Non-paying client?

Hello Everyone,

I wanted to request some advice regarding a non-paying client that we currently have. This is regarding the placement of two of our candidates.

-One of the candidates was hired as a temp, and we were in charge of the payroll, and went through a third party as we do not typically work in a temp capacity. They were paid in a timely manner, but I doubt they would have been if it were the client paying them.

-Both positions were based on a contingency contract, and the hiring manager stated these positions have a high turnover rate.

-One position was a perm position with a thirty day replacement only guarantee. The candidate left three days before the end of the guarantee, but our contract states in events of non-payment, the guarantee is void.

Not only are we out the time and money spent on the search, the temp candidate was paid thousands of dollars that we have lost. The company is blaming us for the candidates quitting, despite the position being high turnover. The hiring manager has been behaving erratically, and only answering when we called from a blocked number. When asked if they received our invoice, they told us not to call them anymore.

Most of our clients are honest, ethical and professional and we are pretty embarrassed to have worked with them. We usually receive very positive feedback from our clients. While we are certainly restructuring our contracts to require a deposit from companies we have not previously worked with, this company owes us quite a bit of money.

We have sent certified mail without a response. Of course, we are moving forward in taking legal action but have not been through this process before.

Does anyone have any advice?

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Permalink Reply by Nicholas Meyler on August 25, 2014 at 11:41pm

Talk to a contracts attorney and find out what they have to say. A demand letter with the invoice, written by an attorney, delivered by certified mail is probably the next step. When a document is signed by an attorney, people start to pay attention, because they know that they will end up paying. Also, in the demand letter, it would be wise to quote the exact passage of your contract that entitles you to the fee, and to recount the specific circumstances. If they told you not to call, that may be better for you, because it shows 'bad faith' on their part. Generally, you probably shouldn't have to sue on something like this, but it depends on circumstances. Usually a demand letter written by an attorney will be enough. Otherwise, you may need to file a lawsuit, at which point (if all the evidence is clearly in your favor) they will have to settle. You probably won't be able to collect the whole fee, though. You might ask your attorney if it is worth filing a police report about fraud... at the very least, you probably can sue for breach of contract, fraud, unjust enrichment, etc. BUT, it all depends on your contract, too. Do you have a clause in your contract that states where legal disputes must be settled? Do you have a clause for "loser pays court costs and legal fees"? Did they actually sign the contract? Watch out for any attorneys that want to charge you 40% (too high!). Avoid attorneys with the initials A and J (in any order) who want to steamroll over you and rip you off. Good luck!

Note: I am not an attorney, but I slept at a Holiday Inn last night.

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Permalink Reply by Jacqueline Bozorgi on August 26, 2014 at 12:31am

Hi Nicholas,

Thank you so much for your advice. Our contract is pretty iron-clad, and yes, they signed. They incur interest every day they are late and they would have to abide by laws in our state (CA as opposed to TX). Does that mean they would have to travel here for the lawsuit? They would also cover all legal fees per our contract.This one definitely isn't a small claims issue. We've had our fair share of deadbeat clients over the years, but none this erratic, and we have never had to actually take anything to court.

I didn't completely get your jokes, but they made me laugh nonetheless.

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Permalink Reply by JP Sutton on August 26, 2014 at 2:24pm

Jacqueline, I just went through this and won my case. You will have to sue them where they operate, not where you are located. If they are in TX and you are in CA. You will need to travel to TX and file a claim there, through their Company Agent. The total time it took for me to get paid was about 1 year from start to finish. If you would like to speak with me about it I can give you my number. Thanks.

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Permalink Reply by Nicholas Meyler on August 26, 2014 at 3:21pm

My contract cites a venue for all disputes which is nearby our office. Consider putting that in yours. Good luck!

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Permalink Reply by Jacqueline Bozorgi on August 26, 2014 at 3:27pm

Thanks so much to you both! We do have a clause that states it will go through arbitration. There is also a venue clause that states CA, so hopefully I can avoid traveling to TX.

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Permalink Reply by Nicholas Meyler on August 26, 2014 at 6:28pm

It's in your advantage to force them to come here for arbitration, since that costs them money... gives you more leverage to make them settle. Arbitration is probably not as good as actually going to court and suing, but could be good enough. Talk to a lawyer! If venue is stated, and they signed the contract, they have no choice.

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Permalink Reply by JP Sutton on August 26, 2014 at 6:55pm

Of course they have a choice Nicholas, all they are going to say is see you in court and put you on ignore.

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Permalink Reply by Nicholas Meyler on August 31, 2014 at 1:39am

Jim Patrick said:

Of course they have a choice Nicholas, all they are going to say is see you in court and put you on ignore.

They shouldn't have a choice if they signed a contract specifying venue... Not in my experience, at least.

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Permalink Reply by JP Sutton on August 31, 2014 at 8:31am

I think your missing my point Nicholas... Any how. I hope this situation works out for this young lady, I hate to see these things happen in our industry. One must be very careful these days when staffing out in outside States.

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Permalink Reply by Nicholas Meyler on August 31, 2014 at 5:03pm

I am probably missing your point, but if they signed the contract and it specifies arbitration and a venue, they don't have that much choice, otherwise they will lose a summary judgment automatically... She should be able to file suit in her own location and simply have the papers served by an appropriate server (usually recommended by the attorney). The only time when I got stuck with an out-of-state venue was the case where the contract hadn't actually been signed, although a clear working relationship had been established.

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Permalink Reply by JP Sutton on September 1, 2014 at 3:14pm

I would disagree with that. From all my experiences, suit will have to be filed where the person/company being sued is located. If it's small claims, anything under 15k, then no attorney is needed. Anything over 15k an attorney is required. Again, I have been through this just recently and have a different understanding than you.

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Permalink Reply by Nicholas Meyler on September 2, 2014 at 12:19am

I'm not an attorney, but I've been through the process about 11 times in 25 years. I don't recall all the details, but I don't remember ever having to file a suit in another state, when venue was dictated by the signed contract. You could be right, however. Getting a good attorney is the first step. It's quite a complicated business. I've placed attorneys, so I've interviewed several thousand of them, and learned a lot along the way, but I'm definitely only going by memory, here.