortunately, there's little that you can do to coerce them. Try and e-mail them again, asking for your due. If no answer comes, phone. If they hang up, send a registered mail. Stay polite but firm. You worked, you deserve your salary. – Harry Cover Oct 8 '15 at 23:13
  • @HarryCover I will disagree with your statement that there is 'little' that can be done in North America,. We value our reputation if we want to keep our business rolling. Your letter suggestion is important, because we usually get asked 'what did you do' to inform the other party? Emails are valid proof today as are electronic signatures. – mugé Oct 9 '15 at 8:36
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    @mugé: this situation is uneasy, because the service provider operates in Pakistan. So what is the applicable law and what is the competent jurisdiction ? I don't believe that the reputation of an American company could be scratched in any way by the complaints of an obscure Pakistani claiming an unpaid invoice. (Don't misunderstand me, I am not saying that the claim of Learning PHP OOP is unfounded, on the opposite; I am saying that nobody will care.) – Harry Cover Oct 9 '15 at 8:46
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Friend, you have screwed yourself on this one, unfortunately.

The best you're going to be able to do to mitigate this situation is hiring an attorney in Arizona to represent you. You will have to show that there was a written agreement made constituting an offer and an acceptance; that there was work performed per that agreement; and that the payment wasn't made. Moreover you have to identify a responsible party (a person or a business entity) to name in the suit. You may get a judgment in your favor from a court in Arizona, but that doesn't guarantee that you will ever collect a cent.

The attorney's fees may easily make this not even worthwhile. (easily $100-$250 USD/hr)

In summary:

You don't ever want to do work in this fashion again, where you lump a lot of valuable work into a final invoice for a client that you can't force a payment out of easily. You'd be better getting paid for milestones throughout the duration of the project, so you don't end up in this position again.

Additionally, you don't release all project deliverables until you've been paid something! Host them on your own servers. But don't go into any other situation trusting that everyone is going to play 'nice'. Your family depends on you, so don't make this mistake again.

Lastly, posting bad reviews is a waste of time.

Best of luck.

  • Lawyers usually don't charge for first consultation and all OP needs to do first is to consult. The rest with what you are suggesting is sound. Voting me down does not change the fact that my suggestion actually came from a lawyer. Like it or not. – mugé Oct 9 '15 at 1:51
  • @mugé The guy is still refusing to have a written a contract, i know he didn't signup a written contract infact i never did that with any of my client before. but his point seems to be invalid because he wanted me to work for 4 months. i knew all those areas where i had been working on. he would have said beforehand " look we are bankrupt and we can't afford your services so please stop working " so it doesn't make sense here. i given gave him a discount of $1k and asked him to pay in $3k into 2 installments. i did favor but what a jerk – Learning PHP OOP Oct 17 '15 at 15:36
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Unfortunately, you are in a bad position. When it comes to "collections" i.e. collecting on debts owed the key concept is 'leverage' and you have very little leverage, if any.

First, you are not an employee. You are an independent contractor so the suggestion earlier about hiring an 'employment lawyer' isn't going to work for you. In the eyes of US law, you and your client are two business entities. So you would need to hire a lawyer who specializes in contracts.

Now, what do I mean by leverage? Well, assuming you win your case how do you collect your winnings? Will the sky open up and deliver your award to you? No. You have to use force. In this case, force takes the form of a court order which is delivered to a Sheriff who can then go to your clients bank and seize the award on your behalf. (The bank will comply with a court order but in the bizarre instance where it refused, the Sheriff could literally use force to seize your funds.) If there is no bank account, no funds or no information about that account you could place a lien against some other company asset but you might not get a recovery from that for years.

I have no idea what Pakistani law is like but if it is anything like US/English law, unless your client has assets in your country your courts won't be able to do anything for you. Thus, you will need to find an attorney who is licensed to practice in the state of Arizona or, perhaps, one licensed to practice before the federal courts in that area. These are questions of "jurisdiction." Since you are from outside the US, you may be able to sue in federal court.

Of course, you have the right to represent yourself. It would be foolish to do so, however. Unless you are fully educated in US legal practice your client's lawyers will run circles around you and run up your legal bills.

Your legal costs could get quite high and they might eat up or exceed to the amount you could recover. US laws usually require each side to pay their own costs. Only in special cases will the judge require the loser to pay the winner's legal fees. (This is the opposite of the English rule).

You should at least try to contact a lawyer and find out for certain what your chances of recovery are. It may be that your client is small and the mere threat of a lawsuit may make them pay up. Or it may be that they are large and it will cost them less to pay you than fight you.

In the end these have to be BUSINESS decisions for you. Don't get caught up in "justice" over a business contract. That kind of thinking can cost you a lot of money and stress. Calculate the risk and return on investment based on getting advice from a licensed professional.

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So, you may have lost a large amount of money but if you can weather it and continue contracting in this way there are things you can do to protect yourself in the future.

1) Get a written contract. Make sure YOU have an attorney who can make sure your contract is solid. You are dealing in international trade. "Gentlemen's agreements" are a great way to end up homeless.

2) Payment up front. You can do this in a couple of different ways. You can get a retainer for part of the work and renew the return for each phase. OR you can have the value of the entire contract placed in escrow which is held by a neutral party for payment when the contract is finished.

3) Break up the work. Never commit to a long duration/large amount of money. Work in monthly increments. Set milestones and bills every two weeks or monthly at the longest. If the client refuses to pay or gets difficult, stop work. If you do this then yo minimize the amount you can lose on a contract and you can find other work to mitigate your losses.

However you choose to operate the key to success is preventing risks like this. Trying to collect after you've taken a big risk is usually a losing strategy.

  • There are couple of things that i would like to point out which i think would bring up the new ways to think of it, First of well, as soon as the company started, everything was provided to me and i was said to have payroll by their representative of the computer, who was very nice. but as soon as this representative left. new representative took her and never cared to pay at the end. which is ofcourse even after 4 months. but the old representative had the agreement with me, it was spoken agreement. but by keeping all the things in mind, i worked for the company not for the individual. – Learning PHP OOP Oct 12 '15 at 3:07
  • so company needs to explain why they are refusing to pay and why using my work online? how would they explain to court? – Learning PHP OOP Oct 12 '15 at 3:13
  • No, first you would have to prove to the court that you have a contract. The person you made the original agreement with left the company so you would have to find that person and get them to testify to the fact that you'd had a contract. Without that witness the company will likely deny you had a contract at all. – Robert Schmid Oct 12 '15 at 14:29
  • Even if they admit to the contract, since it was an oral agreement you have no record of the specifics of the agreement. They will also likely argue that company policy is to have every contract in writing, so the person you made the agreement with had no authority to make the contract. Then you will likely have to prove that the work you did is actually yours. (Which can be difficult with code.) – Robert Schmid Oct 12 '15 at 14:38
  • With regard to your comment about working for the company instead of the individual - status as an employee is very particular. If you were an employee the company would be obligated to withhold taxes and issue you a report of that withholding at the end of the year (form W-2). If they are only in Arizona and you did the work from Pakistan you will most likely be regarded as an independent contractor. The Internal Revenue Service has a series of tests they use to distinguish employees from Independent Contractors. Again, you should consult an attorney in Arizona. – Robert Schmid Oct 12 '15 at 14:38
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First, get all your paperwork ready. Hours worked, written statements that show you worked for them, etc. Find an employment lawyer in the company's jurisdiction, that agrees to take on your case on a contingency fee. Meaning, the lawyer gets only paid at successful result. Sometimes the lawyer just writes a letter to the company and they already get scared and pay. Clearly, the lawyer cost would not go beyond a threshold that would not benefit both, petioner and lawyer. Otherwise, it would defeat the purpose.

Secondly, DEFINITELY put the company out on the world wide web because there will be and maybe already are people like you being used by crooks like that company you worked for.

Also, it is a warning sign if you do not get paid for 2 weeks or most a month, you should have made that an issue. Never wait that long. Some will tell you that they will pay at contract end, that usually is a warning sign. They should pay you something showing good will. Otherwise, get ready for the loss of funds.

EDIT This is to clarify that when I wrote to expose a company who withholds funds from their employee/ worker/ work rendered by contract or mutual agreement, it is fair statement to say that this type of ill intended establishment should be mentioned on the www for others to be cautioned about. NOT in a form of campaign but in an altruistic intention as warning for others.

  • Thanks for responding over, thats makes sense.. I guess you are right, if i put their company's face result with all the proofs on world wide web then it would open their eyes.. thanks for the advise appreciate your response. – Learning PHP OOP Oct 8 '15 at 10:57
  • Don't give out your identity on the world wide web, when you say proof. Just put out a warning about this company on various websites. You may also write to BBB (Better Business Bureau) that they didn't pay your wages. The proof is needed for the lawyer. – mugé Oct 8 '15 at 11:02
  • Muge, why not put my identity when i am on the right and they are wrong? – Learning PHP OOP Oct 8 '15 at 11:15
  • i was thinking to get couple of domain names against their site name for example www.companyname.com i would get like www.companynamereviews.com and filled it up with their real face. – Learning PHP OOP Oct 8 '15 at 11:20
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    This is far, far, FAR from a solution. The original poster was NEVER an employee. – Xavier J Oct 8 '15 at 15:51
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What city in Arizona? I'd seriously consider using the small claims court system in Arizona. You can do most of the stuff via mail and internet. Small claims courts are established so people can represent themselves, without the expense of a lawyer. They are established with a cap on how much you can sue for. The maximum you can claim in Arizona small claims courts is $3500.

ref: http://www.azcourts.gov/selfservicecenter/Self-Service-Forms#SmallClaims

I'd certainly start this process before I contacted a lawyer. Many companies down't want their reputation tarnished by a visit to court, so they have an incentive to settle up before hand.

  • It seems that some people on here are bothered by the word 'law'. Interestingly, there seems to be the notion of giving advice for not seeking your rights and rather staying quiet. I didn't know that small claims look into long distance cases. Thank you for the direction 'To Whom This May Concern'. – mugé Oct 10 '15 at 22:23
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    The amount's too high ($4000), the OP is overseas, and would probably have to be present during a hearing. – Xavier J Oct 13 '15 at 17:31
  • Clearly with that cap, the user will lose $500... but read on. Look at my very first comment, the question that was never answered. That is really key.. subtle hint.. if the small claims court is near where I live, I will gladly volunteer to represent our friend overseas on a general power of attorney, free. I really, really hate companies that screw over people. I don't tolerate it. I'd happily face off with dirt bags in small claims court gratis... It would be truly a pleasure. – zipzit Oct 14 '15 at 15:23
  • Client is not willing to pay.. i tried to explain in all ways and provided him a discount of $1k and asked him to make two installments if it is having problems but.. no he is not ready .. he simply says that he has no money to me as his company is bankrupt, i asked him to turn down the website so i could sell it to other party but he doesn't do that.. – Learning PHP OOP Oct 17 '15 at 15:55
  • Lets try this again. WHAT CITY IN ARIZONA? Did he provide you with a copy of the bankruptcy proceedings? Are you listed as a claimant on that document? If not, I'd assume he is lying thru his teeth. I'm sure he has limited money available, but you need to make the claim anyway, either thru a lawyer or via claim at Small Claims court. Bankruptcy proceedings are pretty formal, and require a formal payment system. If you are a claimant, you need to be listed on his bankruptcy proceedings. Bankruptcy doesn't simply erase his debt, it changes the terms. If you want site back, its done.. – zipzit Oct 17 '15 at 22:41
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Some good answers were given already. So, I will just answer your first question in general.

What are the ways of protecting your income while working as a freelancer?

Here are some tips that every freelancer (or consultant) should consider to make sure they always get paid:

  1. Do some detective work.
  2. Get it in writing.
  3. Bill up front (at least a downpayment).
  4. Use a professional invoicing software.
  5. Make it easy for your clients to pay you (e.g. Paypal).
  6. If conditions change, outline it in the contract.
  7. Know when to stop.
  8. Trust your instincts.

All these tips are discussed in detail in this article: How to Make Sure You Always Get Paid as a Freelancer or Consultant

I hope this helps freelancers reading this answer. And here's to hoping that this incident would never happen again.

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