Contractor Dilemmas - Moral and Financial Obligations?

An Anonymous Coward asks: "This is a true story, one that I am currently trying to resolve and wondered if the Slashdot community could offer any help. I've been developing a new application for a startup company, contracted on a daily basis for my services. I've been providing services for 5 weeks now, and am still trying to get payment for work completed during week 1. The company is refusing to pay me, stating that they are not happy with progress, however all of the milestones we agreed upon for that week have been met. Now, it gets interesting: I know that this company is seeking startup venture capital, and I know from whom. Yes, it would be malicious to contact this party with the information that I have, but am I morally obliged to? If you were set to pump several million into a company with loose moral fibre would you not appreciate a warning?"

Comments

Well,

[Echnin]

I personally think you should "confront" the company first, and I mean "confront" as in "threaten". If they still refuse, go ahead.

Re:Well,

[MrResistor]

I have to agree.

If you have fulfilled your contractual requirements they are required to pay you. I think it's entirely appropriate that you let them know that if they don't, not only will you sue them, but you will also do everything you can to foul the waters with their VC.

It comes down to this: another word for contractor is mercenary. Make it clear to them that you will either get paid or get revenge.

Re:Well,

[markwelch]

Echnin suggest confronting the client by threatening to report their wrongdoing. I disagree, emphatically, since this might constitute extortion, which is a crime.

California Penal Code Section 518:

Extortion is the obtaining of property from another, with his consent, or the obtaining of an official act of a public officer, induced by a wrongful use of force or fear, or under color of official right.

California Penal Code Section 519:

Fear, such as will constitute extortion, may be induced by a threat, either:

1. To do an unlawful injury to the person or property of the individual threatened or of a third person; or,
2. To accuse the individual threatened, or any relative of his, or member of his family, of any crime; or,
3. To expose, or to impute to him or them any deformity, disgrace or crime; or,
4. To expose any secret affecting him or them.

Re:Well,

[Bake]

Since when did it become extortion to demand payment for rendered services/work?

Re:Well,

[toast0]

assuming you're quoting the law correctly (which I have no reason to disbelieve, I'm just lazy and being semi-complete)...

It is fairly obvious that payment (a property) could be obtained by the threat, and that the goal is to obtain the property.

However, the use of fear must be 'wrongful', which is of course debatable. I personally would not consider it wrongful to let someone know that they are past due on payments, and if they do not become current, you will report that to various people (including presumably the VC and possibly a collection agency)

Of course weather or not it was wrongful will be up to a jury to decide.

Re:Well,

[markwelch]

It is not extortion to demand payment for services rendered. It is extortion to threaten someone -- read the statute.

Re:Well,

[Bake]

The keyword in the statute (IMO) is "wrongful".

I'll admit that the original poster is in a very gray area (probably darkish gray even). But as a principle I would consider his actions just and not in violation with the statute.

After all it is not generally considered extortion to pursue payment for an item sold/service rendered.

Going to the supervisor of the party you're dealing with should not be considered extortion if the party you're dealing with has not held up to their end of the deal. I mean, would you consider it an extortion if you got a bad burger at McD (ok ok, bad example), and you threatened the clerk you'd report him to the manager if he didn't refund the said burger.

But IANAL, and that's just my two cents.

Re:Well,

[BitGeek]

Its only illegal if what he were to tell the VC was untrue-- then it would be threatening to misrepresent them in a bad light.

Telling the VC the truth about the situation is not wrongful, and therefore would not constitute extortion.

Its only extortion if your threat is to do something illegal.

Re:Well,

[kasparov]

Actually the statute makes no differentiation between "true" and "untrue." It even goes as far as stating that threatening to divulge a "secret" is extortion.

Its only extortion if your threat is to do something illegal."

Not exactly. It is only extortion if you use fear or force to obtain what you want. You can carry out any of the threats to expose someone and it not be illegal--as long as you are not threatening them with exposure to procure some "property." Basically, it is the threat (used as leverage or a fear tactic) that is illegal.

IANAL

Re:Well,

[markwelch]

The confusion here is "reporting" versus "threatening." You can be held liable for "threatening" even if you are seeking something you are entitled to, and even if you are truthful about the thing you would report, and even if the actions you threaten to report are bad or illegal or breaches of contract.

It is the threat-for-gain that is the crime. Is it a fine line? Yes, it is. For example, you may include, on your invoices, the information that you report defaults to credit-reporting-agencies and/or to Dun & Bradstreet. But you may not call someone who is asserting objections to your invoice, and threaten to contact their investors unless they pay up. That is extortion.

Finally, let me repeat: threatening to report someone's non-payment to their financial backers (actual or prospective), or making such a report, will absolutely, positively NOT accomplish anything positive, and the risks of negative responses (whether criminal complaints, or lawsuits, or nefarious revenge tactics) are NOT worth the potential satisfaction from trying to screw with the deadbeat's business.

Re:Well,

[markwelch]

> Its only illegal if what he were to tell the VC was untrue <

No, no, no. You are missing my point: I never suggested that "telling the VC" was illegal, but that "threatening to tell the VC" would be extortion (a crime).

If I threaten to tell your wife (truthfully) that you had an affair with your secretary, unless you pay my disputed invoice, I am blackmailing you (blackmail is a type of extortion). I can tell your wife if I wish, but threatening to do so unless you do something for me, is extortion.

It does not matter that the "statement" being threatened is true, nor does it matter that you actually owe me the money.

Accurately telling the VC is NOT extortion, and probably is not a crime at all (though it might lead to lawsuits and perhaps revenge tactics). It is the threat that is illegal.

Read the statute. I posted the California statute here, and the third and fourth alternatives seem to apply here.

Again, the risk of criminal prosecution is very slight. Every day, people stand at the customer service desk at retail stores, demanding a refund and threatening to report the store's unethical practices to the Better Business Bureau or the local D.A. unless the refund is given. That is, technically, extortion.

Often, Slashdot posts come with the warning, "I am not a lawyer" (IANAL). Let me repeat: I am a lawyer, and this is not legal advice, I am doing my best to accurately state the law, as applied to the very incomplete set of facts presented.

Re:Well,

[BitGeek]

You're quite wrong.

Otherwise every lawyer and debt collector in that state would be out of business.

Re:Well,

[BitGeek]

Well, since you admit you are a lawyer I should assume everything you say is a lie.

Anyway, if you are afraid of your wife finding out, or of being hauled into court, then either threat is extortion by your definition and you, yourself, are a criminal if you have ever mentioned meeting someone in court to settle a dispute.

By the way, you don't get to claim to be an authority "I am a lawyer" and then claim to not be giving legal advice. IF you aren't willing to be bound by what you say, shut up about being a lawyer. On the net, nobody can tell you're a dog.

Furthermore, the law is irrelevant to this discussion-- the poster asked about MORALITY, not the law. The law has nothing to do with morality, and, in fact, a very large portion of the laws are flat out immoral. (Such as taxation for services not received-- anyone paying property taxes to schools who doesn't have kids is being stolen from immorally.)

Re:Well,

[Anonymous Coward]

You're a moron. The top poster in this thread recommended threatening his employer. All this guy did was point out that doing so would be illegal, and hence stupid. Ask the guy considering doing this whether "the law is irrelevant." It probably wouldn't feel so irrelevant if you were the guy about to do two years for extortion.

Re:Well,

[Anonymous Coward]

dude -- let me clarify.
threat1 :
pay me or i'll tell the VCs : illegal
threat2 :
are you planning to pay me after you get funding from XYZ VC company ? i've got a friend in there who i can call to find out if youre getting funding soon so i get my payment. : legal
extortion1 :
hey VC dude this guy isnt paying for work completed : illegal
extortion2 :
hey VC dude im just calling to find out if youre funding the company cos ive not got payed for work done there and i'd love to get payment soon. : legal.

moral ? heck if i know. im a lawyer-to-be. BTW ive done this before for a client and we managed to get funding stopped completely to the shitheads who tried to scam us. and we also got 2/3rds of the payment even though they *didnt* get funding. hehe.

Re:Well,

[kasparov]

They are not using fear of force or exposure to obtain property. The lawyer isn't saying, "If you don't give my client x dollars, I will tell the whole world that you have sex with sheep." The debt collector is not saying, "Give us our money, or we'll break your legs."

Now, if the lawyer just goes out for fun and tells the world that you have sex with sheep (and you do)--or the debt collector shows up and breaks your legs, then neither are guilty of extortion. The debt collector is guilty of assault, of course, but the lawyer has committed no crime (that I'm aware of).

Re:Well,

[CTalkobt]

Hold on - If a bill collector calls demanding payments then he is legally protected by law so as to make any claims /statements he wants as long as they do not involve physical harm.

What's to prevent this guy from doing the same thing? I see no differance here.

Re:Well,

[DEBEDb]

A threat of legal action is not blackmail.
You can just threaten to sue, and mention
that the VC will certainly find out about it.

Re:Well,

[DEBEDb]

Now, if the lawyer just goes out for fun and tells the world that you have sex with sheep (and you do)--or the debt collector shows up and breaks your legs, then neither are guilty of extortion. The debt collector is guilty of assault, of course, but the lawyer has committed no crime (that I'm aware of).

Try slander or defamation. Not crimes, but you
can still be liable for damages.

Re:Well,

[DEBEDb]

By the way, you don't get to claim to be an authority "I am a lawyer" and then claim to not be giving legal advice

Yes, you do. To give an advice this lawyer
would stand behind and say "this is legal
advice" may necessitate getting more information
from the client, maybe doing some research
into the relevant facts and laws.

Do you have to be a jerk, or are you just playing
one on /.? :)

Re:Well,

[kasparov]

In both of these instances, I believe that "truth is an absolute defense." IANAL

Yes

[Anonymous Coward]

You most definitely should warn them. You'll be doing them a favor.

Yes

[briglass]

As long as you actually completed the "milestones" as you say you have... :-D

conflicting forces

[n9hmg]

A: You are right to warn the investor, but
B:You will give yourself a difficult reputation to carry through a career.

Now, if you have a personal contact within the investor company, you can slip it in that way, but it still probably won't gain you much.
Perhaps you can use your knowledge for .... oh, how can I say this, blackmail? No, that's such an ugly word... How about extortion?

Re:conflicting forces

[n9hmg]

I have to ammend my comment a bit...
You say you're at week 5, trying to get paid for week 1, and you have the agreed-upon milestones finished for week 1. What about weeks 2 through 4?
While you may have the employer contracturally, if you're only 20-25% as far along as you should be, he's got to be getting nervous and regretting hiring you.
If, in fact, you've completed up to maybe week 3 (or especially 4), that's not far behind, and he's purely a scumbag, probably short on VC because of poor management, and trying to stretch to his own milestones to get more VC.

Re:conflicting forces

[stilwebm]

B:You will give yourself a difficult reputation to carry through a career.

I think a five week contract job for a soon-to-fail start-up is highly unlikely to make even a blip on the radar of this guy's career. Employers checking references won't even be that interested. If they are, they will be fully aware of the relative weight of a short-term job with a failed company. If the future employer doesn't recognize this, then he does not want to work for them anyway. More likely, the venture capitalists will be pleased. There is much more networking to gain from gaining the favor of venture capitalists.

This guy should be more concerened about the affect on his paycheck than his career if he reports this.

Re:conflicting forces

[topham]

Don't know about you, but in this business (and a city of 700K) I trip over my old bosses way too much to believe that any bad action on my part wouldn't come back to haunt me.

Each of the people I worked for (in IT) were working at/for a new client site of mine AFTER I left their employment. The reasons for them there arn't relevent. I am sure that they felt free to speak for, or against any past actions I have done.

I.T. is a small world sometimes, even in bigger cities.

Re:conflicting forces

[Anonymous Coward]

Apart for weighting the benefits(?) and disbenefits
in order to decide, you should also consider
some more. They will probably bad-mouth you even if
you don't seek revenge. So what is the point
of turning the other cheek? Go ahead and act like
a man: burn them fact, burn them big! At this
point you probably have nothing to gain.

And I don't sit on my chair speaking without
experience. I have done the that, and that
is what others have done to me. It seems simple to me.

Not clear . . .

[MaxwellStreet]

Has it taken you 5 weeks to complete the work scheduled for the week one milestone? You're a little unclear as to that.

This is obviously a little gray, but your determination that they are of loose moral fiber based on the fact that you are having a dispute over the value of your work and they don't want to pay you seems a little suspect to me.

Frankly, I don't think anything you could say to the VC's would influence their decision any - they might actually view the company's reticence to pay as a good thing. Management will tell them that you're an underperforming consultant, and not getting paid. VC's see management as hardnosed people who won't play fast and loose with their money.

In short, you can only hurt yourself by going to the VC's. Odds are you've lost any shot at future work for these people - time to cut your losses and walk.

Just my 2 cents . . .

Re:Not clear . . .

[SuiteSisterMary]

The way I read it, he's done five weeks of work, meeting milestones, but they haven't paid him for ANY work done thus far.

Bitching to VCs about company?

[markwelch]

First, if you call the client and threaten to report the non-payment to the financial backers unless you get paid, you are most likely engaging in extortion, a crime.

Second, if you just go ahead and call and report the non-payment, your goal is clearly to interfere with the existing relationship between the company and its backers. The company might sue you (for interference with contract, interference with prospective economic advantage, defamation, etc.) and of course they have the money to fight and you don't. Can they win? If what you say is truthful, probably not.

Of course, if you file suit against the client, for breach of contract, your filing of a lawsuit will be a matter of public record, and your attorney might find it necessary to schedule depositions or subpoena the financial backers for some reason, in which case the financial backers would find out. It is possible that your filing a lawsuit might trigger a termination clause in the financing arrangement, but the I can't imagine how the mere filing of a legitimate lawsuit to collect money owed, without more, could be actionable under any theories unrelated to the lawsuit (e.g. you could get sued for malicious prosecution or punished under the SLAPP statute or court rules if your lawsuit is thrown out, but you can't be sued for defamation just for filing a lawsuit).

Do you have an obligation to report the non-payment? Absent some additional information, I don't think so. You might have an obligation to speak up, if you have any kind of relationship with the financial backers, or if you made some statements to them, or if you are aware that your name and reputation were represented to the backers in order to get the funding.

It appears that you are, in fact, ending your relationship with the client. If you are not going to sue them for the money owed, then you should probably just move on and learn from the experience. If you are going to sue them, let your lawyer handle the matter, and don't try to take actions that could cause you more problems down the road.

Yeah, you're mad, and the client is scum. You can gain nothing from bitching to the money-guys, period, and you can lose a lot.

Re:Bitching to VCs about company?

[doc modulo]

My my, a strategist giving you free strategic advice hehe. How interesting life online can be no?

Ah yes, the age old question. Do I take revenge or not?

As the strategist has pointed out, warning the third party is not a legitimate reason. The questions that remain are:

1. Do I want to take revenge? Am I that kind of person? How would I look back at my life having done that?

2. Can I take revenge while not being found out? Or, take revenge without any possibility of retaliation by them?

My personal strategy when being wronged is the Pavlov method. As things get worse I increase the Pavlov dosage. If I cannot influence my adversary that way I usually walk away and wait for an opportunity to get back. If the chance never arises then that's too bad but I won't lose much sleep over it. In any case I will make a mental note of not trusting that person again, no matter what, avoiding contact gives me piece of mind, a chance for revenge is a nice perk.

But more often, it never comes to that. I can, almost always, recognise an egoist/egotist as soon as I lay eyes on them, I can even recognise them over the internet. With that knowledge I can head off any attacks that come my way and because I make friends easily, I usually have more political power than my adversary. I also make sure not to be dependant on my adversary, or at least, make it worth his wile to not cross me (usually, egotists are bad at reading other people's minds while they are predictable).

My suggestion. If you decide to take revenge, do it anonimously. Gloating over your downed opponent is a risk that outweighs it's benefits (your feeling of satisfaction). Learn your lesson and don't trust those people again (most altruistic people keep making the same mistake of trusting egotists). And finally, learn to recognise egotists before they try to benefit through you (they will always try if they see their chance) prevention!

This goes for all you good-natured geeks as well! Never trust an egotist! More power to the altruists :D

Re:Bitching to VCs about company?

[Odinson]

"Of course, if you file suit against the client, for breach of contract, your filing of a lawsuit will be a matter of public record, and your attorney might find it necessary to schedule depositions or subpoena the financial backers for some reason, in which case the financial backers would find out."

That's it. You can't threaten them directly but you can tell them you have spoken to council (after you have of course), and you can mention that signifigant stakeholders may be called to testify.

So long as you can find some other fairly similar case where stakeholders were suppoenaed by a contractor, you can reply to any challenge to your "threat" with the case. You know Joe Smith vs BobCorp, and we all know what public record says happened to BobCorp after the VCs had to appear...

Re:Bitching to VCs about company?

[dubl-u]

You should be very careful in doing this kind of pseudo-threatening yourself. Hire a lawyer with teeth and have them lean on the deadbeat. A good lawyer will know exactly what they can get away with.

Re:Bitching to VCs about company?

[gnovos]

You own the IP until they pay you. You need to go to the VCs and tell them that if they buy it they will be guilty of copyright infringment.

Re:Bitching to VCs about company?

[IQof20]

First, if you call the client and threaten to report the non-payment to the financial backers unless you get paid, you are most likely engaging in extortion, a crime.

For a person who claims to not give out legal advice it just sounds like you did Mark. From how you phrased it, you are likely guilty of poor judgement, not a crime. Plus this is state dependent. The difference in the original example is that of motivation. If you're just going to the VCs to screw this company that's one thing, if you're going with the hopes of getting yourself paid somehow, then that's another. One is vengeance, the other is business. Of course, the needs of vengeance may well be served via the legitimate needs of business, but that's your own ethical trap for you to contemplate. Second, if you just go ahead and call and report the non-payment, your goal is clearly to interfere with the existing relationship between the company and its backers.

Not if you go and ask them when they are considering funding the company because you're going w/o payment for X weeks. You are simply asking a question. Oh...and of course they know you haven't been paid.

You might have an obligation to speak up, if you have any kind of relationship with the financial backers, or if you made some statements to them, or if you are aware that your name and reputation were represented to the backers in order to get the funding.

This is key. If you KNOW the backers or if they are acting based upon work you've provided or are creating then you have a legitimate duty to these people. Again, however, this cannot be about vengeance, but recovery of the funds you've "lost".

If you are not going to sue them for the money owed, then you should probably just move on and learn from the experience. If you are going to sue them, let your lawyer handle the matter, and don't try to take actions that could cause you more problems down the road.

The best advice of all. You should likely just chill and write this event down for future reference. Make a note of it and when they DO get their funding, then explain to them exactly how patient you were, how you didn't smack them around when you have the opportunity and the right, and how you want to continue working with them in the future. Explain that the $ owed and a little extra will heal the breach and you'll forgive and forget. Then, when they pay, do as you promised. Let it go man. I get pissed at non-paying contractors/customers all the time. I take out my vengeance in small ways that are all designed to encourage payment. Like not being able to commit to deadlines 100% until paid, selling great $ saving ideas to the higher-ups and then telling them I can't do it because I haven't been paid, etc. In the end, you do the work. As long as you do good work and can be proud of it then you have the superior position. Don't sully that by acting on an impulse or w/o forethought.

Re:Bitching to VCs about company?

[Hard_Code]

First, if you call the client and threaten to report the non-payment to the financial backers unless you get paid, you are most likely engaging in extortion, a crime.

Uh, doesn't extortion imply extracting money which you are not entitled to. If he is contractually (legally, whatever) entitled to this money, how is it a crime? If a neighbor steals money from me and I tell him that if he doesn't give it back I'll tell others (or the polic), is this really extortion? (in the poster's case, it is his labor that has been "stolen")

hairy situation

[tongue]

With regards to ratting them out to the VC's, I'd watch out that you don't violate any NDA's or something of that nature.

As for the non-payment, your course of action is fairly limited. If it were me, I would notify them that if they don't pay you for the work completed thus far, you will stop work altogether and have to resort to a lawsuit. I'd also consider dropping that company from your client list altogether--given how much trouble you have collecting from them in the first place, I wouldn't be anxious to take on more work from them.

Re:hairy situation

[R2.0]

"If it were me, I would notify them that if they don't pay you for the work completed thus far, you will stop work altogether "

Put a 48 hour deadline on it. Have it delivered by certified mail or some other traceable means.

"have to resort to a lawsuit"

First look into a mechanics lien. Basically, it's a statement filed with a court of proper jurisdiction stating that company X owes you money for work performed. What it does is encumber the company financially - there are a lot of financial transactions that company X can't do if they have a mechanics lien recorded against them.

Also, you need an attorney. The laws on mechanics liens are very specific in each state an involve various deadlines, etc.

As for the VC stuff, that's the beauty of a mechanic's lien - if one exists, company X is required to notify the VC of it. They do the dirty work for you.

You need the VC as well as them.

[WasterDave]

They probably don't have the money. You can be as pissed off as you like about it, but that won't help you get paid. Ditto bitching to the VC's - won't put money in your pocket.

I suggest you have a little chat with them along the following lines:

1, You've not paid me, I'm a bit pissed off.
2, But fundamentally I like you guys, I like working here, what we are doing has value and I hope to have a long and prosperous working relationship.
3, So can we be honest about this - if you've not got the money to pay me right now, just tell me and we'll work something out.
4, But if push comes to shove, until you pay me for it I own the intellectual property on the stuff I'm doing for you. You have to see this as a risk to the bigger picture, and clearly it's a risk that you'll be wanting to alleviate.

Dave

Re:You need the VC as well as them.

[cpeterso]

I definitely agree that you should own the IP to your work IF you have not been paid. Don't check in your code or leave your laptop unattended, if possible.

Re:You need the VC as well as them.

[Manhattan Project]

If it's under a certain amount (declared by your county) you can seek redress in small claims court. If you want to get the full amount, you might want to ask the VC to participate somehow on your side. Essentially, the VC might be in a position to describe how much money the company should be able to pay you.

Before you go to court, of course, you want to try to settle. And if these guys are holding out on you for much more than the small claims limit, you will want to have your lawyer file a regular suit in a regular manner.

The company may simply not have enough money to pay you and they have a cowardly weasel for a financial officer. If this is probably the case, you should ask what they will pay you, decide if you think it's right. If they are looking for VC you could try to make them sign a promissory note for the remainder, assuming they get funding. This would make them a debtor to you and would change the scene entirely if they actually are going bankrupt.

In any event, you've just discovered the primary reason why consulting should be contracted at high rates. The possibility that you do not get paid is so high you really need insurance against it. So if you went in there thinking, "I made 100k as a salaried programmer, I should be able to make $120k as a contractor," you have probably done yourself a disservice. If you did that, you are likely contracting at $480-$600/day. Contract work, even in these bad times, fetches around $872/day. Good contractors are getting hired somewhere above that number.

Good luck!

Re:You need the VC as well as them.

[catfood]

Work something out?

Look, the client has the money. It may be tied up in hardware or office equipment that they'll have to sell at a loss, but they have the money.

I want to know when it happened that geeks turned into happy, generous bankers.

They're avoiding paying the guy because they can. This is like "working something out" with a mugger.

Appropriate channels for action

[Locke!Erasmus]

I think it is inappropriate to contact the VC that is involved.

You knew the risks going to work for a startup. I do not wish to sound harsh, but that is the simple truth. Older, more established companies have policies and procedures to which we as employees must adhere, and those procedures can be a drag...but...those procedures also protect us as employees because they set clear expectations. With a startup, it's different because in a startup usually the emphasis is on "make more money, sell more stuff, get the product out".

Did you sign a non-disclosure agreement? If you did, you might risk forfeiting all your payment altogether if you contact the VC and I think the contractor would be perfectly right to withhold it from you in those circumstances.

What the startup is doing to you is wrong, and should be addressed. Five weeks is an excessive amount of time to way for pay that you have already earned.

I would take whatever documentation that you have, such as your NDA, emails or your written agreement for pay terms, and written documentation such as emails, etc saying what milestones have already been met to your local department of labor and see if they can't help.

You might also wish to consult an attorney.

Whatever you decide to do, I think taking vigilante action of your own by contacting the VC would be just as wrong, if not more wrong, than the startup withholding pay from you.

try again....

[jeffy124]

approach them again about the arrangements and payment. ensure that they aren't missing something. if they continue refusal, simply back out. If they dont hold up their side of the deal, you're under no obligation to either.

But before you do anything: Talk to a lawyer! Most slashdoterrs ANL. (and IANAL)

If at any point you consider a lawsuit, gather evidence to show that you delivered the agreed services (preferably, before backing out). Even your own backup tapes could be used to show that milestone X was reached before date D, as the tape was made shortly after D.

Re:try again....

[jeffy124]

oops, about the VC -- it may not be necessary. If you back out, the VC may notice and not provide, and/or your client may not consider the VC being as they are suddenly not ready for them.

Be honest here

[Otter]

What's the question, really? "Do my moral standards obligate me to warn the VC's?" or is it "Will running to the VC firm help me get my money back?"

If the latter, then forget it. They won't lift a finger on your behalf, and just threatening the company that hired you is liable to create more trouble for you than good. There's a legal system for a reason -- get a lawyer.

If you're acting out of genuine altruism, I'd suggest minding your own business. It's not like you've uncovered some WoldCom'ish fraud. And even if you're the world's greatest humanitarian, I can't imagine the VC mind grasping the possibility that you're not just trying to extort your fees out of the company.

It's not theirs yet

[John Q. Public]

Until you're paid for your work, the code is still yours.

Morally, at least. It really depends on your contract*, but if you've got deliverables and they haven't delivered the money, that may be true legally as well. Read your contract carefully*. At least one person has suggested a lawyer... and doing that gives you really good odds of ending your contract, but it lets you make the dispute public (in front of the financiers) without blackmailing the company.

Have they told you what they're unhappy with? 'Progress' is awfully general - if the milestones have been hit, on time, they shouldn't have much of an argument*. If it took 5 weeks to hit the first week's milestone, then you may have to renegotiate with them since that's pretty bad...

Don't ruin your reputation by an end-around on something this basic. As a consultant, it may make you poison for future employers.

* Check your contract for quality-of-code clauses or milestone-timing penalties

---

Accidents Happen

[Anonymous Coward]

If you *happen* to show up at the same time as the VCs and bust into their meeting to talk to the CEO and make a LOUD compalint about not being paid your message will ro through

Not very anonymous, are we?

[TTop]

Geez, if you're gonna be anonymous, try a little harder, Mr. lee.bolding@unixconsulting.co.uk (the email link connected to the AC).

Other people have good suggestions, but it seems consulting an attorney (and not Slashdot) would be the best suggestion.

You're essentially asking for legal advice here and Slashdot is not the place to ask for moral advice, either (see Warez thread earlier today).

Re:Not very anonymous, are we?

[BandwidthHog]

Geez, if you're gonna be anonymous, try a little harder, Mr. lee.bolding@unixconsulting.co.uk (the email link connected to the AC).

What's truly funny is that their homepage is the default pre-configuration page for a Cobalt RaQ server. Doesn't really seem to fit with that domain name, does it? I mean, c'mon, at least slap something together with FrontPage before you start spreading the url around on slashdot.

GET OUT NOW!

[Anonymous Coward]

Seriously, if they can't pay you, and are going for VC funding, they likely need the VC funding just to make your pay. I'd just walk away from the whole deal now and get another job. I've been in too many situations where this just ends up with you not being paid.

• If you talk to the VC, you won't get paid once the company finds out
• If you don't talk to the VC and stay quiet, the company will take this as tacit approval to keep screwing you
• If you bitch, the company will just not pay you

Your obligations are to your customer

[topham]

Your obligations, regardless of whether they have paid you or not, are to your customer.

Currently they owe you for work done previously, for that you can stop work, threaten them with legal action, etc. All of which is ethical and fair.

Destroying their funding because you have a squable over the first weeks pay (while on the 5th week) could make you, in their eyes, liable for a few million in financing.

Even if they couldn't sue you over it they could ruin your name as a consultant saying you used insider information to destroy their business. And they would be right.

Currently your in the situation where they COULD pay you, they COULD resolve the outstanding situation.

Re:Your obligations are to your customer

[ClosedSource]

"Your obligations, regardless of whether they have paid you or not, are to your customer"

Your customers obligation, regardless of whether they like your work or not, is to pay you as agreed.

Re:Your obligations are to your customer

[topham]

The problem in this example is the time period.

5 weeks.

5 weeks is NOTHING toa business. Companies typically take 30 days (or more) to pay P.O., even if they get a discount for paying earlier. Thats over 3 weeks on a standard purchase.

There was a dispute over what was finished, or not finished. fair enough, stop ork and wait for it to be resolved, or, continue working and hope it is resolved.

Interfering with other aspects of the business is not, in my opinion, ethical.

If they get the VC funding perhaps they can pay the individual. Maybe they CANNOT pay him until then. Bad situation, but telling the VC might prevent them from getting funding, resulting in the individual not being paid. Why shoot yourelf in the foot? Its much easier to sue a company that has money (assuming the situation cannot be resolved).

Re:Your obligations are to your customer

[ClosedSource]

All that I was suggesting is that both the customer and supplier have responsibilties. The fact that many customers don't live up to those responsibilities is not an excuse.

It has to be said on /.

[Anonymous Coward]

GPL THE SHIT!!

You wrote the software. You're the copyright holder. You can release your software under any license you chose. GPL it, leave, and let them deal with the code.

Re:It has to be said on /.

[Anonymous Conrad]

You wrote the software. You're the copyright holder. You can release your software under any license you chose. GPL it, leave, and let them deal with the code.

But then

1. they get it legally for free
2. he's pissed away any chance of ever getting paid for it
3. he's very likely breached his NDA

Re:It has to be said on /.

[Anonymous Coward]

I'd be very surprised if the NDA was binding on source code he wrote under contract, considering they haven't actually held up their end of the bargain.

Re:It has to be said on /.

[Anonymous Conrad]

I'd be very surprised if the NDA was binding on source code he wrote under contract, considering they haven't actually held up their end of the bargain.

I was thinking more along the lines of leaking the company's business idea through details in the source code. Even if he obscured the details, it's still a minor (inferred) leak of which technologies the company were interested in.

I was also thinking of 'non-competitivity' clauses, but you're right: that'd probably be in the contract not the NDA.

I'd imagine the NDA and contract are separate so the NDA would likely survive breach of the contract.

Labor laws

[ceez]

Whether you're a contractor or not, there are these things called labor laws.

Have contacted your state's dept of labor or workforce commission? You should!

Huh???

[Anonymous Coward]

Coming to Ask Slashdot for ethical advice?

What's next? Cowboyneal's 24-hour online confessional?

I'd say don't do it

[pediddle]

Keep your mouth shut for the time being, and build your case for a future lawsuit. If they don't want to pay you legitimately, you can forget about seeing your money for at least until the courts will give it to you.

From what I've seen with startups, they might not really *have* the money to pay you at the moment, even if you were to win a suit (maybe this isn't the case; you know better than I). If they can get venture capital, then they will be able to pay you comfortably. I'd say *encourage* the VC to invest, and only after that happens, fire all of your ammo.

If you don't think you can build a court case, then you need to ask, "Why can't the contract be enforced?" That leads to, "Did I really fulfill my contractual obgligations?" If you have to answer those questions, then I suppose revenge is your only recourse.

Remember your career, though. Don't burn bridges, because taking revenge *will* come back to haunt you. Do this legitimately, through the courts, and you probably win both ways.

Sucker

[Anonymous Coward]

If you were set to pump several million into a company with loose moral fibre would you not appreciate a warning?

A company which gets suckers like you to build its software built for free? Nah, that sounds like a good company to invest in!

Sue 'em

[ender's_shadow]

Sue 'em. It's the only thing you're really entitled to do, and it should send the message you want to send.

let them know you must be paid or you will sue

[ZillaVilla]

let them know you must be paid or you will sue
set a date 1 week out just to be reasonable.
then go file the lawsuit, it doesn't cost much for you to file it(maybe less that $100) and it may cost LOTS for them to make the lawsuit go away.
Given the highly technical nature of your work, it would take an expert lots of time to review your code and give an expert testimony, hell if you get into the nity gritty details, you may keep them in court for 5 weeks (all the while they're paying an attorney and some other employees to be there, and that other Unix-consultant who had to review your code) If they hired you as a contractor to handle this area of expertise, they likely don't have anyone in house that could be considered a valid witness and thus they'd have to pay someone else (as much as they owed you) to come in on thier behalf. Explain the above to them and you'll get your money. It may help to go get the form/papers for filing the lawsuit ahead of time and have it in front of you on the table, so they can see you're not bluffing.

A smart venture capitalist will check to see if anyone is presently suing the company anyhow so you don't have to tell them about it. you might remind your client of this fact in your meeting.
in a nutshell give them hell in a legal way so you don't end up getting sued for slander or whatnot.

Morality?

[anthony_dipierro]

Yes, it would be malicious to contact this party with the information that I have, but am I morally obliged to?

Depends if your morality follows "eye for an eye" or "turn the other cheek".

Re:Morality?

[dubl-u]

Yep! If it's the latter, you *might* want to publish the fact that they haven't paid you on your site, so that anybody who searches on them can find it. But you have no moral obligation to the VCs in particular.

State labor board

[MImeKillEr]

Contact your state's labor board. Not paying you for work you've already done is illegal. I'd also call the state AG's office.

I saw on a movie or TV show once where a programmer put a time-bomb in a program and when the company he contracted for didn't pay him, he let it go off. It was one of those will-go-off-unless-you-pay-me-and-I-enter-a-specia l-key-type things. Not sure if this is even possible, legal, or ethical.

You say milestones were met. I assume that you have something in writing that says what your goals are or were. If push comes to shove, you can always threaten to take your source code and walk. If they were to threaten to sue, call your local TV station's watchdog reporter (I'm sure every market has one) and spill the beans... Might also hint that any potential VCs looking to back their company would surely re-think their decisions.

I'd also look into finding out your state's laws regarding recording conversations. My state, Texas, is a one-side state. Meaning that at least one party must be aware that there is a recording being made. As long as you know, that base is covered. I don't know, however, if its admissable in court. Maybe civil court, but not criminal..

All in all, don't let them screw you over.

Yes

[spike2131]

If you have reason to believe that the company that ripped you off would be likely rip off the Venture Capitalists as well, then the right thing to do would be to warn the investors to prevent that from happening. It's called good citizenship.

Lein

[stinkydog]

You should file for a lien on the eventual "product". That should get their attention quickly. The "mechanics lein" allows you to collect your pay and expensenses and if necessary, to liquidate their asset (your code) in the 'real' world. If intellectual property is actually 'real' property it should work. Or at least get some lawyers all twisted up. Of course IANAL.

SD

No mercy!

[Anonymous Coward]

Since the assholes are taking your work without
compensation, you practically have a moral
obligation to retaliate in whatever way you can.
Do not pass up this opportunity to nail them.
Don't be a pussy, or people will take advantage
of you all your life.

In California

[dubl-u]

Are you there on a W2? Or a 1099?

If you're on a W2, then you have a lot of leverage. In California, at least, businesses are required to pay wages first, before other obligations. Not paying wages can get them in a whole heap of trouble with some state department, resulting in really impressive fines.

When a company tried to welch on three months of W2 contract work, I got a lawyer to write a mean letter. If you are in Cali and on a W2, send me an email to the obvious address and I'll send you a copy of the letter for you to show to your lawyer.

They'll be delighted

[Lars T.]

Delaying to pay one's contractors is quite common business practice, and the VCs will sure like that the start-up knows how to save money.

clarification?

[rabbits77]

From the post it sounds like teh only week you met the miletsones for was week 1. Is that true? If so, I woudln't pay you either seeing as you seemed to have f-ed up the other *month* of the contract so far.

Moral vs. Ethical vs. Legal

[IQof20]

From your example, its a little difficult to give a good answer. It all depends upon your situation and the details are crucial.

There is no moral obligation to warn a person of minimal danger or where such a warning might endanger yourself. I believe both situations apply to your own.

While there is no moral obligation, it does question the application of ethics within business. Is it ok to do X to get $? In business, the answer appears to almost always be YES as long as it is legal. In some it is YES as long as you don't get caught. And even in others it is YES as long as the punishment is so small and the benefit so great, or the cost of someone to press charges so great and their recovery so small, etc.

What you are facing is the situation where X owes you $. Y is offering X $. You ask if you are obligated to tell Y. Y's actions will likely get X to pay you, therefore, from a business ethics standpoint, you are in the clear. Also, since the simple moral question is rather light risk and also likely to punish yourself, there is no moral duty.

Legally, who cares. 99% of illegal business activity that occurs is never challenged. Also, most of the minutia are STATE laws and therefore change upon your location and the location of the two other companies in question. In general, if you act in a manner that is moral and ethical then you're likely legal *enough* that nobody will come after you.

Personally, if this is about vengeance and not about getting paid, then you had best stay quiet. If this is about getting paid, and you feel you have a reasonable method that will make it so, then you are likely clear for "business-level ethics". Of course, some people aren't comfortable with that lowered standard.

Individual Only

[kenp2002]

The law you quote applies only to private individuals, not companies.

things a naive consultant forgets.

[mulcher]

Cease continued development. Bill with interest, after 1-2 months report them as an unpaid debtor negatively effecting their business credit. Did you have that in your contract terms?

Also put in a clause that says any non-payment of
any owed debt results in the software rights
not being transferred from you to them. That is you still own the software. Then sue if they use it (piracy).

If it is a blame game, cut your losses, cease development, then bill them for the work done
so far. If they really need it, they'll pay.
Also, don't give them any specs. Specs should
be bought in advance from you (cash payable on delivery) with 2 price options: 1) if you are developer 2) if they want to use another developer. Contract should stipulate severe penalties for breach of said contract.

Computer consultants seem to loose track of this issue, they forget that the business is a customer and subject to the same rules of credit damage that normal people are. Don't let them
get away with it. If you do, it shows your lack
of professionalism.

I generally start clients out on a payment plan that is money gets contributed no matter what the progress is, if the company is a good company then
they will have no problem with it.

If you do tell a VC do it by word of mouth. Non-traceable. I don't think that is the best idea.
Just pursue your legal channels. You might find they actually start to pay when the VC roles in.