Sub Contractor Pay Question

[joey heydt]

Hello Everybody. I have a question regarding a business owner / sub contractor pay issue. Here is the situation. I am 1099'ed sub contractor still working for the man whom trained me 15 years ago. He pays me once a month at a percentage of the business I do for his company. 15 years and never a problem. Here is what is going on now. 3 appraisals I did for a company way back in April and May were paid to me by him back in May and June. This week I have been informed by the man I work for that he got a letter from this company and they are filing bankruptcy. Instead of paying the full fee for the 3 appraisals they are only paying him 25% of what is owed. He is talking that he wants me to pay him back the money that he paid me 3 and 4 months ago. My question now is this. Whether you are the business owner and you have sub contractors working for you or if you have a situation similar to mine and you work for somebody,,,,,,how does this situation get handled when and if it happens in your office? Would like to say Thanks in advance for any input anybody here can give me. If you would rather not post here and you would rather email me privately you can at: [email protected] Thanks again for any input! Joey

 

[Meandering]

Welcome to bankruptcy law 101 meets subcontractors.

Speak with your county DA and ask them your questions.

.

 

[SpartanAG]

I used to do some sub contract work. I always got paid my fee. If the contractor would have asked for money back because his client didn't paid him, I would have told him to go pound sand. It isn't my problem if the contractor has a problem with his clients not paying. I did the work; I get paid.

If I had sub contractors I certainly would not expect them to reimburse me if one of MY clients failed to paid. I would have to eat the loss and find better clients.

Ultimately, this is a business decision on your part. Are you willing to lose a 15 year relationship over what may or may not be a significant amount of money to you? Are you willing to lose this source of income? Can you live without out or replace that income? Can you honestly produce your best work knowing you may be asking to repay some of your fee so your contractor does not take a loss, just you do?

 

[Michigan CG]

Part of owning a business is the risk side of it. He has been taking a percentage of your fee for 15 years and making a profit off of you. He is the business owner and he needs to pay his people. If you wanted the risk and hassle of collecting/billing you would hang out your own shingle. Fifteen years is pretty loyal, most people would have left him long ago.

 

[hastalavista]

As an employer who has hired (and continues to use) subcontractors, I've always paid the subcontractors their due if the assignment was completed as required. As the owner of the business, I take on the collection risk. That's one of the reasons the fee split is less than 100%.

I don't believe your employer can enforce his claw-back unless you agree to it. That's a business decision and the 15-year relationship you have with him will certainly play into your decision.
My guess is this: Your relationship with him has been for such a long time, that even though he pays you as a subcontractor, he's probably thinks about the relationship as more of a partnership. I see this kind of dynamic a lot on all sides of the fence (employer/employee/subcontractor); it isn't usually thought through and the decision reflects more of the personal relationship rather than the business relationship:

Denis is my friend and we've worked together for 15 years; I've always paid him when I've gotten paid. We both got shafted here.
(Emphasis on "we both" collectively got shafted)​

I'm not defending the claw-back; as I said, I don't do that and pay the contractors (sometimes early). I'm simply providing an explanation for why such a dynamic can occur based on my personal observations.

From my perspective, what's more damaging than the claw-back in the fee over the two assignments (real as that is) the potential damage it will do to what I presume has been 15 years of a mutually beneficial and rewarding relationship. If I were in you position, I may or may not agree to the claw-back (that would be 100% dependent on the relationship) but I would bring it up to clear the air.


Good luck!

 

[Elliott]

Never been a sub-contractor and pretty much have always been paid for the work I've done. I think your situation is unique that falls under the "is it a hill you want to die on, or at least have a major battle."
How many dollars are we talking about?

 

[Adios]

Hello Everybody. I have a question regarding a business owner / sub contractor pay issue. Here is the situation. I am 1099'ed sub contractor still working for the man whom trained me 15 years ago. He pays me once a month at a percentage of the business I do for his company. 15 years and never a problem. Here is what is going on now. 3 appraisals I did for a company way back in April and May were paid to me by him back in May and June. This week I have been informed by the man I work for that he got a letter from this company and they are filing bankruptcy. Instead of paying the full fee for the 3 appraisals they are only paying him 25% of what is owed. He is talking that he wants me to pay him back the money that he paid me 3 and 4 months ago. My question now is this. Whether you are the business owner and you have sub contractors working for you or if you have a situation similar to mine and you work for somebody,,,,,,how does this situation get handled when and if it happens in your office? Would like to say Thanks in advance for any input anybody here can give me. If you would rather not post here and you would rather email me privately you can at: [email protected] Thanks again for any input! Joey

More than likely the IRS would have a real issue that you are a 1099 subcontractor . But as such you have an agreement I would assume. Your payment should not be subject to whether or not he gets paid. Sounds like you need to consider establishing your own business . And if you do consult an attorney and an accountant .

 

[Mike Kennedy]

"I am 1099'ed sub contractor still working for the man whom trained me 15 years ago. He pays me once a month at a percentage of the business I do for his company. 15 years and never a problem. Here is what is going on now. 3 appraisals I did for a company way back in April and May were paid to me by him back in May and June."

The other side of the coin says the Mentor Appraiser gave the OP the opportunity and the training and a consistent flow of assignments annually x 15 years.......... He got burned and is asking you, who benefited from the assignments in question to "share the pain a bit".

Old Fashioned perhaps, and definitely an Irish thing - Loyalty matters. He showed you his for 15 years, your turn.

Recommend deducting the split fee loss from say the next 10-20 assignments (installment plan). Retain the good working relationship and keep on rockin' in the free world. Win-Win - your working relationship continues to benefit both you and him.

Or expect to continue on Solo (< assumes you have no direct clients or other Appraisers you "sub-contract" for).

 

[Tom4value]

A door closed means another one opened. 15 years? Time to hang out your shingle! Thank him for the time you had and go off on your own. That is what I did. Best descision I ever made.

 

[CenterTim85]

Good ole' TCV. I was faced with a similar situation with a person I am 1099'ed with. I went to bat for him and went straight to the client to ensure full payment. At this point, it's probably too late for that for you. If you have a good relationship with this person and wish to work together in the future, just eat the money or at least a portion of it. Speak with him and ask what he thinks to be reasonable. Depending on the fee split and what TCV paid, it cannot amount too much. Offer to do one for a "good" client for free and well ahead of schedule or something similar. Best of luck to you.