Stopped Paying – Agency has stopped paying IT Contractor

Stopped paying the contractor
Stopped paying the contractor

Stopped Paying Contractor

An agency has stopped paying a contractor. What should he do?

A Contractor, who just called himself S, sent us this, after reading our article “What To Do When Your Agency Goes belly Up”.

Refusing to Pay Invoice

My agency is refusing to pay my invoices as the client has not paid theirs.

Client is blue chip so it’s not that they won’t get paid – its just the usual big company admin delay.

However, whether they are paid on time is immaterial to the agency paying me, correct?

So the agency are clearly in breach.

Id like to continue to work for the client via another agency. Can you pass me on the details of the ones you mention in this article?

Also – I’d like for the invoices owed to be paid.

How do I do this and still break the contract?

IT Contractor Reply

Under the Agency Regulations which came out in July 2004, agencies must pay IT Contractors. That’s whether or not they get paid by the client themselves.

One is not dependent on the other.

Indeed under the regulations they don’t even have to have signed timesheets to have to pay you.

So, this agency is out of line – and probably breaking the law.

Breach of Contract

They also have an IT Contract with you which should stipulate the time period that they should pay you in.

If they haven’t paid you in that time period then they are in breach of contract.

If they are in breach of contract then the contract no longer exists and you can go elsewhere.

There are two tricky bits to this though.

Unbroken Contract

Firstly, the agency hasn’t broken their contract with the client. That’s because they are still providing your services as stipulated in the contract. Therefore the client has to pay the agency as long as they fulfill their part of the agreement.

Therefore you have to force the breaking of that contract.

The standard way that has been done in the past is to not come in for a day when you are perfectly healthy. Then you can start a new IT Contract with the client or another agency.

Getting Paid

The second tricky bit is, as you stipulated, getting paid for the work you have done already.

The agency is legally obliged to pay you that money but you may have to take legal action to get it.

I would be a bit wary about the health of this agency, though.

This is usually the first sign of an agency having financial difficulties.

In fact this is usually their first excuse when in trouble, i.e. that they have not been paid by the client yet.

Many IT Contractors, in the past, when they have checked with their clients have found this not to be true.

Chamberlain Scott

This is what happened at Chamberlain Scott which went under leaving IT Contractors with huge debts of up to £48,00 in one case.

The Administrators appointed by the directors sold back the contract assets of the company for just 95 grand. They offered IT Contractors just 3p in the pound.

So, I’d be very careful here.

It might be an idea to do a quick credit check on the agency if the agency has stopped paying you.

Force the Issue

I would certainly force the issue.

IT Contractors tend to do nothing when this happens. They hope the excuses are correct. However, what usually happens is that they are just pouring good money after bad.

If an agency is breaking its contract with you, you should act immediately.

Don’t take any excuses if an agency has stopped paying you.

You want paid, and you want paid now or you’ll consider them to be in breach of contract. You will then take the appropriate action.