Hi everyone,
I am an Industrial Designer who currently resides in Detroit.
Over the last month I worked remotely for a company in California. It was a part time 10 hours a week Industrial Design job starting from Oct to Nov. I still a have an original copy of the contract that I signed on which stipulates the term and payment amount I will be receiving. This job was offered by the CEO(owner) of the company and during the work I directly communicated with him(Phone, email, Skype. Basecamp).
The work was ok but after I submitted last work and asked for a payment I haven’t heard any replies. (It’s been more than a week and I sent two emails and txt msg)
I am very concerned that this employer may not pay me. I was hoping to hear some advices to solve this matter. Where can I go to file this matter? Does it require a lawsuit?( I am not planning on getting a lawyer) How would you approach this problem?
The old non-paying clients. Hopefully you don’t have a huge amount outstanding (40-80 hours)?
Deposits are not typical in design work (At least not in the US) unless there are clear upfront material costs (prototypes, competitive product analysis, etc). The best way to handle this type of stuff is with milestone payments, but it sounds like this was a small enough project that it was one and done.
The questions I would ask:
-Have you handed off your final deliverables? Typically any final deliverable is something you hold tightly until payment is submitted and agreed upon. If you have anything they still need (raw files, CAD data, etc) then it’s leverage. If you gave them everything, you have no leverage left.
-How formal and legally sound was your statement of work or contract? Was it your contract, or something they filled out and made you sign? Was there an agreed upon price and payment terms, IE net 30 from invoice/delivery? Technically if you signed a contract agreeing to Net 90 or something silly they don’t have to pay you for 3 months.
-If you did sign a contract, did it have an interest stipulation clause? In some cases you can charge interest on late payments and that is additional leverage for them to pay on time. This varies by state.
-Did you submit a formal invoice? Or just send an email saying “Can I get paid”
-Do you have a phone number you can call? Or try calling a generic line at the company and see if you can request accounts payable and discuss?
Your last line of action would be threatening or going to a lawyer. If the guy is just busy he might have sent you to his accounts payable person and just hasn’t gotten a followup. If they are purposely trying to push your payment as late as possible, you just need to keep hammering at it.
If you worked with anyone else besides the CEO on the project, they are also a good person to reach out to.
If you’d like to discuss more directly shoot me a PM, I’ve gone through this and had to lawyer up, the strategy will depend on a lot of the above variables.
I’ve never worked for or hired a design firm that didn’t take a substantial deposit up front on contract signing. No matter what the project. Typically between 25%-50% of the Total fees on signature depending on project scale. Anything below $150k typically 50% at signature. At frog projects that were over $500k were usually billed in 25% increments with 25% up front. Most firms owners I know that are 1-10 people always require 50% up front as a rule.
I’ve also not heard of no deposits. I usually do 50% upfront with 30% as a “Kill fee” standard but some projects I can work with a different payment structure.
I know that doesn’t help.
Best I can suggest is try tracking the company/CEO down (google, LinkedIn, social) and see if there are any other red flags (going out of business, lawsuits, etc.). But it could just be you/him.
You can always try as a last ditch attempt something in an email about ownership of the IP remaining with you unless paid in full if that’s what your contract states (it should).
Getting lawyers involved only makes the lawyers money and you won’t get any of it.
I don’t know if you can negate NDA, but mine says -
“The Company will retain all intellectual property rights associated with any invention, design or process pre-existing prior to the start this contract or created by the Consultant for The Company that is paid for in full as per the terms of this agreement.”
Also-
"All invoices are due Net 15. A 1.5 percent monthly service charge is payable on all overdue balances. Payments will be credited first to late payment charges and next to the unpaid balance. Client shall be responsible for all collection or legal fees necessitated by late or default in payment. Designer reserves the right to withhold delivery and any transfer of ownership of any current work if accounts are not current or overdue invoices are not paid in full. All grants of any license to use or transfer of ownership of any intellectual property rights under this Agreement are conditioned upon receipt of payment in full which shall be inclusive of any and all outstanding Additional Costs, Taxes, Expenses and Fees, Charges or the costs of Changes. "
I’m not a lawyer. And a contract is only as good as your ability to enforce it.
I’ve only ever once had a non-payment issue that wasn’t resolved 100% but ended with the company going bankrupt and I took a reduced payment figuring it was better than nothing. There was nothing I could really hold back and they didn’t really care as they were closing up shop. No lawyers involved. A $5000 or so loss was something I was willing to take after being paid 100s of $ over years and a good relationship notwithstanding.
Maybe I’ve been part of too many bastard corporations (our typical consulting budgets over my last 3 companies were never above $500k, usually $25-$150k per project even if we were doing $1M in business at the same time), but the only time I’ve ever signed a PO agreeing to upfront costs was when the consultant could justify it for something specific like acquiring materials, customer research travel, etc. Otherwise, it was always milestone payments (do something, get paid, do more, get paid, finish, get paid).
Good to know you guys are able to get people to give you money early. Even on my freelance work I never ask for a deposit, I would just set a milestone that was only based on like 1wk work to get the ball rolling.
In my freelance case, it was part of the contract language that IP would remain in my ownership as well until payment was received in full, and typically I would not deliver any working files (Cad Databases, etc) until at least some portion of payment was received.
I have a friend who runs maybe a 5-10 person studio. Projects probably range from $10k-$100k. He won’t start a project until a 50% up front fee is fully deposited. If the company has 30 day payment terms, they won’t kick off for 30 days. I’m not that strict, but I appreciate his policy. He just explains to clients they are a small business and that is their policy.
I have had a client ask for 90 day payment terms. I struck it from the contract and added back my 15 day terms and they said “do you have cash flow problems?”… my response was “do you? I’m not the one trying to get a 90 day free loan from vendors.” … they agreed to the 15 day terms
I’ve had two big projects go away because they wouldn’t do an upfront fee and they had 90 day terms. In one case the firm I know who ended up getting it spent 6 months after the project trying to get paid…
Will have to try that one day.
In Sweden we mostly have 30 days, but all companies that have American parent company have 60. Even if you agree to their terms, one could reserve the right to invoice every XX days.
Do you have something called “selling invoices” in US? Depending on vendor/negotiation it can be 2-5-10% cost to get the money to you account instantly (depending on how much risk). When someone asks for 90 days, you can ask to increase your rate accordingly, and still get payed on time.
90 days is ridiculous for any small/medium company to float, be it design work or otherwise. The company I’ve been contracting for just finished a $10m+ manufacturing contract for a big bad mega-corporation and even that was only 45 day terms. I like your cashflow line, I will have to try that one day!
Hello everyone,
I totally forgot about this post! after sending several emails, I was able to receive a check early this month(January)!
The work ended on 11/31 and they send me the check at the end of December… I guess they weren’t in a hurry to pay me… (It was unprofessional how they took more than 10 days to respond to my email asking about payment since during work they replied to my questions in a day or so)
Thanks for all the advices!
Hello everyone,
I totally forgot about this post! after sending several emails, I was able to receive a check early this month(January)!
The work ended on 11/31 and they send me the check at the end of December… I guess they weren’t in a hurry to pay me… (It was unprofessional how they took more than 10 days to respond to my email asking about payment since during work they replied to my questions in a day or so)
Thanks for all the advices!
30 day payment terms are not unusual (nor are 60 day terms). This is why it is so important to have payment terms detailing net days and late penalties in a signed contract so everyone knows what to expect.
Hold on there Hoss. First of all, end of year, accounts payable is always hit with a slew of invoices. Second, its the holidays, people take time off and there is less staff. Third, who responds to your different questions? Because your engineer/manager who is running the project has absolutely no say with accounts payable. Fourth, as yo pointed out, I’d be will to bet dollars to donuts that the terms of your agreement was at least net 30. My company will go up to net 90.
So who is the unprofessional one for not knowing the terms?
