Add Your (In)Voice to the World's Longest Invoice

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Have you heard about the World's Longest Invoice?  

To demonstrate the scope of the freelance non-payment epidemic our friends at the Freelancers Union created the World's Longest Invoice.

Join the movement by listing the amount you've been stiffed so the world understands how big this problem is.  Freelancers like you have listed almost half-a-million in unpaid invoices in just 24 hours! Take a look!

When you add your unpaid invoice, you also add your powerful voice to the effort to stop non-payment.

And while you're at it, if you have not already, why not register your invoice for collection with Indepayment? Register your debt here.  No fees until we collect. 

Protecting Freelancers in New York City

Indepayment is proud that our home town, New York City, is considering creating the first-of-its kind legislation that statutorily protects freelancers and independent workers from non-payment and wage theft.   The protections are badly needed: One study estimated that NYC freelancers annually may be owed $1.1 billion annually in unpaid wages. The legislation is supported by the Freelancers Union, and it is a model for solutions to freelancer wage theft around the nation. 

The New York City Council’s Consumer Affairs Committee is holding a hearing on Monday, February 29, 2015.  Our friends at the Freelancers Union are holding a rally before the hearing, and really want a full house during the hearing to show support to any wavering City Council members.  Democracy in action!

New York City’s legislation is known as City Council Intro 1017 of 2015 and called, in legislative speak “A Local Law to Amend the Administrative Code of the City of New York, in Relation to Establishing Protections for Freelance Workers.”   You can read the full proposed legislation here.  

We’ve been working with the Freelancers Union to support the legislation. The Indepayment team will be there on February 29 to testify in support of Intro 1017. 

The proposed legislation does two significant things to combat wage theft and non-payment: it provides freelancers similar protections against wage theft as employees have in court and makes not paying freelancers a violation of the New York City Administrative Code. Once a violations of the Administrative Code is established, the violation is enforced by the City, like a parking or Health Code violation.  Intro 1017 creates a streamlined administrative process where the City adjudicates alleged violations and, if a violation is found, enforces the Code,

Here are some of the cool parts of Intro 1017 as written:

  • Requires a written contract that has the scope of the project and the payment terms;
  • Requires payment within 30 days after work is done.  That basically makes it impossible for the client to claim not to have known when payment is due.  It also should make clients adjust their payroll policies to meet the legal requirement;
  • Bans the ol’ “we can pay now if you take less” routine;
  • Bans retaliation against freelancers who assert their rights;
  • Puts in place an administrative process through the New York City Department of Consumers Affairs for debts that are under two years old as measured from the date of non-payment.
  • Creates a new “cause of action” for unpaid freelancers who sue for their wages in Court.  If they prevail, then they get double damages and attorney’s fees;
  • Requires the New York City Department of Consumer Affairs and the New York City Law Department to track non-payment complaints to identify recidivists and track the scope of the problem;
  • Creates a criminal penalty for a knowing and willful violation – employers who purposely don’t pay could be imprisoned for three months!

Although we will suggest some improvements in subsequent blog posts – such as creating liability on behalf of the owner of the client for non-payment which exists for employees under the New York City Labor Law and the Federal Fair Labor Standards Act and allowing for court cases subsequent to the City’s enforcement by extending the limitation period for bringing these claims and making it clear that a freelancer can use private enforcement as a supplement to City enforcement -- Indepayment supports the legislation as written.

We look forward to working with the Freelancers Union, the City Council and other stakeholders to see Intro 1017 become a part of the New York City Administrative Code. 

Prepare to Win: Contract Clauses That Prevent Non-Payment

“By failing to prepare, you are preparing to fail.” 
― Benjamin Franklin

Anyone who offers a product or a service without being paid the full amount upfront is providing credit.  Managed properly, credit is a good thing.  But it also has a well-known downside: non-payment.  The techniques used to deal with non-payment are generally known as “credit management.”  

Strong credit management starts with having favorable contract terms.  When non-payment happens (and it happens to the best of us) the contract terms below will help get you paid.  Consistency is key: no matter how much you want to think your clients are a going to pay you need to consistently apply the techniques below to prevent non-payment. 

  • First things first: ALWAYS HAVE A CONTRACT.  You can find many samples and templates on line. Use them.  Most have the basics to have an enforceable contract, such as when the contract begins, what the contract is for (also known as “scope”), and how much you’re supposed to be paid for your work.  But there are a few clauses which you should also include to help make sure you’re paid and you can win in Court, if it comes to that: 
  • Always make sure that payment terms are specific.  The best thing to do, of course, is to get paid as much as possible before you even start the project.  Negotiate for that.  But most clients won’t agree to that.  Rather, they will say they will pay 20% of the fee on signing (or within 10 days but, in any event, before you do anything) and the rest within a certain amount of time of each deliverable, say 10 days or 30 days (“net 30”). If it’s an ongoing engagement, you may need to continue to work during the period your waiting for payment.  Your contract should say something like “Client agrees that Provider may terminate the contract with no further liability to Provider in the event the Customer breaches the payment terms set forth herein.”
  • Always have a late payment penalty clause.  A typical provision reads “Unless otherwise specified in writing, invoices not paid within X days of the invoice date will accrue interest at 1.5% per month.”
  • Always have a clause specifying that if the account is placed in collection the Client has to pay the lawyer or collection fees.  A typical provision reads “Client agrees to pay all reasonable attorney’s fees and or other fees or costs if the account is placed with an attorney for collection.”
  • Always have a choice-of-law, forum selection and jurisdictional waiver clauses.  Those clauses allow you to sue for your fees in a court convenient to you, and not where the client may be located.  It also means that the law that will apply is the one you want.  A typical choice-of-law clause reads: “This Contract and any claim or action related thereto will be governed by and construed in accordance with the laws of the State of ____, without regard to its conflict of law provisions.”  A forum selection clause and jurisdictional waiver clause typically read: “Any party commencing against the other party any legal proceeding (including any tort claim) arising out of this agreement must bring that proceeding in the State or Federal courts in or nearest the county of ____ in the State of ____.  Each party hereby consents to the exclusive personal jurisdiction and venue of the State or Federal courts in or nearest the county of ____ in the State of ____. Each party hereby waives any claim that any a legal proceeding brought in accordance with this paragraph has been brought in an inconvenient forum or that the venue of that proceeding is improper.” The law on this is tricky, but most of the time the forum selection, choice of law and jurisdictional waiver will prevail against any claim that the Court lacks jurisdiction.
  • ·Sometimes when you threaten sue to collect your fee you’re going to be threatened with a lawsuit back.  You can preemptively strike and disarm the deadbeat by inserting into the contract a “waiver of counter-claims” clause.  A typical waiver of counter-claims clause reads “Client waives any and all of its rights to interpose any claims, deductions, setoffs or counterclaims of any nature in any dispute with respect to the Agreement.  Any claims, deductions, setoffs or counterclaims must be brought as a separate action subject to the choice of law, forum selection and jurisdictional waiver provisions of this agreement.”  That won’t stop then from suing you, but it will increase the costs on them if they chose to do that because they won’t be able to piggyback on your claims against them.
  • When you think there’s a non-payment risk either because the client is newish, seems shady, or you know they’ve failed to pay a freelancer in the past, demand a personal guaranty from the owner.  That way, if the company fails you can always go after the owner for your fee.  There is no hard and fast rule for when you need to ask for the guaranty, but as a general rule when you think there is a non-payment risk, there probably is.  If you ask for the personal guaranty and they won’t give it to you, RUN.  Language of a personal guaranty of payment typically reads “[owner] hereby personally guaranties the payment of all obligations of [Company Name] hereby agrees to bind itself to pay on demand any sum which may become due under this agreement whenever [company name] shall fail to pay the same according to the payment terms set forth above. This guaranty shall be a continuing and irrevocable guaranty and action may be taken against [owner] for any non-payment without notice thereof.”

Of course, none of this is legal advice.  We just want to make sure that if you need to register a debt with Indepayment, you’re in the best possession possible to collect.  

Keeping Tabs on Your Clients’ Tabs

Indepayment’s comprehensive debt collection platform makes getting paid on overdue and hard to collect invoices as simple as possible.  But that raises a big issue: Do you really know when your invoice is overdue?  After all, you can only collect a debt that you know is due.

Most freelancers and small business hack their way through this problem.  Calendar reminders, reminder emails to clients, nastier emails to clients, etc.  Everyone has their own system.  You can see our recommended system here.

There are a few services that automate the process of reminding you that invoices are overdue and in some cases send automatic and customized reminders to your clients to pay.  Last week we met with Jess Perez, the founder of Tycoon App.  We’re pretty excited about Tycoon App.  Its the first app designed to let freelancers track their overdue invoices in real time.  It’s got a really simple and intuitive user Interface and it’s a great complement to Indepayment’s debt collection service because it makes sure you, and your client, know what payments are due and when they are due.  From there, if you don’t get paid, our team at Indepayment has can offer our comprehensive debt collection solution.

The “automated account receivable management space” offers freelancers other options, too.  If you have a client who “forgets” to pay, or just figures they can delay payment, and you don’t want to make aggressive calls yourself, you can hire a freelancer to make those calls for you. A great option is our friend Julie.  Her service is great. Julie promises to be “thermonuclear nice” so as to get you paid without alienating your client.  If you’re looking for an automated solution and anticipate having many accounts to manage all at once, try http://www.invoicecare.com/.  Plans start at $500 per month with a one-year contract, but rest assured you’ll never need to make that difficult “where’s my money” call again. 

You may not need live folks to make the calls, and may just want to send personalized emails.  For that, the folks at https://debtordaddy.com have designed a software as service that sits on top of your accounting software and sends reminders to your clients to pay. Basic plans are very affordable, and they also have a premium package for about $400 per month that includes live phone calls. 

Indepayment’s network of lawyers and collectors pick up where your account receivable management service leaves off. We deal with the deadbeats that don't pay no matter how many times you ask, nicely or otherwise.  Unlike account receivable management services, where you’re paying for the service of contacting your clients so you don’t have to, at Indepayment you’re paying for the collection, and we don’t get paid until you do.

And remember, even when you think you’re dealing with a deadbeat who won't pay no matter how many times you ask, we recommend you send one final demand letter before registering your debt on Indepayment.  Knowing that you’ve demanded your money and still not been paid creates a clean break between your efforts to collect and Indepayment's debt collection.   

Now, lets get you paid!

A Big Guide to Small Claims Court - Part VI: Your Winning Trial Presentation

This is the sixth in a multi-part series that explores and explains filing and winning a small claims court case.  You can access the other parts by clicking here or just by scrolling down.

When we last left off, you were in the process of choosing between a judge or an arbitrator or in a rare case, a jury.  Now that you know who the "decision maker" will be, here is how to present your case, and win.

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A few basics: The person who brings the case, that’s you, has the burden of proving it.  Thus, you go first.  Someone is going to make you swear to tell the truth.   

Now you’re answering two questions: what happened, and how can you prove it?  

You should start with a general statement about the case and how you intend to prove it.  Some courts let you give opening statements, others do not.  It is always good to prepare something since it creates a coherent narrative for the court. Get down the chronology and what evidence you’re using to prove each fact.   

While every case is different at the very least bring your contract, or emails were you agree to do the work, proof you did the work, the invoices the defendant paid, if any, and any written evidence of the excuses they provided for not paying what was owed.  Bring at least three copies of everything (one for you, one for your adversary, and one for the decision maker). 

If it’s a jury trial, bring at least six more copies of everything so you can hand the jury a copy of all the documents you’re using to prove your case.  In the event of a jury trial, you’ll have to ask the judge permission to give stuff to the jury.  The judge will examine the document, ask the defendant if they have an objection, and then rule on whether its “admissible.”  If it’s anything normal (a contract, an invoice, a check) you should have no problem having it admitted into evidence.   If it is anything more complicated, listen carefully to what the other side is saying and be ready to explain to the judge why the document you’re trying to show the jury is authentic and reliable (shows what you contend it shows). And if you are challenged on any piece of evidence, when your adversary goes to show the jury something, make sure you repay the favor and challenge it the same way your evidence was challenged.  The number one rule of litigation is to never give up an inch without a fight unless the decision maker tells you to. 

The bulk of your case happens when you testify – sometimes called the “case-in-chief.” At a minimum, you should testify that you did the work, expected to be paid, but were not paid.  You can expect the other side to testify the opposite.  In their “direct” testimony, they are both going to say you were paid and you’re lying (unlikely), that you did not complete the project, that your work was sub-par or beyond the scope of what was agreed to. 

Any witness that testifies can also be "cross-examined."  The cross-examination can either come from you or from the judge or arbitrator. You can expect the judge or arbitrator to ask less pointed questions, mainly aimed at clearing up anything they don’t understand as opposed to showing the weakness in your opponents argument. That is your job.

 So when the person who did not pay you claims they did, but in cash, you can ask about where he got the cash, how often he pays in cash, his process for tracking cash payments – all questions aimed at showing that he may be lying about paying you. If they say your work was beyond the scope of what was agreed to, then present them with any evidence that shows they asked for the additional work or that they were aware of the extra work and did not stop you.   If they claim the work was substandard, be sure to ask them where in your agreement they are allowed to withhold payment for work unilaterally deemed substandard and make the point that they never asked you to revise the product before determining not to pay you. 

You can’t prove a negative, so don’t think too much about how to demonstrate you were not paid.  Your testimony should be enough. If it’s a dispute about the quality of the work, you can testify that the work was fine.  Or better yet get an “expert” to say that this work was fine.  That is allowed, although the defendant is going to try to challenge the qualifications of your expert.  The defendant can also present his own “expert” to say your work was substandard.  You should try to convince the decision maker that the “expert” they present is not qualified.  If you have a jury trial, you can expect the judge to make the determination about whether the expert is qualified before allowing the jury to hear what he has to say.  The judge does not want someone who is not qualified to be influencing the jury.  If it is just a judge or an arbitrator, they will be more lenient with allowing an unqualified expert to testify.  They may even let them testify, and then say when they render the decision that they can’t rely on anything said.

You should also always ask expert witnesses whether they are being paid and, if so, whether they have been paid yet.  They are likely being paid, and if they have not been paid before the testimony, or will be paid more if the side they are testifying for wins, then the fact finder can conclude that they are not testifying honestly but will say anything to get paid.  Just the fact that they are paid will generally make a substantial dent in the expert’s credibility.

It’s also possible to have people testify who may not want to.  You can do that through the “subpoena process.”  We don’t generally recommend you try to coerce people to testify for you. It’s a time consuming process to get out a subpoena, you need to pay a “witness fee” and then you need to have someone serve it properly, as if that person was being sued.  The penalty for failing to show up when subpoenaed is contempt of court. The biggest problem with the subpoena process is that you’re subpoenaing someone who does want to help you.  So you’re going to need to examine a subpoena witness very carefully.  It’s a skill that even most experienced lawyers lack.

Pro-tip: regardless of what else you ask about, make sure to examine the defendant about their name and address if you have any questions about it.  Ask specifically whether the name you have for them is the same one on their articles of incorporation or founding documents or, if an individual, it is their legal name.  In the event you think you got it wrong you can ask the judge or arbitrator to change the caption of the case to reflect the correct name.  If you don’t do this, and you have the wrong name, you’re going to get a judgment against the wrong entity or person.  You will have trouble enforcing the judgment.  You can also examine the defendant about their assets.  Where do they bank? Who owes them money?  Do they own a car?  If you’re not allowed to ask these questions, ask the judge or arbitrator whether they can make the examination.  As you will see in the next section, it is important.

Small claims is not a “your way right away” type place.  After you’ve put in your case, the judge or arbitrator is likely to reserve judgment and then issue something in writing in a few weeks’ time determining the case.  They do this because (1) they need to think about it and (2) don’t want the parties to be near each other when a decision announced.  That is just smartness.  

If you lose and your case was heard by a judge, you can appeal. But most claimants who lose in small claims court don’t appeal, and when they do, they lose most of the time.  The standard for reversing a trial judge is very high.  It’s almost insurmountable when the decision was rendered by an arbitrator or jury.  If you do want to appeal, you have a set amount of time (typically 30 days) from the date you learned of your loss. You will likely need to file another document with the court, and pay a fee.

If you win, congrats!  If you’re winning, it means someone else lost.  The loser – the person who is ordered to pay – very often appeals just to avoid paying.  In most places, that does not work because an appeal does not “stay” enforcement of the judgment.  To do that, your adversary will need to pay the money into the court, or buy a bond from a “surety” who will ensure that the money will be there if they lose the appeal. But that’s not your problem, it is theirs.  If that is not done, and it won't be 90% of the time, don't let an appeal stop you from collecting your judgment.

So assuming you won, and enforcement is not stayed, you’ll need to enforce the judgment to actually get money.  We will deal that in the next part.

A Big Guide to Small Claims Court - Part V: To Arbitrate or Not to Arbitrate

This is the fifth in a multi-part series that explores and explains filing and winning a small claims court case.  You can access the other parts by clicking here or just scrolling down.

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In prior parts, we discussed deciding to sue, suing, and then trying to resolve the case by agreement, something we don’t necessarily recommend even if the person you’re suing wants to settle. 

Now it’s time to see the judge. 

Not all “judges” are actually judges.  Due to the volume of cases, an actual judge can’t address all the cases in small claims court. If they did, what feels like an endless process would actually be an endless process.  Most courts rely on volunteer lawyers they call “arbitrators.”  Technically, arbitration is an "alternative dispute resolution process" where both parties agree to an expedited process to resolve their dispute using an agreeable neutral who comes to a binding decision.  Unlike mediation, which is the process by which a stipulation can be reached (addressed in a prior part), the decision an arbitrator reaches is binding, as if a judge rendered it.  A mediator’s job is to reach consensus that leaves everyone “happy.”   An arbitrator decision is based on the law – the arbitrator says who is right and wrong.

Should you be alright with your case being decided by an arbitrator?  In the usual course, we would advise against it because arbitration tends to be expensive and, unless you have a loser pays agreement, you’re not going to get that money back.  Most of the cost of arbitration goes to pay the arbitrator.  But in small claims court, that is not the case. Arbitrators are volunteers, most likely putting time in so that can one day market themselves as professional arbitrators and get those fees. 

We like small claims court arbitration.  For starters, there are many more voluntary arbitrators than judges, so if you opt for arbitration your case is going to be heard quicker.  In some places, arbitration is the default.   Arbitration is less formal.  So instead of standing in front of a judge on the bench, typically wearing a robe and sitting several feet off the ground, you’ll be dealing with a person sitting across the table in a suit and tie.  They may even be nice.  The rules of evidence are more relaxed, meaning you can, for example, tell the arbitrator what someone said the defendant said, which would otherwise be hearsay, and you can use documents without having to show they meet the criteria to be formally considered evidence. 

Arbitrators also have one important advantage that judges don’t: finality. Generally, an Arbitrators’ decision can’t be appealed except on very limited grounds.  Like, for example, you did not agree to arbitration but ended up in it.  Otherwise, its game over.

An arbitrator will not preside over a jury trial.  That’s because it’s the arbitrator’s job to determine the facts and the law. By contrast, if your case goes to the judge, the judge decides legal issues and instructs the jury about the law and how the facts should be applied.  In New York, like most places,  jury trials in small claims are very rare.  New York discourages them by only allowing the defendant (the person you’re suing) to request a jury trial and then charging them a fee, plus an additional amount to secure the plaintiffs costs in the event of a loss.  Those costs are really just the filing fees, which are pretty cheap, but that extra steps sends the message that jury trials are risky.

Jury trials require a jury to be selected, and also require additional time for the judge to explain the law to jurors.  In New York small claims practice, if the defendant requests a jury trial, and goes through the trouble of paying the additional fees and providing the bond, you can expect the trial to be rescheduled for a time when a jury is available.  We typically see a request for a jury in small claims court as the ultimate form of delay and not something a plaintiff should be pining for.  In a typical breach of contract action, a judge or arbitrator is fully capable of deciding the law and facts. 

In the next part we will look at proving your case, whether you’re in front of a judge, arbitrator or jury.

A Big Guide to Small Claims Court- Part IV: Settle This!

This is the fourth in a multi-part series that explores and explains filing and winning a small claims court case.  You can access the other parts by clicking here.

In prior parts we discussed choosing small claims court, filing a claim, and the very likely scenario where, instead of seeing a judge on your court date, you’re sent, or chose to, go to mediation.  And eureka!  You reach an agreement!  Now you have to do a “stipulation” resolving the case.

A stipulation just means that you and your adversary settle the case and put your agreement on paper that is signed by the Court.

A stipulation is not a judgement.  It’s an agreement between you and your adversary. From the perspective of the person you're suing, you’re actually agreeing to drop the case because you’re getting some relief that the Court would otherwise grant without having to go to the judge and risk getting nothing.  

As we noted in prior parts, we don’t recommend settlement in a non-payment case. For one, you’re going to have to give a discount, which you should be in no  mood to do after having to drag the defendant into court. But the bigger problem is that a stipulation resolving the case is not binding – it is just another agreement like the one you had to get paid initially, but which was violated.  There are ways to make that agreement more binding, so if you chose to go that route and settle case with a stipulation you need to make sure that the stipulation is written correctly.

If you’ve decide to settle the case by stipulation, here are some pro tips:

  • Get try to get whatever money you can there.  It seems tacky, but you can tell your adversary to go to the ATM to get you cash for at least a portion of what they have settled for and then agree to pay the rest by a certain date.  At least then you have some money in your hand.  If your adversary balks at that, it’s not a good sign;
  • Ask the court whether you can have a judge sign it and make it a “So Ordered” Stipulation. Sometimes that is just part of the process.  Other times you need to ask. Technically, a stipulation of settlement signed by both parties is valid but getting a judge to sign it is a belt and suspenders thing;
  • Many courts have a process where, if you put certain words in the stipulation, you don’t need to come back to court and can just file the judgment if its violated. In New York, the magic words are “and for the balance unpaid as of [last date payment can be made] the plaintiff shall have execution therefore of the outstanding amount.”  With those magic words, it may be possible to file the stipulation as a judgment against the defendant if the agreement is violated.  But make sure you ask someone at the court that night what the process, in that court, is to convert a stipulation into a judgment if it’s unpaid.  The last thing you want is to have to sue for the unpaid balance.

What if you can’t resolve the case by agreement?  How do you get in front of then argue you’re case to a judge? We’ll explore that next.

 

A Big Guide to Small Claims Court- Part III: One Crazy Night

This is the third in a multi-part series that explores and explains filing and winning a small claims court case.  When available, you can access the other parts by clicking here and here.

We’ve already explored what kinds of cases get brought in small claims court and the basics of bringing claims in small court.  Now we will go over what to expect when you show up for your court date.

When you do, you’ll be sent to a courtroom that looks something like this:

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You may see your adversary milling about.  Say hi.  Or don’t.  Keep in mind that you’re going to see them a few times that night or day and likely run from room-to-room together, or just glare at each other across the room. If you don’t see your adversary there, they may not have shown up. That situation is addressed, below.

Before you get into the courtroom, there is going to be a calendar nearby that looks something like this:

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That is the order that the clerk will call the cases.  You should try to see who is before you or, if there are numbers, what number you are. That will give you some sense of the wait.  At about the time the Court is supposed to be in session (a fancy way of saying “start”), a clerk, or possibly a Court Officer (“bailiff”) who will inevitably have one of the strongest local accents you have ever heard will give you some instructions.  Listen carefully.

Typically, what he or she will say is that if you hear your name and you’re ready to go to present your case to a judge, mediator or arbitrator (explained below), say “ready.”  If you hear your name and you want something from the court other than to try your case that night, say “application” or “motion.” Most applications are made by the defendant – the person you are suing – and they generally involve asking for more time or asking for the case to be dismissed (you lose!) for one reason or another.  As the claimant, the person who started the case, you want this case to be heard and be heard now.  So treat any “application” accordingly.  And when your case is called, best to just say “ready!”

What happens if the deadbeat does not show up?  Well, when your case is called you will have one of those “Buhler . . . Buhler” moments.  And then, assuming the clerk did not get the notice they mailed returned because you had the address wrong [link], you win!

Sort of.  If your adversary does not appear, you’ll eventually be sent to an arbitrator, referee or judge, to argue your case without anyone arguing against it.  Whoever hears the case will likely write a decision giving you everything you want.

Conversely, if you don’t show up your case will likely be dismissed (defendant wins). In that case, you can start the case again because that is not considered a “dismissal on the merits.”  But you’ve wasted everyone’s time.  In some jurisdictions, if you do that too many times, you’re going to get banned from using the court.

What if no one shows up?  Either the court will dismiss the case or “adjourn” it to another date.  If you know you can’t make it, best to call in advance and ask for an adornment and offer to notify your adversary, although the Court may insist that they notify the adversary of the adjournment through their process.   

If everyone is there, its time to see the judge.  Well, maybe.  Due to the volume of cases that come up in small claims court, the court really likes when cases are resolved without “judicial intervention” or “by stipulation.”  Generally, you’re going to be given a choice: talk to your adversary and resolve the case, use a mediator, use an arbitrator, or see the judge.  Depends on the court.

Some courts send you right to “mediation, “where a volunteer lawyer will try to suggest a resolution after hearing what everyone has to say. Nothing the mediator does is “binding.”  It's just a chance to see whether the case can be resolved “on consent” so that the Court does not have to come to a decision.  As part of the each side makes an opening remark about their case and then the mediator talks to each side alone to see where compromise is possible.  

While mediation is possible in some cases, we don’t generally recommend it in a non-payment case. We’re fairly sure that small claims court is not the first time you’ve tried to resolve the case with your non-paying client.  If you’re client is going to be unreasonable by forcing you to file the lawsuit, it is best to go right to a judge.  It’s a binary proposition: either they’re going to pay or their not. And now that you’ve had to take the time to come to court, you’re not in the mood to give discounts.  Unless you are.  Then mediation could help.  Of course, if you’re facing a counter-claim, mediation is a good option.

Up next, we’ll give you some tips into how to resolve a case where you’re adversary wants to settle, whether the settlement is reached by mediation or just because you all decided to settle it after the case was filed.

A Big Guide to Small Claims Court- Part II: File Away!

This is the second in a multi-part series that explores and explains filing and winning a small claims court case.  When available, you can access the prior part by clicking here.

In an earlier post we explained what types of cases can be brought in small claims court.  Once you’ve decided that small claims court is for you, it’s time to file the case.

Starting a case in a small claims court is pretty easy.  Really, you just show up and tell whoever is behind the window, below, “I need to sue this deadbeat.”

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You’ll need to fill out a few forms explaining what happened and how much you’re owed. There is also typically a small fee.  In New York City, it is $15 for a claim under $1,000 and $20 for a claim over.  Generally the court will take cash or a credit card, but check.  We’ve seen some finicky courts that require a check or money order because they won’t handle cash and can’t figure out how to process credit cards (really).

Some courts allow you to start an action by mail, which is pretty handy if you’re suing someone far from where you live.  In that case, follow the instructions and mail everything to the court in the way they ask it to be mailed.  But be warned- even if you start the action by mail you will need to make the trip to the court eventually for the hearing.

Also be warned: Courts are notorious for losing things in the mail or just putting aside mailed documents that don’t fully comply and then not notifying you that your claim was not processed.  So if you do mail documents, always follow up with a call to make sure the case has been received and is being processed.   It’s only a matter of time before all courts allow you to file claims online. Some places are already doing that -- like Los Angeles.  When you’re thinking about bringing a case, its best to go to the court’s website to see whether they have some type of file by mail or electronic filing system.

It’s essential that you have the correct name and correct address of the person or company you’re suing.  The clerk is going to send what you filled out to them by certified mail and first class mail.  If it comes back as undelivered, you’re suit is going to be postponed until they have the right address.  And in most places, you’re not going to know  the mailing was returned until you show up for your court date and are told that nothing can happen because the notification was returned as undelivered.  So not having the right address can really be a problem.

When you give the clerk back the form, you’ll get a date for a hearing.  If you’ve done it my mail (or electronically), the Court will mail back a notification of your court date.  In some places the small claims part meets every day of the week.  In other places it meets more like once a month. Everywhere, however, these courts are understaffed and overwhelmed, so your court date might be quite a bit in the future.

Pro Tip: If you go in person, bring your calendar.  Most clerks will let you pick a date you’re able to make it, but only if you ask nicely.  Otherwise, they will schedule your court date the evening of your birthday, your significant other’s birthday, or your anniversary, or that important client dinner you’ve had planned for weeks. Guarantied.  Most small claims courts operate at night so folks could come after work. But they also have day sessions available, generally.  Just ask.

Assuming that you filled out the form, had a few bucks to pay, had the right address and got a date that works, the next step is showing up at the courthouse on the date of your hearing.

In the next part, we’ll explore what should happen when you show up on your court date.

A Big Guide to Small Claims Court- Part I: Sue 'em All

This is the first part of a multi-part series that explores and explains filing and winning a small claims court case. 

You’re owed under $2,500 from some deadbeat client.  You’ve tried everything to get paid, but all you’ve gotten is the run around.  Everyone now says the same thing:  “Sue them in small claims court.”  

Ok.  Good advice.  Now what?  In this first post, we'll explore the fundamentals of small claims court: who you can sue, whether a lawyer helps, whether you can get sued back, and what you can sue for.

First, it is important to understand what is “small claims court?”  Almost every jurisdiction in the country has a slightly different system, but the principle is the same: because there is less money in dispute (“small claim”) than typical large-corporation cases, the regular rules of the Court are relaxed.   But that does not mean you can just show up and get justice.  There are still procedures to follow.  It is important to know what to expect and how to navigate the system.

Although small claims processes are different in every jurisdiction, we think the small claims court in Brooklyn, New York, which we know (too) well is a good place to provide some insight into what to expect from any small claims court.  If you happen to be in Downtown Brooklyn, the Kings County Civil Court, which contains the “Small Claims Part,” looks like this:

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You can sue anyone anywhere in the country from anywhere in the country, subject to the local court's rules. In New York City, the person you're suing must have an address in New York.  But in other places, they will likely allow you to sue someone anywhere in the nation, with one important caveat: unless your out-of-state client has assets in the state, you’re going to have to get the other state's courts to recognize and enforce your New York judgment. It can be done, but it takes some time and effort.  That’s beyond the scope of this article, so look for it in future parts.  

Once you’ve decided on the right court, it’s time to find a lawyer who can bring your claim, right? Nope.  In many states individuals cannot be represented by a lawyer in small claims court.  However, even in jurisdictions where lawyers are allowed, you won’t find many.  The smaller amount of money in dispute rarely justifies the fees a lawyer would charge. Unless you’re working with a high volume practice (like Indepayment’s Network Participants) you’re not going to find a good lawyer to work your $2,500 non-payment case on contingency. You’re now your own crack civil litigator.  Best to watch a few episodes of Boston Legal, Ally McBeal, or LA Law, depending on your age, to brush up on the basics of presenting a cogent and convincing case.  Actually, skip that.  Just get your facts straight and documents in order.

Tip: in New York City and some other larger jurisdictions, corporations or partnerships or limited liability corporations sue in a different part of the small claims court that specifically handles claims by those types of entities, which generally also has relaxed rules, but not as relaxed. If you did the work as a corporation, LLC, or partnership, you can sue as your entity, if you have one.  If you decide to use the commercial part of the small claims court, you likely want a lawyer to help you.

In New York, like most places, you can only sue for money in small claims court.  The amount you can sue for in New York City is topped at $5,000.  In California its $7,500 statewide.  In other places it is less.  For example, outside of New York City in New York State the cap is $3,000.  The limitation on the relief (legal outcome) you can get is something to seriously consider, because if you’re looking to make someone do something (i.e. return the code you developed for which you were not paid or stop the deadbeat from using the logo you designed for them) the small claims court is not going to do that.  They are only there to award money, or not.  You’ll need to sue in a different court that has the power to make those types of orders.

The person you’re suing can also sue you back for money damages within the jurisdictional limit ($5,000 in New York City). That is called a “counter-claim.”  If they do it right, they will make the counter-claim within five days of getting your forms from the Court (explained below).  However, they can pretty much do it at anytime, which is especially annoying because it could delay the case if a counter-claim is asserted on the court date.  In that case, in most jurisdictions, the Court will adjourn the case for about 20 days to allow you to prepare to defend the counter-claim...

Don’t worry too much about counter-claims.  They’re not too common, and they do not come out of the blue.  You know you’re in a dispute with someone, and they have the claim.  When a counter-claim is made, you basically become the plaintiff on your claim and the defendant on the other.  Lots of times, the person you’re suing will bring a bogus claim hoping the judge (or arbitrator as the case may be) will split the baby and the case will end up a wash.  In reality, that does not often happen.  The judge or arbitrator is pretty good at spotting nonsense counter-claims.  We’ll go over the procedure for defending a counterclaim in a future post.

Now, what happens if someone sues you back for more than $5,000?  Interesting question. The entire case is supposed to be transferred to a court that has jurisdiction over those types of those larger cases.  That’s actually the best result for you because you don’t want the small claims court to decide that larger claim.  You’ll also want the time and opportunity to get rid of that case.  Don’t worry too much about all that.  It is rare.  Most people who know that someone can sue them for something much bigger than the money they are owed are reluctant to pull the tiger’s tail. Basically, before you use small claims court, it is best to think about tigers and tails.

Up next: Filing the case.

$200 Billion of What Now?

News broke recently that the Consumer Financial Protection Bureau (“CFPB”) fined the nation’s two largest “debt buyers” tens of millions of dollars for improperly collecting on the debts they purchased.  The allegations were pretty straight forward: these companies were telling debtors that they could be sued on a debt when, in fact, they likely could not because the time to sue had expired.

“Debt collector guilty of too aggressive tactics" is a dog bites man story if ever there was one.   The real story, we think, is found buried in the eighth paragraph of the New York Times story:

Debt buyers purchase delinquent accounts for pennies on the dollar, but may try to collect the full amount of the debt claimed by the original lender. The two companies’ combined have bought the rights to collect more than $200 billion in defaulted customer debts on credit cards, phone bills or other accounts.

$200 billion!

Most Americans are debtors, not creditors, and most Americans need to be protected from unscrupulous collectors.  No argument there.  But there is a growing group of Americans – between 10 million and 53 million, depending on who you ask – that are actually creditors some of the time.

Those are freelancers, independent workers and small businesses who frequently go unpaid for their work. So how are freelancers effected? Are their debts part of the $200 billion purchased for collection?

Nope.

Why not?  Because no one has found a good way to get all that debt in one place, and you can't sell the debts individually (hence the $200 billion).  Indepayment is the first company to aggregate debts owed to freelancers, independent workers and small businesses to allow for sale to debt purchasers after "charge off."

If you’re interested in learning about Indepayment’s “charge off” services, register an unpaid debt with us.  We will try to collect, and only charge you if we do. 

If we can't collect, you can then chose to send it to a debt collector or charge it off (you can also charge it off after the debt collector attempts to collect).  Your debt may then be eligible for sale to a debt purchaser as part of the next $200 billion.

Maybe the debt purchaser can collect. Maybe they can’t. Hopefully they will act lawfully.  The neat thing is that the debt no longer your problem.  The debt, and the risk of non-payment, is off your books, and onto theirs.

That is one way that Indepayment turns your liability into an opportunity.   

Thanks for reading and thanks for your trust. 

Make Independence Pay!

During the signing of the Declaration of Independence, either on July 4, 1776 or August 2, 1776, depending on who you ask, John Hancock gave a speech regarding the importance of the colonies remaining united against the British.  After the speech, Benjamin Franklin famously retorted “Yes, we must indeed all hang together, or most assuredly we shall all hang separately."  It’s a little bit of, literally, gallows humor at an otherwise very sober and serious occasion.

Why do I think the signing of the declaration of independence was sober and serious?  By the summer of 1776, the colonies were already at war with the crown for a year and victory was far from certain.  By declaring independence before actually winning the war, the Continental Congress was raising the stakes considerably.  Nevertheless, the founders were also a very principled group: they thought that rulers must have the consent of those they rule.  In their mind, King George III had broken that bargain, and natural law required they set that right.  They saw a challenge and rose to it. And the rest is history.

Freelancers, independent workers and small business also face a host of challenges. When you’re working for yourself, its more challenging to pay taxes, get insurance, and in the space that Indepayment services, collect debts. Like the founders, Indepayment is rising to the challenge.

Indepayment was founded on the idea that by aggregating debts freelancers, independent workers and small businesses can get access to the same debt collection infrastructure used by huge creditors. We can also create a market for “charged off” debt which debt buyers purchase in bulk and we can also better evaluate credit risk by knowing in advance who pays, and who does not.  As Ben might say: by hanging together, we’re no longer hanging apart, most assuredly.

This Independence Day, make Independence Pay by registering an unpaid invoice with Indepayment. 

-Happy Independence Day from the Indepayment Team.

We're All In This Together

True story: the first $400 I ever failed to collect freelancing as a solo lawyer was for work I did for my friend’s father’s friend.  When I took the gig, I could not imagine that these people would not pay.  After all, it’s my friend’s father’s friend!  Alas, I did the work.  And the money never arrived after many calls, emails, and even a terse Facebook chat or two.  

When I started Indepayment, I set out to quantify exactly how much is owed to freelancers and independent workers.  I needed that number for Indepayment’s business plan, but I was also just sort of interested in whether I was one of a few unlucky freelancers, or one of many.  Turns out I was not alone.  Not by a mile. 

In in a 2009 survey of 3,000 independent workers by the Freelancers' Union, seventy-seven percent (77%) of freelancers reported having trouble collecting on invoices at some point while working independently, while in 2011 alone, forty-four percent (44%) of freelancers were unable to collect on invoices.  The average freelancer was unable to collect $4,643.  The problem is national in scope, but William M. Rogers, a professor of economics at Rutgers University, found that in 2009 in New York State alone, 120,733  freelancers were unable to collect $965,015,072 in payments. The report assumed 13.5% of independent workers were unpaid annually and the average unpaid invoice was $7,993.  In addition, the report found that in New York State alone in 2009 there were $2.3 billion in late payments to freelancers. 

We don’t have a lot of good information about whether these numbers have gone up or down in the last six years, but with the growth of the freelance workforce, it’s a pretty good bet it increased.  Based on a very conservative estimate that there are 10 million freelancers in the U.S., Indepayment’s research indicates that 1.3 million U.S. freelancers are shorted about $2.5 billion each year in business-to-business invoices, which is what Indepayment specializes in collecting.  My $400 was a fraction of a drop in the bucket.  Cold comfort.

Why does this happen? After all, there are so many resources out there that aim to help freelancers and independent workers avoid non-paying clients.  Whole books in fact.  Not to mention our collective guts.  The most obvious reason freelancers get screwed is that freelancers are not like banks or credit cards.  Banks (supposedly) and credit cards (definitely) loan money out based primarily on the credit worthiness of the borrower.  Freelancers and independent workers, on the other hand, are not taking gigs based on the collectability of the invoice.  We’re taking gigs because we have a connection to the client, we think the work is interesting, or we just need a gig.   That’s not going to change, although Indepayment’s IndeScore lets you assess in the risk of not being paid before you take the client, which is a start.

The second reason we freelancers have such a collection problem is that we lack the infrastructure to collect.  Banks, credit card companies, and just about any other creditor (hospitals, utilities, and landlords) have a whole industry build around the collection of debts owed to them.  Freelancers, independent workers and small businesses? Not so much. Indepayment aims to change that by giving freelancers, independent workers and, eventually, small business, access to sound debt collection infrastructure, on our terms.

I’ll let you know when Indepayment collects from friend’s father’s friend.

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