What If My Agency Stops Paying?

So you’re a developer who has been working with an agency successfully for a while. They find you the work, you do the work, and they take out the hassle of getting paid. Life is sweet. Then the payments stop. What do you do?

Agencies are likely to have some fairly favourable terms of contract, whether or not you noticed them at the time you signed them. You might have noticed the restrictive covenants saying that the agency’s clients are their clients and you cannot work for their clients directly, but there might also be other provisions that you need to be aware of before you are able to work out what your negotiating position is and what your options are.

First Steps

First stop when you have not received payment is to call your agency and ask whether there is a problem: you submitted your invoice on time the work has been done and you’re entitled to be paid. What gives? What you do then depends on the response from the agency.

A common response is that there has been a mistake and payment is on the way; on the other extreme you might receive the silent treatment, where there is no response at all to messages to your contact.

Setting Up Your Position

If you have done what has been required of you to be paid, there are a series of steps you are able to take to improve your position if things turn sour.

1. Read through the contract and make sure you understand what each clause means. There should be notice provisions (for you to stop work or for them to stopping passing you work) and “paid when paid” clauses, that is, prerequisites for payment and other provisions.
2. Take notes of what is said in calls with representatives of the agency, write the date on them and keep them in a safe place;
3. If you do have a conversation with someone where they make statements that suggest that you haven’t done a good job, email the person you were speaking to that day or the next day, reciting what you discussed, and your response to it, so that you have a written record of the conversation and your response. Do not be fooled by statements designed to keep complaints quiet while they sort them out for you on the quiet. It may be that they are buying time or have some other agenda.
4. At any given time you should have upper limits to the amount of credit you are prepared to give any business to which you supply your services. Different companies will probably receive a different level of credit –  long-standing customer might receive £3,000 in credit before you stop work after warning them in advance; other customers might receive £500 in credit.
   You are not the agency’s banker, and should you be asked to invest in the software development project by continuing to work without being paid. You are after all meant to be a professional. Professionals get paid for what they do.
5. You do not want to place yourself in breach of contract when pursuing a payment. It will give rise to a basis for the agency to make a counterclaim, and another reason not to pay you. Don’t give them the satisfaction.

Closing

After you have spoken with the agency to find out what the problem might be, as stated above, those reasons need to be reduced to writing and put to them. You might find that the agency has more of a problem changing its position once it is in recorded writing. Assuming that they do in telephone calls, it makes sense to email them after the call again and record what was said in a polite, friendly and understanding tone.

After a time has passed, you will generally have a picture of the reasons why payment is not forthcoming. It is at that stage that you are presented with the choice of continuing to work with the agency, or walking away. Another question entirely is whether you take formal steps to recover the debt. If you do decide to go down that road, there is Money Claim Online which provides an excellent online service, the agency’s local County Court to commence legal proceedings, or a statutory demand.

Leigh Ellis is a solicitor based in London advising businesses and on technology & IT contracts and businesses disputes. As a software developer, commercial contracts and intellectual property specialist with over 10 years’ experience as a commercial lawyer, he is well placed to assist businesses resolving commercial disputes.