Not Getting Paid for Work You Have Done?

Unpaid wages for work are different for employees and independent contractors. Unfortunately, it's not uncommon for independent contractors to have difficulty being paid by their employers. These employers, who may be facing difficult times financially, may also cut the pay of their regular employees. 

However, both independent contractors and full time regular employees have the right to be paid as agreed.

The Difference Between Employees and Contractors

When beginning work with a company, you should know whether the employer considers you an independent contractor or an employee. This is especially true if the company is in the process of declaring bankruptcy, as your classification can affect your rights and chances of getting paid for the work or services rendered.

The basic difference between the employee and the contractor is that an employee's day-to-day work is directly supervised and controlled by the employer, and an independent contractor works unsupervised without the employer telling them exactly how the work must be done. 

Employees are paid by wage and hour, while contractors are typically paid by their services or on a negotiated timeline, which employees cannot do. 

Employees are often given certain benefits, like paid lunch or health benefits. Independent contractors are not conferred these benefits, though their client may choose to involve them in some activities like holiday parties or company days off.

Finally, the difference between being classified as an employee or as an independent contractor non-employee is important because dealing with nonpayment for work performed is different for employees and independent contractors.

Are Payments to Independent Contractors Considered Wages?

The main difference in payments to independent contractors instead of employees is that independent contractors are most often paid per project they complete. So, technically, independent contractors are not paid “wages” like an employee.

Simply put, unlike employees, independent contractors are not paid a salary and may not be paid hourly, though hourly billing and an hourly rate are quite common ways for freelancers and independent contractors to price their work. 

Also unlike a full time employee, an independent contractor has no employee benefits,since they are not technically employees of that company. 

Employees are often paid an hourly wage, and if a full time professional they are paid an annual salary, by the company they work for. These employees are paid on a set schedule, unlike most independent contractors. Employees are entitled to their minimum earned wage plus any other employee benefits. 

Remember: employment laws vary vastly for employees and independent contractors, so it is important for independent contractors to educate themselves about their rights so that they can advocate when needed. 

What Is An Independent Contractor?

An independent contractor is someone who works with a company but is not considered an employee. They are sometimes called freelancers. 

Independent contractors are often paid upon completing specific tasks, assignments, or at an agreed upon time interval that may be different from how often the company pays employees. 

Negotiating this involves a contractor agreement between the service providers and the independent contractor. Independent contractors in the United States are most often paid as a 1099 contractor for taxation purposes.

By nature, payment claims and pay schedules and terms should be accepted by both parties. The laws covering these arrangements vary depending on the state, so in cases of disagreement it is advisable to reach out to an employment attorney to determine the best course of action for your situation or claim.

What Is a 1099 Worker?

A “1099 worker” is another name for an independent contractor. 1099 is a reference to Form 1099-MISC, which designates the contractor’s type of worker as an independent with “Miscellaneous Income.” 

1099 is a special designation that is commonly used to pay independent contractors as it is advantageous for both parties.

In a 1099 agreement, the client pays the independent contractor the full amount owed to the contractor. Because it is a 1099 arrangement, the client does not have to pay payroll taxes but can still claim a tax deduction for the payment.

The independent contractor receives the full amount billed for their services, which helps their cash flow situation. They must remember, however, that they are responsible for paying taxes on the payment. Because of this, independent contractors often owe taxes each year instead of receiving a refund from the Federal Government or their state.

Do Independent Contractors Have Any Payment Rights?

Self-employed freelancers have the rights to a contract, control, and decisions, as well as the ability to work full-time or part-time. Independent contractors can often work from anywhere, collaborate with other freelancers, and work with other clients at the same time as long as a contract does not explicitly forbid it. 

Independent contractors have other points of leverage that full time employees do not. For example, when a client does not pay on time, independent contractors can impose late fees, if agreed upon in the contract. 

There are some downsides to being classified as an independent contractor non-employee, however. Because independent contractors are not considered as an employee, they are not covered by most federal labor laws or employment laws. They are not protected against discrimination laws in the workplace under Title VII. And for most freelancers, as a business owner, you also don’t have any employee benefits, like an employer-funded 401k or even basic health insurance, conferred like full time employees.. 

Similar to employees, independent contractors not paid for work have the right to file a claim. Not only should contractors file a complaint with their state’s Department of Labor for unpaid wages, but they should also file a claim with the Federal Department of Labor, which enforces the FLSA, otherwise known as the Fair Labor Standards Act). 

Employees and Nonpayment

Employers are obligated to pay their employees and must offer fair pay, at least the minimum wage required by their state. Employers also must pay overtime hours to employees, and pay must be distributed on a regular basis. 

Every state has specific laws that govern how employers pay their workers, and payment is also regulated by the Federal government’s Fair Labor Standards Act (FLSA).

Employees who do not feel they are being paid as agreed should contact their employer in writing before doing anything else. Explain in detail what payments were not made as expected, including overtime or late paychecks. 

If the employer does not make it right after your attempts, you can do one of the following:

  • Contact an attorney that handles this type of case. They will help you get the pay you're owed, but you will also have to pay the attorney for their time. Many attorneys of this type agree to be paid only if you win the case. You can also specify that the attorney's fees will be paid as part of the settlement by the employer.
  • Contact your state's employment agency, specifically the wage and hour department, to file a claim against the employer.

Either process can take a long time, and it's possible you may never get paid. You could also be opening yourself up to termination by your employer. These protections vary state by state, so be sure to educate yourself on your rights surrounding termination before pursuing this course of action.

Should you choose to pursue legal action, keep all documentation given to you by the employer that proves how much you are owed. This may include pay stubs from previous paychecks, letters or emails, employee guides or handbooks, or any other relevant documentation. 

Keeping these records will help substantiate your claim and increase your chances of success.

Contract Workers and Nonpayment - What Happens?

Independent contractors typically have contracts with their employers, who are also referred to as customers or clients. A contract is a strong legal document that should be created by a lawyer, with signatures by both parties agreeing to the stated terms. A contract makes it easier to get paid, should non-payment occur.

If a contractor does not have a contract in place, getting paid owed wages may be harder. However, it may still be possible to force a client to pay as agreed without a written contract.

Just like employees, contract workers should send their claim to the business in writing. This letter should explain in detail the work that was performed and the payment that is expected in exchange. If you do not have a written contract, gather all documentation you do have, including previous payments and tax documents, such as a 1099 form.

If the written request does not result in payment, your next step is to hire an attorney. 

They will help you sue for payment, and the more documentation you have available, the better your chances of success will be.

How Long Do Companies Have To Pay Independent Contractors?

Laws and regulations governing payments to independent contractors vary by state, but by and large companies are solely bound by the payment terms specified in a legally binding contract between them and the contractor.

Contractors most often specify in their contracts when they will invoice, for what work, and when payment is accepted. This section of a contract is often one of the most negotiated clauses, as contractors like to get paid as quickly as possible and clients like to delay it.

Most contractors get paid on a net-30 basis, meaning payment is due no later than 30 days after they send their invoice.

Can Companies Withhold Pay From Independent Contractors?

Companies can more easily withhold pay from an independent contractor than from someone classified as an employee, but this does not mean it is necessarily legal or right.

If a company has a legally binding contract in place with an independent contractor but does not pay them on time, they are technically in breach of contract and thus legally liable to litigation. Most infringements like this are settled amicably, but independent contractors do have some legal recourse options should the client continue to not pay.

Small Claims Court

Whether you are an employee or an independent contractor, you can go to small claims court to attempt collection from an employer or client. Each state has its own limitations on the amount you can claim in small claims court. 

However, be aware that you may still have difficulty getting payment even if you win your case. This is especially true in cases of bankruptcy. Taking a client to small claims court will also likely sever the relationship, which means they will never be a client again. 

Bankruptcy of a Business

If a contractor has been working for a business that files for bankruptcy, they may have an even tougher time getting paid. 

Businesses that file for bankruptcy have to pay claims for money they owe in a specific order, and independent contractors are rarely at the top of the list. However, this doesn't mean all hope is lost. 

They should contact an attorney,be patient and persistent, and they may get the payment they are owed.

If you need more information or help as an independent contractor who was not paid for work given, you can post your legal need on UpCounsel's marketplace. 

UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.