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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.

Amelia
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Learning PHP OOP
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  • 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. –  Oct 08 '15 at 15:31
  • then what can i do here? what is the solution ? – Learning PHP OOP Oct 08 '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. –  Oct 08 '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 09 '15 at 08:36
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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.) –  Oct 09 '15 at 08:46
  • @HarryCover. Outsourcing is a huge market. The jurisdiction is the country or state that does the hiring. Believe me when I say that as long as I was firm to get my money, it is do-able. Recently, this happened also to a friend of mine who did a substantial interpretation from Canada to a UK company who keep deferring her pay for months. She let it go. This is a multi-centered company. They must have found a good way to grow. I would be on their case and also example to others. Few days ago, I won my case against a telecom company. I didn't pay a cent. I just used the right place to go. – Mugé Oct 09 '15 at 09:03
  • And sometimes, you just drink a glass of water over your loss, but it is worth to give it some fight beforehand :). – Mugé Oct 09 '15 at 09:12
  • @mugé It's doable but don't give false hope using the law and don't mix in-country cases and international cases; you can't compare your situation with the OP's situation, some countries have treaties and accords with each others, some don't. Hiring a lawyer specialized in international law VS going to the small claims is totally different. $4000 would barely cover what it would cost to sue your neighbor for installing a fence on your property...! The best the OP can do with the law is bluffing and hoping the company doesn't know he can't really sue them. – go-junta Oct 09 '15 at 09:30
  • @go-meek is that what you will suggest to all freelancers, to just learn from it? I know what I am talking about, because I was the middle person outsourcing to a company that did not want their reputation challenged for hiring IT personnel from India. I made sure that I was paid 1 month in advance before the IT tech worked for the company. He did his work and he got paid 2 weeks after. So yes, my suggestion is to research (consult!) first. Research first and then go from there. This is a growing industry and cannot be just ignored for gain or fail experience. – Mugé Oct 09 '15 at 12:43
  • @mugé Yes, learn from it and move on. Laws are laws no matter the attitude or motivation a freelancer may have. That's interesting you mention you got paid fully upfront yet you didn't pay fully upfront your own provider...! Clients often do the same as you, probably for the same reasons: lack of trust in new oversea providers because they know they'll never see their dollars if something goes wrong, and they have the power to do so in some case. As you did.. I suppose the company who paid you upfront knew you already and/or was Canadian/American/UK/Australian/Commonwealth-like too. – go-junta Oct 09 '15 at 14:00
  • @go-meek I hoped you understood the mathematics and work force standards in our calculations. First 2 weeks require work before pay. The other 2 weeks is not to have interest gain but administrative timings from the funds getting transfered from company to me and the wheels turning of the money being shipped to India. HR and wire reasons. Interesting that you could not see the workings behind. Anyway, my word has been passed on. Good day! – Mugé Oct 09 '15 at 23:52
  • I appreciate all your comments on this but i am stuck , i don't see a solution of getting myself paid. i can't afford my daughter's doctor fees, its getting so complicated. do you think if i submit my case to the court of arizona, is there any chance they would take this seriously? what are the chances? i have written emails from the employees who was always asking me to make the changes and promised to pay the payroll one he is back from his tour but he never released the funds. but i don't have a written contract from him.. please advise – Learning PHP OOP Oct 10 '15 at 21:42
  • Contract or not, you have it in writing. The person asking you to do things for the company will need to be authorized to do so. Either way, it doesn't seem that they will make it easy for you to get paid, but you must try to get what you were promised. Good luck! – Mugé Oct 10 '15 at 22:30
  • Thank you so much .. i will try my level best and would let you guys know about it. – Learning PHP OOP Oct 10 '15 at 23:12

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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.

Xavier J
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  • 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 09 '15 at 01:51
  • @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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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.

Mugé
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  • 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 08 '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 08 '15 at 11:02
  • Muge, why not put my identity when i am on the right and they are wrong? – Learning PHP OOP Oct 08 '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 08 '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 08 '15 at 15:51
  • what do you mean by that? – Learning PHP OOP Oct 08 '15 at 22:57
  • @codenoire what do you know? Are you affiliated with that company? The OP obviously wasn't volunteering for 4 months when he has children to feed at home. Integrity should be the name of the game. If crooks are steeling from a worker, what do you call them? Employee on payroll or not, no one would confide their login and password to some volunteer living in another country. There is foul play here! – Mugé Oct 09 '15 at 01:43
  • @HarryCover is right when he says not to start a campaign on the internet but others should be made aware. Again, keep your identity private. Codenoire made a very good point about 'Milestones'. You get paid some and then you work some, and so on. All needs to be laid out in the beginning and documented. – Mugé Oct 09 '15 at 02:36
  • In a lot of country, oversea claims will be rejected if they are under $10,000 and are not done in a normal court but higher level one. It's almost pointless to try to sue oversea for a "small" amount like $4000, unfortunately. It's sad to say, but the best way to deal with these issues is to anticipate them and get paid by milestones before the files are delivered. @LearningPHPOOP I don't recommend wasting money and time trying to attack the company's reputation; it's gambling. It's almost better to move on and keep your energy to find new projects, and learn from this one. – go-junta Oct 09 '15 at 06:27
  • @mugé , Hi Muge, finally writing to BBB , client agreed to pay $2k , which i agreed on , however here is the another problem , i use Western Union only for my transaction and i don't have any other way to get paid for years. i find Western Union very much reliable but client has no time to go their store and so he asked for paypal account and paypal doesn't provide its service for my country. so i gave him my friend's paypal but after receiving $1k through paypal , paypal froze his account and rejected his document and its taking forever. is there any way to get the funds out of paypal? – Learning PHP OOP Nov 24 '15 at 23:21
  • Talk to PayPal. I wanted to say congrats on finally receiving your hard-earned money but it looks like, although they made a promise for $2000, they paid you half, which is troubled transaction and still not received. PayPal encourages to communicate with them. Once you know what will happen to the funds, which does not seem will reach you, definitely contact the company you worked for and update them on the transaction. Their account may show as the money was taken out. Also make a point, reminder.. they are to pay $2000 NOT $1000! – Mugé Nov 28 '15 at 01:25
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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.

Robert Schmid
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  • 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 03:07
  • 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 03:13
  • 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
  • woow this is getting so complicated then i thought.. the last representative agrees that he had the oral contract with me and he is ready to testify this infront of all. he is a very good dude but this new doesn't even reply to my emails. i guess i will need to find a good lawyer from Arizona on contingency fees who could handle this smoothly. you seem to have alot of knowledge about this area, could you please redirect to some of the relevant website where i could find an honest lawyer? – Learning PHP OOP Oct 12 '15 at 22:52
  • Let me check with a couple of lawyers I know in the area. They don't practice this kind of law but they may be able to provide a good recommendation. – Robert Schmid Oct 13 '15 at 04:04
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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.

Carlo Borja
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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.

zipzit
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  • 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