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Independent Contractor agreement says Contractor gets paid “after Company receives payment from Company’s clients” – Is this legit?
I’m reasonably new to this forum. I am an freelance editor, and just received an Independent Contractor agreement to sign. I haven’t dealt with a lot of these, and there’s one item about compensation in it that concerns me. The section reads:
“Independent Contractor shall invoice Company on a monthly or more frequent basis and within 30 days after the project/job to which the invoice pertains. Such compensation shall become due and payable to Independent Contractor within 30 days after Company receives payment from Company’s clients for service provided by Independent Contractor.”
Does this mean if I do $5000 worth of work for the company but their client doesn’t pay them for six months that I have to wait six months for my $5000 payment? I don’t want to wait for their client to pay them. That’s between them and their client. Isn’t it? Would it be a good idea to just cross out second sentence, or re-word it?
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15 Replies
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[Mike Bissonette] “Does this mean if I do $5000 worth of work for the company but their client doesn’t pay them for six months that I have to wait six months for my $5000 payment?”
No, not at all.
It means you have to wait seven months to get paid, because the contract gives them another 30 days to pay after their client pays them.
[Mike Bissonette] “That’s between them and their client. Isn’t it?”
In a perfect world, yes. We have to deal with this all the time, as I’m sure many others in this forum do. Clients would love to have us all “be the bank,” and let bills ride while they are waiting to be paid. For some of us, it gets more complicated than that. For example, in the automotive biz, or other clients that depend on co-op money. Say, we produce a commercial for a car dealer (and we do many of those). Well, the ad agency would prefer not to pay us until they get paid by the car dealer. And the car dealer would prefer not to pay the agency until they they their co-op money from BMW or Porsche or whoever is paying the co-op. And you know each of those don’t write their checks the second the money comes it… they sit on it a while. So, yes, the wait can get lengthy… IF YOU LET IT.
What especially is bothersome to us in the commercial world is being made (or asked) to wait for our money when we know what the media buys are. If I produce a television commercial for a biggish client, I have little sympathy for a client who wants to make me wait before they pay a $12,000 bill for production when I know they’ve already paid television stations $120,000 this month for media buys to air it.
The key is to make sure the client knows that you are not the bank, and can’t let bills ride. True, as you said, your contract is with your client, not with their client. We’ve had to have this conversation with one particular agency more than once… that we don’t care at all when they get paid, whether it’s a week, or a month, a year, or never. Nor do we care if they get paid in advance. Our bill is due when it is due, and one has nothing to do with the other. Or at least it should be that way.
We’ve had to explain to a client more than once that we can’t do to others what they are trying to do to us… we can’t tell the utility company “You’ll get paid when we get paid,” or say that to our health insurance company, or to software companies that we subscribe to, or to my employees, or every single other payment that we have to make.
But… many don’t see it that way. It just depends on what you can and will put up with, your relationships with existing clients, and all that jazz.
But yes, if you sign that contract as is, you won’t get paid until they get paid. And if they never get paid, you never will. I’ve seen that happen, too. That exact scenario drove one of our city’s largest and oldest ad agencies into bankruptcy, and eventually out of business altogether.
T2
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Todd Terry
Creative Director
Fantastic Plastic Entertainment, Inc.
fantasticplastic.com
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It’s not enough for them to say “you get paid when the client pays us.” Whatever happened to them requiring timely payment from the client?
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There is no “way to peace.” Peace is the way.
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I find this to be common when working for agencies. Sometimes I agree but will say I will release the final version without the watermark when I get paid. That way all the creative and approvals are made. I don’t mind if it’s “just” my labor but when hard costs such as travel are involved it hurts. Also, I won’t sign anything and after awhile I use nuisance tactics to get paid. You would be surprised as to how many departments have contingency funds, especially the marketing folks, so if your invoice isn’t too high you can get paid that way. But don’t sign anything except the IC part (excluding the payment timeline) and the fees section. You can cross out and initial any section you want.
The problem is the definition of “Completed” is squishy so who knows when the agency’s client will consider it “done”. On the other hand I am guilty of doing this too. I have several humongous clients and I have no real idea when I will be paid, the invoice goes into a black (automated) hole that is outsourced. I produce for America’s largest “too big to fail bank” (you know who they are) and I swear to God, they outsource all their back office paperwork to Mumbai. So what I tell my editor is that I’ll pay you the day I get paid, and that has worked for a dozen years. I’ll pay the crew out of my own funds especially if I know they are young renters.
What I really don’t like about agencies doing this is that we all know they have a decent cash flow, after all, the lights are on, salaries are being paid, BMWs are in the parking lot and when you Zillow their upscale home addresses they obviously are making their mortgage payments. So my theory is that they try to figure out which vendors can be pushed to accept the “We’ll pay you when we get paid” BS. They can’t do that if they need a new roof but they figure they can do it to us. In sum, I will sometimes accept this to get the gig but if they go too long I have become expert at being a “squeaky wheel.” So become a squeaky wheel. It helps if they have a crush deadline.
P.S. You just reminded me of 2015, I will start a thread in the near future on this. For the US’s largest advertising agency’s marketing arm I was sent all over the US for six weeks interviewing CEOs. When I wasn’t getting paid and started my squeaky wheel I was told “We don’t cut checks the last month of a quarter”. This is now very common with the Fortune 100s. Four months out of the year they stop all APs, whether they owe $2000 or $2mil.
Ned Miller
Chicago Videographer
http://www.nedmiller.com
www,bizvideo.com -
The following clip contains a repetitive use of the f-word, to illustrate a point. So, maybe NSFW, at least, not without headphones on. But the guy makes some great points relevant to this discussion:
https://www.youtube.com/watch?v=6h3RJhoqgK8
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[Mark Suszko] “maybe NSFW”
No Shortage of F Words.
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But when you get past that, the underlying message is relevant.
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I wouldn’t sign that agreement. We require full payment before we release the final video. We keep a burned-in time code window on the video until we receive payment. That works fine and we never end up chasing a client down for payment.
Greg Ball, President
Ball Media Innovations, Inc.
https://www.ballmediainnovations.com -
An airdate or a date the video will be shown at some event, is your best leverage to get paid. They’re counting on it being ready for the deadline. After the deadline is over, their motivation to pay is significantly less. Presenting them with a watermarked copy and the promise you’re holding the “clean” copy in your left hand, while the right hand is extended to accept their check, the day before airtime, is the BEST bargaining position. You’d be ill-advised to give up that leverage in any contract.
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[Greg Ball] “We keep a burned-in time code window on the video until we receive payment.”
I just used a logo with our phone number below it, bug-style, but I absolutely adore this kind of approach.
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I have the version number as the watermark so it doesn’t look like I’m “punishing” them for payment. Inevitably they ask, “Can we get the final without that version number?” and that’s when I ask for the second half. I don’t phrase it as, “Soon as I get my check.”, rather a quid pro quo: “Sure, I’ll make and send the final and you’ll put the check in today’s mail, right?”. If they then hem ‘n haw that’s a red flag to me. I try to stay friendly till there’s a problem. I’d say a good half of my clients are repeat, referrals from regulars, friends, acquaintances, and only if I smell a problem do I go hard ass, mainly with one-offs and out-of-owners.
A problem that I have been having with the Mega Corps is I am often hired in an emergency, as in, “My boss says we need a trade show video for the convention next week!” They come to me with their hair on fire and if I play the, “I ain’t doing nuthin till I get my upfront 50%.”, well…they’ll call my competitor, so it helps to be known as flexible. This approach backfired last summer and I’ll tell that story soon, that’s the one where the head of APs at the U.S.’s largest ad agency told me they never write checks the last month of a quarter, and she said that when they were already 90 days old. But 90% of the time when I work for Mega Corps my client submits my invoice into a dark, automated hole and it’s untraceable. If I go hard ass and say they don’t get the final until I get the second half, there’s nothing he or she can do, so I have to give it to him or they will look very bad to the boss. However, I’m not worried about a Fortune 100 stiffing me.
The individuals and small companies, that’s a different story. Then I use DEFCON Levels and when I no longer ever want to work for that client again, then I Cross the Rubicon. I’ll tell those stories someday. Such as sending grainy telephoto shots of their kids on the playground. (just kidding)
Here’s a good one: Two years ago I was hired by the bank too-big-to-fail to produce training videos for the Navy, they were going totally cashless and every base and ship would no longer accept currency. So in January I film on an aircraft carrier in port and by July I hadn’t got the second half and the videos were delivered in March. So I hassle the bank, they hassle the Navy as to where’s Ned’s money and the answer was that they passed it onto the U.S. Treasury and there was no way anyone could ever know when the big check would arrive. Fortunately the second half was my profit and the editor’s fees and he’s a buddy, but it was very disconcerting. Totally untraceable. In sum, it’s important to have a cash savings cushion just like we have for personal, so you can survive these cash flow issues that are a part of being a little guy servicing the big boys. Or at least a low interest credit card with a big limit to see you through.
I think it’s considered customary to give 30 days net in creative services and when you want COD it’s tantamount to saying, “Don’t trust you”, which is OK with new clients and one-offs but my regular base would be highly offended if I acted as if I don’t trust they’ll pay. Someday when I have some time, and to save me time from answering questions I get about collections from newbies, I will elucidate on:
• Personalize Your Squeakiness
• Crossing the Rubicon
• We never write checks the last month of a quarter.I’m expert at collecting. Helps to seem unhinged!
Ned Miller
Chicago Videographer
http://www.nedmiller.com
www,bizvideo.com
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