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

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: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.

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.

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: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.

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: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.)

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.